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What Vudu Users Will Lose Under Walmart

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The retailer is known for its censorship. Don't expect anything different this time.

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Walmart (WMT), already the largest seller of DVDs in the United States, is now taking on Amazon (AMZN), Netflix (NFLX), Blockbuster (BBI), and Apple's (AAPL) iTunes in the movie-download space.

Vudu, a service that allows customers to stream movies on demand and has licensing agreements with, in Walmart's words, "almost every major studio," will become a wholly-owned subsidiary of Walmart.

Financial terms weren't disclosed, as the acquisition is "not material" to Walmart's first-quarter earnings for fiscal year 2011.

The real question here is whether or not Vudu -- which has never been profitable -- will emerge as a true threat to its competitors under Walmart's ownership.

Perhaps not surprisingly, Edward Lichty, Vudu's executive vice president, thinks it will.

"We are excited about the opportunity to take our company's vision to the next level," he said in a statement. "Vudu's services and Apps platform will give Walmart a powerful new vehicle to offer customers the content they want in a way that expands the frontier of quality, value and convenience."

Eduardo Castro-Wright, Walmart's vice chairman, does too.

"The real winner here is the customer," according to Castro-Wright. "Combining Vudu's unique digital technology and service with Walmart's retail expertise and scale will provide customers with unprecedented access to home entertainment options as they migrate to a digital environment."

But, if history is any indication of things to come, customers won't have the "unprecedented access to home entertainment options" Walmart is promising.

For years, Walmart has refused to carry products that don't adhere to the company's family-friendly ways.

And, therein lies the rub with regard to Vudu.

Among the major digital streaming services, Vudu happens to be the only one to offer porn, which comes courtesy of a partnership with the AVN network and includes selections from Hustler Video, Wicked Pictures, Digital Sin, and Vivid.

AVN boasts such titles as It's Okay! She's My Step Daughter 2, Asstounding 3rd Degree, and Tiger's Got Wood, none of which one would expect to see for sale by Walmart.

A report in the New York Times quotes a "person briefed on the Walmart deal" who said Walmart plans to remove the adult category from Vudu "immediately."
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No positions in stocks mentioned.
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