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Why Sony Is Shutting PlayStation Vue and Walmart Wants to Sell Vudu

By Rich Duprey - Dec 4, 2019 at 7:30AM

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The streaming video market is in the midst of a big shake-up.

With so many people cutting the cord to cable, it seems an odd time for Sony ( SONY -0.12% ) and Walmart ( WMT 1.51% ) to exit streaming video. Seemingly almost every network and studio wants to get into the market, but Sony announced it is shutting down its PlayStation Vue, and if Walmart can find a buyer, it's rumored the retailer is willing to sell Vudu. 

Considering Apple launched Apple TV+ at the beginning of November and Disney kicked off Disney+ almost two weeks later, is this a warning sign for the tech industry and streaming video players, or for cord-cutting in general?

Well, yes and no.

Man cutting coaxial cable

More people than ever are cutting their ties to cable TV, but Sony and Walmart want to get out of the video streaming market. Image source: Getty Images.

A long time coming

The entire video landscape has changed since PlayStation Vue became one of the earliest live-TV streaming services, though that never conferred any first-mover advantage to Sony. No doubt a big part of why it never gained much traction was that Sony had to advertise that you actually didn't need a PlayStation console to watch the service. It may have thought by attaching itself to the gaming console, it would lure more viewers, but instead it just created confusion. 

With only a reported 500,000 subscribers, Vue badly trailed both Hulu and Sling TV, which have about 2.5 million subscribers each. Even YouTube TV has around 1.5 million. That means it was a money loser for Sony, and not even a price hike this summer that brought its base offer up to $50 per month would fix that. It was almost inevitable that PlayStation Vue would shut down.

Vudu's exit might not be inevitable, but it was behind the eight ball from the beginning. Walmart acquired Vudu in 2010 and made on-demand movie rentals available through its website the following year. Ad-supported video came in 2016. Yet Vudu also marked the retail giant's third attempt to take on Netflix after a DVD rental service and movie download business both failed. 

A crowded field

Video is different today than it was a decade ago. Subscription services rule the day, and the real battle is in bulked-up budgets to acquire content. Netflix is reportedly spending $15 billion on content this year, up from $13 billion a year ago; and Apple may each spend as much as $6 billion. And Disney is said to be spending $1 billion, though it has a built-in advantage of a massive library of content ready to go, developed over decades.

With content creators like Disney, AT&T, and Comcast having (or soon launching) their own services, they're feeling very proprietary about their respective catalogs of movies and TV shows, and have begun pulling them from Netflix. They're not going to want to share with other competing services, either.

That left Sony and Walmart with a not-particularly difficult decision to make: commit billions of dollars to acquire content with little payback from businesses largely unrelated to their core operations, or get rid of them. As I said, it's not a tough choice.

The coming shakeout

Sony tried to sell PlayStation Vue, but was unable to find a buyer, so it is shutting it down in January. That might indicate a problem for Walmart: If it is shopping for a buyer, it may be difficult to find. 

Walmart might also just decide it wants to keep it. After all, a few years ago, Disney, Comcast, and Fox sought to sell Hulu, but ultimately decided to keep it (Disney now owns all of it). And last year, Bloomberg reported Walmart had thought about using Vudu to create a service to rival Amazon Prime Video, opening the video-on-demand platform to third-party services such as HBO Now and Showtime, and allowing customers to pay for the add-ons.

It's clear Walmart really isn't sure what to do with this seemingly valuable asset as the marketplace rapidly evolves. Not all of these new services are going to survive, but smaller platforms will experience the greatest difficulty.

It's a warning sign for the industry that there will be a greater shakeout to come, but it also indicates that with so many options available to consumers, cord-cutting is as healthy as ever.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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