Dive Brief:

• As Amazon pulls ahead of the retail pack with a multitude of products and services, Walmart is considering mounting a challenge to a core component of Amazon’s Prime offering: streaming video, according to The Information. 
• Walmart is conceiving a video service priced under $8 a month, The Information reported, citing unnamed sources familiar with the situation. Amazon charges $8.99 a month for Prime Video or $12.99 a month for the whole Prime package. An annual Prime subscription is $119. Netflix charges between $8 and $14 per month, while Hulu’s lowest priced plan is $7.99 per month and it’s highest $39.99. A Walmart spokesperson told Retail Dive it does not comment on rumor or speculation.
• While discussions are underway, Walmart may ultimately decide not to join the streaming fray with such an offering, The Information reported. The retailer already has a comparatively unsuccessful service called Vudu.com that it acquired in 2010. Besides lower pricing, Walmart is considering offering an ad-supported free service and sees potential in the middle of the country where Amazon and Netflix are less popular, and which has long been a brick-and-mortar stronghold for the giant retailer, sources told The Information.

Dive Insight:

While the infrastructure and programming of a competitive video streaming service might be pricey for Walmart to set up and maintain while charging lower rates than the competition, the video category is familiar terrain for the retailer. When the home video market transitioned from rental to sales, Walmart fast became the dominant retailer with the lowest prices, only to see that niche eventually go to companies like Netflix and Amazon with the growth of video on demand. It was once regarded as the best customer of prominent video content producers like Disney and Fox.

Lately, the competition between Walmart and Amazon has been heating up. At the same time, Walmart’s relationship with Google, which is emerging as Amazon’s most direct tech and video competitor, has been warming. Walmart is now matching prices on 53% of all Amazon products, according to research from e-commerce analytics firm Profitero. And the retailer forged a voice ordering partnership with Google through smart speakers Google Home and Google Home Mini. The competition between Amazon and Google for the smart-speaker market is intensifying, and Amazon is making Prime the loyalty program for Whole Foods Market, which it bought last year. Each year Prime Day breaks more sales records, like it did this week, while other retailers ride the coattails of the event.

On the video content and device front, the battle has grown even hotter. Google has pulled its YouTube channels from Amazon video services, and Amazon has been withholding search results for Google Home products. Apple, meanwhile, has been exploring a bundled subscription plan for video, news and music that would enhance its competitive stance.

In considering a video streaming service, Walmart could be reacting to what it sees as an opportunity to compete with Amazon online and a need to solidify its offline dominance. The problem is Prime, as it is for all who would take on Amazon. The multi-faceted shipping, shopping, entertainment and loyalty juggernaut with 100 million members keeps customers on Amazon’s pages and in its digital ecosystem longer than other retail offerings. The tipping point for many consumers on the decision to spend $119 year for Prime includes consideration of its streaming entertainment service. When compared to what other entertainment providers like Netflix and Hulu charge, the annual price looks comparatively reasonable since it would amount to just about $10 a month if divided out.

Walmart has previous relationships with some content producers, a substantial financial reserve to set up such a service, and many ways it might take advantage of merchandise and brand synergies if it went with an ad-supported model. Its Vudu streaming service — which distantly trails Netflix, Amazon and Hulu — offers several thousand titles to buy or rent, and started a free ad-based program two years ago, noted Variety. Whether Walmart’s top executives and shareholders will have the patience for such an endeavor is another question.