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Wal-Mart Is Said to Be Buying Vudu Movie Service

Wal-Mart is making a major move into the business of selling movies over the Internet.

The retail giant has agreed to buy Vudu, a three-year-old Silicon Valley startup whose online movie service is built into an increasing number of high-definition televisions and Blu-ray players, according to two people briefed on the deal.

The terms of the acquisition could not be learned. A spokesman for Vudu did not respond to a request for comment, and a Wal-Mart representative could not immediately be reached. The two companies began informing Hollywood studios and television manufacturers of the deal on Monday.

Wal-Mart, based in Bentonville, Ark., is one of the world’s largest retailers of DVDs. But it has so far lacked a way to deliver movies digitally to people’s homes — a glaring weakness as consumers shift from renting and buying physical discs to streaming movies over the Internet.

Wal-Mart’s move is likely to give a lift to sales of Internet-ready televisions and disc players, which generally cost a few hundred dollars more than devices without such connections. These products allow people to watch movies and shows over the Internet, bypassing their traditional cable or satellite service.

The deal could also allow Wal-Mart to one day sell a variety of other merchandise through people’s televisions via the Vudu service.

Vudu, based in Santa Clara, Calif., and backed by the Silicon Valley venture capital firms Benchmark Capital and Greylock Capital, was never profitable. It first emerged in 2007 pushing a sleek black set-top box, which people connected to their TVs to access thousands of Hollywood films.

But like other Silicon Valley companies including TiVo and Roku, Vudu found it difficult to convince consumers to connect yet another box to their already cable-snaked televisions.

In 2008, Vudu’s chief executive left the company and was replaced by Alain Rossmann, a co-founder who was an early Apple executive and a pioneer in making the Web accessible from cellphones. Last year, Vudu stopped making hardware and instead began offering its movie store and simple interactive service as a feature that the largest consumer electronics manufacturers could build into their devices.

That effort has gained visible traction over the last few months. At the International Consumer Electronics Show in January, Vudu announced deals to puts its service into the devices of Samsung, Sanyo, Sharp and Toshiba and said it was expanding its older relationships with LG Electronics, Vizio and Mitsubishi.

Panasonic and Sony are the only major manufacturers that have not yet added the Vudu service to their devices.

Many of these companies also embed other Internet movie services, like Netflix’s Watch Instantly, Amazon.com’s Video on Demand and CinemaNow, a division of Sonic Solutions, which is helping the retailer Best Buy develop an Internet movie store that it plans to introduce this summer.

Apple is another major competitor, selling movies and TV shows alongside music in its iTunes store. But iTunes is only accessible from computers, Apple’s own mobile devices and on televisions through the Apple TV set-top box, which has not sold well and which the company has referred to as a “hobby.”

Vudu has sought to distinguish itself from its rivals by touting its large catalog of high-definition movies, its simple user interface and its integration of other Internet services like Facebook, Twitter, Flickr and Pandora into what it calls Vudu Apps.

This is not the first time Wal-Mart has tried to formulate a digital strategy to compete with the likes of iTunes and the various digital services of Amazon, its archrival. It introduced a music download store in 2004, but the effort has badly lagged iTunes and even Amazon’s MP3 store.

In 2007, Wal-Mart experimentally unveiled a movie and TV show download service with the help of Hewlett Packard. But customers never embraced it, and Wal-Mart shuttered the site the following year after H.P. closed the division that was providing the technology.