The Big Bridge: Retail's New Sweet Spot

In retail, it can seem as though the movement from early adoption to the next big thing occurs at the speed of light. No sooner does a new product, innovation or technology hit the scene than version 2.0 is announced, beginning a quickening race to obsolescence. In many cases, however, transitions still drag on longer than anyone thought, particularly when it comes to solutions involving many moving parts and stakeholders (RFID anyone?). In fact, they sometimes never actually happen. One good example can be seen in the predicted demise of brick and mortar stores, which continue to be alive and well, not despite the Internet, but arguably because of it.

Staying mired in the solutions of the past and waiting for others to take the lead can feel like watching grass grow, as lost revenue from the road not taken is painfully underlined with each passing day. This is also true for those who take the opposite approach, lunging ahead into early adoption and waiting for demand to catch up. No wonder capitalizing on the space between these two is becoming retail’s new sweet spot.

Walmart’s debut of its Disc-to-Digital service this past week is a great example of hitting this spot by building what we’ve come to call a “big bridge.” Disc-to-Digital enables customers to bring the physical DVDs gathering dust on their shelves into Walmart stores and convert them into cloud-based streaming media that is playable at home or on the go. Cloud services enable users to store media on third-party servers and then access it on web-enabled devices, which, according to Walmart’s Disc-to-Digital press release, will cover over 300 devices for its customers. The service isn’t free, but at $2 for standard definition copies and $5 for high-definition, it unlocks a world of options at a fair price.

Walmart was able to build this big bridge by linking its Vudu video streaming service, which it acquired in March of 2010, to its participation in the movie industry’s UltraViolet initiative. The online movie technology, backed by most movie studios and a coalition of technology companies, offers digital “proof of purchase” and online storage capabilities.

Walmart is said to have received an exclusive on Disc-to-Digital from the participating studios until next fall, in exchange for its aggressive promotion of the service. This could turn out to be a large-scale lifeline for studios, since home entertainment revenue has plummeted about 40% from its peak in the mid-2000s, due in large part to lower DVD sales. The icing on the digital cake is that online movie purchases are more than three times as profitable for studios as digital rentals and as many as 30 times as profitable as Redbox and Netflix rentals. By making movie downloads less complex, UltraViolet could swing the ratio of purchases-to-rentals in favor of the more profitable purchases.

Critics are already claiming that Walmart is riding the fence at a time when online access is making DVD ownership obsolete. So what? The fact is that some of Walmart’s customers may not have even heard about the cloud and for many, DVDs and home video are inextricably linked. There are still far too many DVD players out in the field to plan a funeral just yet and in the meantime, Walmart will grab business throughout what I believe will be a multi-year transition period, driving traffic to its stores as customers bring in DVDs for conversion. Walmart has built a big bridge, not just for its customers, but for an entire industry.

This article originally appeared on the International Licensing Industry Merchandisers' Association (LIMA) website.