By Nandita Bose
NEW YORK (Reuters) - Walmart Inc (N:WMT) said on Monday it will partner with U.S. movie studio Metro Goldwyn Mayer to create content for its Vudu video-on-demand service, which the retailer bought eight years ago.
Walmart has been trying to prop up Vudu's monthly viewership that remains well below that of competitors like Netflix Inc (O:NFLX) and Hulu LLC, which is controlled by Walt Disney Co (N:DIS), Comcast Corp (O:CMCSA) and Twenty-First Century Fox Inc (O:FOXA).
Media outlets have reported that Bentonville, Arkansas-based Walmart was looking to launch a subscription streaming video service to rival Netflix and make a foray into producing television shows to attract customers.
But company sources have told Reuters that Walmart is not planning such a move and the company does not intend to spend billions of dollars on producing or acquiring exclusive content as of now. The retailer continues, however, to look at options to boost its video-on-demand business and offer programs that target customers who live outside of big cities.
Walmart and MGM will make the announcement at the NewFronts conference in Los Angeles on Wednesday and unveil the name of the first production under the partnership, which Walmart will license from MGM.
"Under this partnership, MGM will create exclusive content based on their extensive library of iconic IP (intellectual property), and that content will premiere exclusively on the Vudu platform," Walmart spokesman Justin Rushing told Reuters.
The focus will be on family-friendly content that Walmart customers prefer, Rushing said.
These shows will be exclusively licensed for a period of time to Vudu for North America, and available on Vudu's free, ad-supported service Movies On Us. Vudu will also commission and license original shows from other sources.
The first MGM-produced short-form original series for Vudu is likely to debut in the first quarter of 2019 on Movies On Us.
The financial terms of the deal were not disclosed.
Licensing content is a cost-effective strategy at a time when producing original content has become costly. As of July, Netflix said it was spending $8 billion a year on original and acquired content. Amazon.com Inc's (O:AMZN) programming budget for Prime Video was more than $4 billion, while U.S. broadcaster HBO, owned by AT&T Inc (N:T), said it will spend $2.7 billion this year.
Walmart also plans to roll out a new video ad format for Movies On Us, which will allow viewers to make purchases from Walmart.com.
Walmart acquired Vudu in 2010 to safeguard against declining in-store sales of DVDs. Walmart bet customers would continue to buy and rent movies and move their titles to a digital library, which Vudu would create and maintain for viewers.
But the video site has not posed a significant challenge to rivals that dominate the segment even though it is preloaded or can be downloaded to millions of smart televisions and video-game consoles.
Vudu offers 150,000 titles to buy or rent, while its free, ad-supported streaming service, called Movies On Us, includes 5,000 movies and TV shows.
There are currently more than 200 video services that bypass cable providers and stream content directly to a TV, laptop, phone or game console. That is up from 68 services five years ago, according to market researcher Parks Associates.