Walmart Doesn't Need to Fight Amazon on Every Field

Male watching streaming video on laptop

We get it. Walmart (NYSE: WMT) wants to fight (NASDAQ: AMZN) everywhere: groceries, next-day and same-day delivery, meal kits, and online shopping. But one field on which it doesn't need to do battle is video streaming.

According to The Information , Walmart executives are mulling the possibility of offering a subscription streaming service, but it would be a mistake. Netflix (NASDAQ: NFLX) has 57 million U.S. subscribers, and 125 million Amazon Prime members get streaming video for free. The last thing the marketplace needs is yet another provider, even a discount one along the lines of what Walmart is reportedly considering.

Stars in its eyes

The retailer is said to envision a discount streaming service for less than $8 per month, which would be less than the cheapest offering from Netflix -- which costs $8 per month and lets you watch movies on one screen -- and below Amazon Video, the non-Prime streaming service that costs $9 per month. Walmart is also considering a free service that would be supported by ads.

Walmart went down this path once before and failed miserably. It tried competing against Netflix with a discount DVD movie rental service and ended up selling the whole thing -- to Netflix! It also owns the Vudu video streaming service that it bought in 2010 but has failed to turn it into an effective competitor.

Vudu isn't a subscription service like Netflix or Amazon Prime but rather allows viewers to buy or rent movies and TV shows, individually or bundled together. For example, you can own the first two seasons of HBO's Westworld series for $50, while individual episodes are available for $3 each. And like Walmart's imagined service, Vudu offers some free, ad-supported programming as well.

Yet the service hasn't caught on. The Information reports that although Vudu has some 100,000 movie and TV show titles, users spent only 18,000 hours watching them compared to spending nearly 900,000 hours on Netflix and 315,000 hours on Amazon Prime. There's nothing to indicate a Walmart-branded service could do better.

If Walmart wanted to challenge Amazon in streaming, it might do better bolstering its Vudu service instead of building a new one from the ground up. A new Walmart service would require the retailer to make deals with movie studios, cable providers, and broadcast networks to acquire content. To be competitive, Walmart would have to be willing to spend billions for content, a diversion of resources shareholders might think could be better spent elsewhere in the business.

Stick to its knitting

Walmart's earnings last quarter helped reassure investors it's still able to compete effectively, after its e-commerce sales rebounded with a 44% gain following a first-quarter stumble, but Amazon is keeping up the pressure in groceries. The online retailer extended its Prime Day sales event to Whole Foods Markets, offering members-only 10% discounts across all of the supermarket's stores nationwide.

Walmart has enough on its plate maintaining its own turf without crossing over into areas it doesn't know well and hasn't performed well in. For all of Netflix's dominance in streaming, it fell 1 million subscribers short of the number it expected to add last quarter.

More importantly, what has largely separated Netflix and Amazon from most of the estimated 200 or so streaming services that currently exist is original content. Netflix is reportedly ready to spend as much as $13 billion this year on acquiring content, and the billions it has already invested has resulted in it besting HBO in winning the most Emmy nominations of any studio.

Amazon also creates its own content through Amazon Studios and has developed some engaging programming, including Sneaky Pete , Goliath , and more recently The Marvelous Mrs. Maisel . It might not have the Emmy nominations yet, but it is building up a credible portfolio of its own.

Why Walmart should just say no

In theory, a Walmart-branded discount streaming service could make sense, particularly because of subscription price creep narrowing the value between streaming providers and their cable rivals. But the market is saturated with streaming providers, and the amount of financial commitment it would require of Walmart to make the new service viable suggests the retailer would be better off staying off this battlefield.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Netflix. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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