Vudu Joins On-Demand Movie Crowd

There's a new entrant in the growing on-demand movie space, but Vudu takes a slightly different take that may spur adoption or spell its doom. Customers will be able to stream movies over the Internet to their living room, but must first shell out $399 USD for the Vudu hardware.

With broadband finally reaching speeds where on-demand movies over the Web is possible, there's no shortage of companies hoping to cash in. Movielink, which was recently acquired by Blockbuster, is the market leader, but Netflix, Apple, Microsoft and Amazon have all joined the race as well.

In addition, television providers like Comcast and DirecTV have been expanding their on-demand offerings with more-recent movie titles and better-quality content. Vudu, however, is banking on a vast movie library and no subscription fees to lure customers.

Movie rentals through Vudu will cost between 99 cents and $3.99, depending on the age of the film. Downloaded movies can be watched for a period of 24 hours before they expire, although purchasing is available for between $4.99 and $14.99.

The company has so-far signed licensing deals with major studios and a number of independents, and promises to grow its library in the near future. Of the 5,000 movies initially available, titles include "300," "Breach" and "Dreamgirls."

But can Vudu succeed where Movielink, CinemaNow and Starz's Vongo have struggled to find footing? The company thinks the answer is instant gratification. It says rival services require you to use a PC to download the movie and lack the ability to order directly from the television. While TiVo is enabling its customers to buy movies from Amazon's Unbox service, the movie must be fully downloaded before it's watchable.

Still, the company faces an uphill battle convincing consumers to shell out $399 on the outset. That cost is more than the new TiVo HD DVR, and amounts to over two years of subscription fees from companies like Netflix or Blockbuster. In addition, there's no guarantee that Vudu will be around long enough to make the cost worthwhile.

Internet telephone company Ooma is taking a similar tack by selling a $399 hardware box just to use its service, but in return customers receive calling.

Vudu will need some stellar reviews in order to avoid the same fate as MovieBeam, which sold a set-top box for $250 and $1.99 to $3.99 movie rentals before puttering out. MovieBeam relied not on the Internet, however, but an antenna to stream movies over the air, limiting its potential customer base to certain metropolitan areas.

Vudu expects to begin shipping its set-top box by October 1.