After Cutbacks, Vudu Accelerates Plan to OEM its Video-on-Demand Software

Vudu, maker of IP-based video-on-demand solutions, has endured another round of layoffs. Founded in 2004, the company has had as many as 110 or so employees and is now down to about 50, according to co-founder Tony Miranz.

"We plan to keep that steady," Miranz says.

These days, everyone is down-sizing, so the Vudu layoffs might not be a big deal.

But it's more significant than the Microsoft or Bose layoffs, for example, because Vudu has yet to firmly seed itself in the marketplace.

At the rate its been spending, the company would need a capital infusion sooner rather than later. "Sooner," of course, is a bad time to be raising money.

The operational changes, Miranz says, will allow Vudu to "extend the runway to get more capital."

Vudu Accelerates OEM Plans

So it looks like Vudu will have to fast-track its OEM software model. We all knew that Vudu wasn't in the box-making business. "We're a software company first and foremost," Miranz says.

As any pure-play software vendor will tell you, though, you gotta make the boxes to prove the concept. "We've done that," Miranz says.

He says that Vudu is not exiting the retail or custom channels.

"Another generation is coming" for the retail market, according to Miranz. The barebones Vudu box retails for $299, but Best Buy always seems to be running some kind of promotion on it. Miranz says that an even lower cost product is in the pipeline.

On the custom side, Miranz says, "Our commitment to the CEDIA [custom electronics] market remains. We will continue to build for and innovate for that channel."

Vudu's most recent innovation for the channel is the XL2 box ($1,300), featuring a rack-mount form factor and much more integration options than the consumer product.

Back in November, Vudu national channel manager Mark Donnigan said the company had signed up more than 1,000 integrators, which of course is no indication of the sell-through in the channel.

So while Miranz says Vudu will still sell boxes, the company is "counting on other platforms to get us propagated. … We are going to try to piggyback on TVs, DVD players and other classes of devices."

The CE vendors, he adds, are lining up at Vudu's doors: "Right now, we're getting bombarded with inquiries. … Our job right now really is to pick and choose partners that we want to work with."

Does Vudu have the Steam?

When Vudu launched its IP-based VoD solution three years ago, the pickin's were still pretty slim.

But overnight, it seems, the studios have freed up their content, and dozens of new players – veterans and startups alike – are delivering viable options for video on demand.

Windows 7 Media Center promises a wealth of easy-to-find on-demand content.

Then there's cable, Hulu, Apple TV, Blockbuster, HDGiants, Amazon, Netflix, Digeo, Tivo and the plethora of CE devices that can stream from these and other providers.

Can Vudu compete with those juggernauts?

"At the end of the day, we are the premium play in the market," says Donnigan. "No one has challenged us there. So, is there room for a premium play?"

Vudu is banking on it.

The company still may be the only on-demand provider of 1080p/24 resolutions over IP.

Currently Vudu offers 1,300 titles natively encoded in 1080p HD.

Another plus for Vudu is its elegant user interface – but how long can the company sustain that advantage?

Miranz claims that Vudu is the only "high-grade, over-the-top" IP media streamer with "near-Blu-ray quality, high reliability and a phenomenal user experience."

For that reason, he says, "We have the highest RPU [revenue per user] of any video-on-demand in the industry … by orders of magnitude. The better the user interface, the higher the revenue per box."