Walmart betting on cord-cutting?

Boxee TV went on sale this week at 3,000 Wal-Mart stores in the U.S. as part of an exclusive retail distribution deal between the five-year old startup and the world’s largest retailer. The $99 set-top box features a handful of embedded streaming apps, including ones for Netflix, YouTube, Vimeo, Spotify and Walmart’s own Vudu service. It also comes with an antenna for receiving over-the-air HD broadcast channels and cloud-based DVR capability with unlimited storage for $14.99 a month.

As part of the rollout, consumers who buy a Boxee TV during “the holiday season” will get three free months of unlimited DVR storage, after which they can continue subscribing for $9.99 a month. Holiday buyers will also get three free months of Netflix, even if they already subscribe, plus a $5.99 credit for Vudu.  Walmart is setting up dedicated displays for Boxee TV and providing marketing and promotional support via email and flyers.

The Walmart deal is obviously a coup for Boxee, which has struggled to keep pace with better-known Roku and the strength of Apple behind Apple TV. Boxee TV will now have the kind of retail visibility the company was never able to achieve for its first-generation Boxee Box and the kind of marketing support it could only dream about. But the deal also speaks to the Walmart’s ambitions in the over-the-top video space.

Walmart has already shown a commitment to OTT video, having spent $100 million to acquire Vudu in 2010. It also hasn’t hesitated to use its leverage with consumer electronics vendors and game console makers to ensure the Vudu app gets embedded in their hardware, building the base of Vudu-addressable devices. Last year it strong-armed Sony into adding the Vudu app to the PlayStation 3, where it quickly supplanted the PlayStation Store in share of the online movie market. By pushing sales of the Boxee TV set-top, Walmart will be able to add non-connected TVs and those without the Vudu app to its base of addressable sets (the Vudu app is also available on Roku devices, but not on Apple TV).

Walmart already sells Apple TV and Roku boxes, as well as a few other streaming devices, and obviously could have chosen to get behind any one of them if it simply wanted to move some set-top boxes this holiday season. Boxee TV is a different animal from those other streaming devices, however,

As GigaOM’s Janko Roettgers notes, Boxee TV has been radically simplified from the original Boxee Box. Gone is the scatter-shot approach to apps, the open-source code base, and the geeks-only pricing in favor of a curated selection of the most popular streaming apps and a mass market price point. Its main selling point, however, is the integration of live TV via over-the-air broadcast into the same, stripped down UI as on-demand streaming content. It is, in short, a cord-cutting device aimed at the Walmart audience.

Or at least it could be. The main reason I suspect Walmart is working so closely with Boxee on the rollout is a desire to gain insight into how ready its shoppers are for an off-the-shelf cord-cutting solution. Details of the terms of the deal between the companies have not been released, but it’s a fair bet Boxee didn’t secure Walmart’s support for the rollout for nothing. Whatever data Boxee collects on Walmart shoppers’ use of Boxee TV will almost certainly be shared with Walmart.

Given Walmart’s previous willingness to acquire Vudu, it wouldn’t shock me if its exclusive deal with Boxee also included warrants, options, or some other mechanism by which the retailer could take control of Boxee as well (the dollar amount of such an arrangement at this point would be too small to be material to Walmart, and therefore would not have to be disclosed).

Finally, Boxee’s strategy for integrating live TV is different from that of Apple, Microsoft or other OTT players in ways that are likely to be critical to Walmart. Whereas Microsoft, and even Apple, have begun exploring ways of opening their platforms to integration with pay-TV services, Boxee’s over-the-air approach does not require it to negotiate with pay-TV providers to offer its users a meaningful selection of live TV content. If Walmart were to make any sort of broader move into the OTT space beyond Vudu it would be in the form of something it can sell off-the-shelf in its stores, not something to be bundled with Comcast or DirecTV service.

Call it pay-TV in a box.

 

 

 

 

 

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Paul Sweeting

Principal Concurrent Media Strategies

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