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WAL-MART STORES (WMT)
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Wal Mart Stores : Walmart Cuts Online Video Deals in Bid to Become Entertainment Hub

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10/11/2018 | 02:15pm CET

By Joe Flint and Sarah Nassauer

Walmart Inc. has struck deals with an old-school Hollywood studio and a next-generation interactive-video startup as part of the drive by the world's largest retailer to become an entertainment hub.

Earlier this week, Walmart reached an agreement with MGM Holdings Inc. for the studio to create original content exclusive to Vudu, the on-demand streaming service Walmart bought in 2010. Separately, Walmart is also creating a joint venture for content with Eko, a video platform that specializes in entertainment and commerce content.

The moves are indicative of the growing competition between Walmart and Amazon.com Inc., which is investing heavily in video as well, in large part to lure potential customers to its platform.

"We think this will drive a deeper engagement with customers," said Scott McCall, the Walmart senior vice president overseeing entertainment. "We want them to drive by our digital store multiple times a day."

A priority for Walmart is strengthening Vudu, which allows users to buy or rent around 180,000 individual films. The service is widely available on televisions and streaming devices such as Roku, but hasn't attracted the usership of rivals, including Netflix, Hulu and Amazon Prime Video.

The first original show out of the MGM partnership will be a series remake of "Mr. Mom," the 1980s comedy about a man bumbling through child care while his wife works outside the home. It is expected to debut next year.

The shows will be free when viewed with ads on Vudu. Walmart is also looking to partner with other studios to license exclusive video content from them, but doesn't plan to own the shows long-term or undergo the costly effort of producing shows directly.

"We don't want to come across as being a studio. We want to partner with studios and content creators," Mr. McCall said.

He also said the company has no immediate plans to launch a separate subscription-video service to compete with Netflix Inc. The company had early discussions about creating such a service, but they never advanced, he said.

Walmart aims to license video that targets its core middle- and low-income shoppers in rural and suburban communities, a demographic Walmart believes is underserved by current streaming services, said spokesman Justin Rushing.

Creating breakthrough content is increasingly challenging in a media environment where consumers have myriad options. An array of companies, from streaming giants like Netflix to newer players like Apple Inc. and Facebook Inc, are creating original programming. AT&T Inc. on Wednesday said it plans to launch a new subscription streaming service next year that will house TV and film properties from its WarnerMedia division.

The cost of entry is high, as these players compete for the best talent and shows. In its favor, Walmart has a website seen by more than a million unique users a month, giving it a strong base to build awareness for its programming and e-commerce efforts.

Terms of the deal with Eko weren't disclosed, but people familiar with the matter said Walmart is investing $250 million in the venture. Walmart will also take part in Eko's next round of funding, the companies said. Other Eko investors include Sequoia Capital, Sony Corp., MGM and Samsung Electronics Co.

Founded by Yoni Bloch, an Israeli musician turned tech entrepreneur, Eko has made branded interactive content for Coca-Cola, Ford Lincoln and IKEA. It also makes original, short-form interactive series in which viewers can choose the direction of a story. The company was also behind a 2013 video of Bob Dylan's "Like a Rolling Stone" that became a viral hit.

Mr. Bloch said the goal for the venture is to help Walmart evolve from "a transactional relationship" with its customer base "to an emotional relationship."

Content for Walmart could range from cooking shows to interactive toy catalogs, the companies said. It will appear on Walmart.com, though Eko also has the freedom to take the content to other social media platforms, people with knowledge of the partnership said.

Walmart advertising will be included in the entertainment content the venture produces, and the companies would share in revenue.

"This is really what we think is the next generation of storytelling," said Mr. McCall. "It can be marketing. It can be short-form video or long-form content. It can reside on Walmart.com or Vudu, but it is not tied to those platforms," he added.

Walmart's partnership with Eko has been dubbed W*E Interactive Ventures. Mr. Bloch will lead it and former CBS Television Network President Nancy Tellem, who is Eko's executive chairwoman and chief media officer, will serve on the joint venture's board.

"Audiences are hungry for immersive entertainment and storytellers are embracing this new technology in creating a new type of story narrative that deeply engages the viewer," Ms. Tellem said.

Write to Joe Flint at joe.flint@wsj.com and Sarah Nassauer at sarah.nassauer@wsj.com

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Financials ($)
Sales 2019 514 B
EBIT 2019 21 948 M
Net income 2019 7 048 M
Debt 2019 45 576 M
Yield 2019 2,30%
P/E ratio 2019 38,23
P/E ratio 2020 19,36
EV / Sales 2019 0,60x
EV / Sales 2020 0,58x
Capitalization 265 B
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Number of Analysts 33
Average target price 106 $
Spread / Average Target 16%
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NameTitle
C. Douglas McMillon President, Chief Executive Officer & Director
Gregory B. Penner Non-Executive Chairman
Brett M. Biggs Chief Financial Officer & Executive Vice President
Jeremy King Chief Technology Officer & Executive VP
Clay Johnson Enterprise Chief Information Officer & EVP
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