Your new online video shop: Walmart?

The world's largest retailer, Walmart, is reportedly getting into online video by purchasing Vudu.

Neither company has confirmed the deal, but the New York Times says Hollywood studios are being briefed today.

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Vudu, which launched in 2007, uses peer-to-peer technology to serve up movies for rent or purchase. Movies are downloaded, but the technology allows users to begin watching before the download is complete. It was the first service to allow the purchase of high definition movies, though other services such as Amazon and iTunes have followed suit.

The Vudu service originated on its own set-top boxes, not unlike the Roku box, which launched as a way to play Netflix Instant Watch movies. However, over time Vudu began to appear on other hardware, such as Blu-ray players and televisions. Panasonic and Sony are now the only major electronics manufacturers who don't offer Vudu on any of their Web-connected products.

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Interestingly enough, Vudu killed its set-top box strategy earlier this year, saying it would only focus on integrating with other hardware. I'm guessing this was either a condition of the deal with Walmart, or the final push the retailer needed to go after Vudu. Assuming Vudu turns into a Walmart branded service, the no set-top strategy allows the retailer to suddenly get its name on all sorts of connected electronics without having to sell its own hardware. It sounds like a winning strategy to me.

Best Buy is doing the same thing, the Times reports, creating a branded download service with Sonic Solutions' CinemaNOW to launch this summer. But Walmart's size and standing as the world's largest retailer makes the Vudu deal more significant. In general, I'm wary of Walmart's size (and tendency to crush smaller competitors), but this could be a huge step for online video, one that pushes on-demand internet movies into the mainstream.

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