Walmart, MGM Studios Strike Video Production Deal

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There’s one big advantage for streaming video companies that produce their own content: they own all the rights to the content. But there’s also one big disadvantage: producing shows is expensive.

Walmart Inc. (NYSE: WMT) does not plan to spend the money that would be needed to launch its own subscription streaming service, ala Netflix or Hulu. Instead, the company is expected to announce Wednesday a partnership with MGM Studios in which MGM will produce original content for the retail giant. The two companies are also expected to announce the name of their first production according to a report from Reuters.

According to a Walmart spokesman, the content will be licensed exclusively to Walmart for a specified period for streaming on the company’s Vudu service. The content will be “family-friendly” and target customers living outside big U.S. cities.

Walmart’s Vudu offers 180,000 titles to buy or rent. The company also offers a free, ad-supported streaming service, called Movies On Us, that includes 7,000 movies and TV shows. MGM-created content will be available on both Vudu and Movies On Us.

As part of beefing up its streaming video service, Walmart also plans to implement a new ad format for Movies On US that would allow viewers to make purchases directly from Walmart’s website.

Licensing content is more cost-effective for Walmart and Vudu than competing with the Netflix, which has announced an original content budget of $8 billion for this year, or Amazon Prime, which plans to spend more than $4 billionm or HBO with plans to spend $2.7 billion on content this year.

The companies did not disclose financial terms of the deal.