The Wall Street Journal reports that Walmart Inc (NYSE: WMT) has begun work on a streaming media service. It is so late to the industry that it is taking a large gamble which is not likely to pay off.
24/7 Wall St’s had a look at Walmart’s possible plans last week:
Several media outlets tried to get Walmart Inc. (NYSE: WMT) management to confirm that the company will go into the streaming media business. Presumably, the move would be to better compete with arch-rival Amazon.com Inc. (NASDAQ: AMZN). The rumor is almost certainly a rumor. Walmart executives know better than to walk into a buzz saw.
The first report about Walmart’s possible plans was posted by The Information, which reported that Walmart is “considering launching a subscription streaming video service….”
Netflix Inc. (NASDAQ: NFLX) has 57 million subscribers in the United States. Amazon may not have as many, but between them, the number has to be close to 100 million. Walmart would start from scratch. If the market is not already saturated, it must be close. Netflix added less than a million U.S. subscribers last quarter, and its management knows the business better than any other company in the world.
Walmart would have to go through the almost impossible process of cutting deals with television networks, cable networks, and movie studios. Its management would then need to decide if it wants to spend hundreds of millions of dollars on its own programming. Amazon and Netflix believe original programs are essential to the addition of and loyalty of subscribers. Each of the two companies has been in the process for over a decade.
Walmart also would face the challenge of how to launch and promote its own service. It might use Walmart.com, but the site is appropriately jammed with products Walmart needs to sell if it wants to be successful online. It could begin an entirely independent market effort, but the costs of that would be staggering.
Walmart has many challenges as it competes with Amazon, from e-commerce to logistics to Amazon’s popular consumer electronics. It is not going to add to those problems by chasing a business in which it cannot be successful.
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