One of the constants of 2018 has been Walmart (NYSE:WMT) and its determination to go on the offensive against Amazon (NASDAQ:AMZN).

From ramping up its website to taking on Amazon’s Kindle eReaders and even considering an Amazon Go-like automated checkout system from Microsoft (NASDAQ:MSFT), Walmart is aggressively fighting back against the e-commerce behemoth.

The latest news on that front has Walmart reportedly working to reposition its Vudu “video locker” service as an affordable video streaming service. Doing so would take on Netflix (NASDAQ:NFLX) and Amazon’s Prime Video.

WMT stock has dropped as much as 25% this year from its all-time record January high, but it’s beginning to claw its way back as the company makes big moves to fight back against AMZN. 

Report: Walmart to Launch Vudu as Streaming Video Service

Vudu is primarily a video locker service. Consumers buy or rent digital movies, which they can then watch on a variety of platforms, via the Vudu app. Think Apple (NASDAQ:AAPL) iTunes video rather than Netflix and you have the general idea.

Walmart has owned the company since 2010, and according to reports that surfaced this week, Walmart has decided to turn Vudu into a video streaming service with a monthly subscription plan. Doing so would put it in direct competition with Netflix; but more importantly, from Walmart’s perspective, Vudu would also be going head-to-head against Amazon’s Prime Video.

According to Variety, Walmart is planning to launch Vudu as a low-cost subscription video streaming service in Q4 2018. It would offer the usual mix of licensed movies and TV shows, along with some original programming.

Vudu already has existing relationships among studios and networks that could be leveraged, and Variety says Walmart has been reaching out to those content providers to discuss licensing deals.

The company is reportedly targeting an $8 monthly cost — another tweak at Amazon, which charges $8.99 for Prime Video. The Informant suggests Walmart may actually consider offering Vudu at under $8 monthly, along with a free, ad-supported tier.

What’s In This for Walmart and WMT Stock?

Running a video streaming service is expensive. It’s estimated the cost to Netflix for content in 2018 could hit $8 billion. Walmart would have to sell a lot of $8 monthly subscriptions to recoup a spend like that. Netflix — which is the undisputed video streaming market leader — just reported it has 130 million subscribers, worldwide and Vudu isn’t likely to hit those kinds of numbers any time soon.

There’s no quick upside here for WMT stock.

So with a streaming video market that’s already dominated by Netflix and Amazon, and with big players coming soon in the form of Apple and Disney (NYSE:DIS), why would Walmart consider entering the streaming video business?

Battling Amazon

The real target here is Amazon’s Prime Video. It was bad enough that Amazon has become an e-commerce giant, but when the company bought Whole Foods in 2017, it began competing directly against Walmart’s brick and mortar stores for grocery shoppers.

Since then, Walmart has been determined to take the battle to Amazon. In January, WMT partnered with Japan’s Rakuten to promote Kobo eReaders and eBooks in stores and online, in a move to take on Amazon’s Kindle eBook business.

Walmart launched a complete overhaul of its website in April, and has partnered with Alphabet (NASDAQ:GOOGL) for voice shopping using Google Assistant –taking on Amazon’s Echo. Walmart has been talking to Microsoft about adopting its automated checkout system —in response to Amazon Go.

And the two companies just announced a five-year partnership to transition Walmart’s website to Microsoft’s Azure cloud platform, with a new emphasis on AI for faster transactions, improved customer convenience and more rapid response to changing shopping trends.

Vudu streaming video would be another tweak against Amazon. And in the bigger picture, it becomes an incentive Walmart could offer to its customers in the same way Amazon offers free video access to Amazon Prime members.

If the company goes ahead with this plan, Vudu may not ever be a major contributor to WMT’s bottom line. And in the short term, it’s bound to be a money-losing proposition. But a streaming video service could help Walmart to compete more effectively against Amazon, and in the long term, anything that helps in that battle is a positive for WMT stock.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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