Wal-Mart Taking on Netflix, Blockbuster

NEW YORK ( TheStreet) -- Wal-Mart ( WMT) is stepping up the competition in the movie rental business with the acquisition of Vudu.

The retail giant announced on Monday that it is buying Vudu, an online movie service that is built into high-definition television and Blu-ray players, according to the New York Times.

The terms of the agreement were not revealed.

While Wal-Mart has been the largest seller of DVDs, with this acquisition it is now encroaching on the domain of Netflix ( NFLX) and Blockbuster ( BBI).

Netflix has become the golden child of the DVD rental/streaming business, as it continues to steal market share away from traditional movie-rental retailers like Blockbuster.

Last week, Blockbuster said it is attempting to cut its overall number of stores, and the amount it pays in rent for those stores. Standard & Poor's cut its rating on the company to deeply distressed, and said Blockbuster is vulnerable to debt default.

Still, shares of Blockbuster are recovering this week, up 7% to 40 cents in afternoon trading.

Shares of Netflix are falling 2.8% to $64.84 on the news.

There has also been increasing competition from Coinstar's ( CSTR) Redbox kiosks.

The purchase of Vudu may also present Wal-Mart with the opportunity to sell other products through televisions in the future.

-- Reported by Jeanine Poggi in New York.

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