Vudu Debunks Rumors of Demise

Rumors of Vudu's demise are greatly exaggerated … if you believe Vudu.

The start-up developer of IP-based video on demand is "doing very well in CEDIA [custom electronics channel] and retail," says Tony Miranz, a Vudu co-founder in charge of sales and business development.

Rumors began swirling yesterday at RemoteCentral.com after several Vudu employees -- including Patrick Cosson, a co-founder and former VP of marketing – were dismissed. At the same time, dealers said they were caught in voice-mail hell and told that Vudu would only provide tech support via email.

Couple that with the fact that several reps have done poorly with the line, and it's no wonder that the rumor mill was churning.

I went over the rumors one by one with Mark Donnigan, national dealer channel manager for Vudu. Most of the allegations are completely wrong, he asserts.

Furthermore, Vudu has plans to launch exciting new services at CEDIA 2008, including more HD titles, HD over component video, and a lifetime warranty on downloaded content.

Rumor 1: Rampant Layoffs

It is true that Vudu recently laid off several staffers, including Cosson and Jez Hildred, formerly AV channel marketing manager.

But layoffs were nowhere the numbers suggested by rumor mongers, who estimated that up to 32 people were sacked. Donnigan and other reliable sources say that 16 to 18 of Vudu's 100ish employees were let go.

Donnigan says that the layoffs were "just a normal process" for a startup that has expanded so quickly. "We just have to figure out how to get back on track in terms of spending."

The official word from Vudu is this:

It is the normal course of business for fast growing startups to align resources to meet market opportunities. We are focusing on expanding distribution in retail as well as specialty AV partners and on broadening our product offering. We are aggressively hiring to support our market and product line expansion. We will continue to be aggressive in aligning resources to drive growth and to meet our business objectives."

Indeed, the company lists 19 open positions on its Web site – mostly technical positions, but four are listed in sales and marketing.

Rumor 2: Discontinued Phone Support for Dealers

Dealers and reps have reported that Vudu discontinued telephone-based support for dealers, and that all support would be provided solely through email.

"Not true at all," says Donnigan. "I can absolutely confirm that."

Although there seems to have been layoffs in the customer support area, Donnigan insists that dealers have not been relegated to email-only support.

He points to the ongoing efforts of Casey Benjamin, a senior tech support guy formerly from Kaleidescape. "He is highly regarded by dealers," says Donnigan.

Donnigan concedes, however, that "for other segments of our business we will probably transition to email only, like for consumers."

In fact, Donnigan says, the dealers that complained about phone support might simply have been caught up in Vudu's transitioning its consumer-oriented support. During the switch, he explains, dealers might have called and got the wrong message.

Rumor 3: Unrealistic Quotas for Independent Reps

Some reps have indicated that Vudu has been hounding them to sign up more dealers and sell more systems than is practicable.

Donnigan responds, "There's always some tension when you're trying to grow a business. … You're always going to be driving your [sales] team."

He adds, "I've got territories that are not only performing where they should be, but they're setting the pace."

Others, he says, are "struggling."

So far, Vudu has signed up about 750 dealers, each of which is required to buy a demo unit and two Vudu XL units for sale.

But have the dealers re-upped?

Donnigan suggests that the classic 80/20 rule applies, where 20 percent of the dealers are selling 80 percent of the units.

Rumor 4: Channel Product at Retail

We've heard from dealers and reps that Vudu was going to drop the price of its high-end "channel-only" Vudu XL settop box, and sell it through retail.

"That's not even close to true," Donnigan says. "We are preserving the XL, and will not give it to online distribution and mass-market channels."

He explains that Vudu will adopt a "more modular model, where we'll give dealers the opportunity to sell additional features as required. These features will not be available on the X100, the base-level box."

He adds that we can expect to see "really exciting things" at CEDIA Expo 2008. (Among the CEDIA debuts: HD over component video, lifetime warranty on downloaded content, 1,000 HD titles. See related story on Vudu at CEDIA.)

Rumor 5: No More Retail Product for Channel

Dealers and reps have indicated that they would no longer have access to Vudu's original, low-cost box, the X100.

That is true.

As of October 1, says Donnigan, Vudu is pulling it (the X100 only, Vudu emphasizes) out of the custom A/V channel, "all because we're trying to further provide dealers with products that they can make money on, rather than race to zero against Best Buy."

[update: Some folks have inferred from this comment that Vudu is reducing its emphasis on retail/mass-market channels. No way. Vudu must dominate the mass market to survive, and they are doing everything they can to move huge volumes of Vudu boxes.]

NEXT: What the resellers are saying

From the Mouths of Vudu Resellers & Insiders

Vudu dealers, reps, insiders, and others who claim to be "in the know" have plenty to say about the company. They just don't want to be identified.

Some of their comments and speculations have been called "completely wrong" by Vudu.

The Good

• The dealers who do have it really like it and are selling it, at least in my territory.
• Dealers are warming up and we expect to have a strong CEDIA show with Vudu.
• Vudu has not gone anywhere. There was a thinning out today most likely due to pleasing investors but they are in no way shape or form going out. Vudu has some very sharp people working for them and unfortunately one of those people left today as a part of the thinning. He will be missed.
• Adult programming has been a big hit with some of my dealers.
• Great product, decent picture, and you can almost control it pretty good.

The Bad

• It’s been slow to take off.
• The biggest weak point is the lack of purchasable hi-def content. If you sell a box that holds a lot of 1080p movies, people want to collect them. They don’t want to collect them in 480p. They probably already own the DVD version of the movie. (Vudu says it's working on this.)
• I got a call that all of the inside people were fired and tech support is only done via email now, with no phone support.
• I heard but have not verified that includes approximately 32 of their 37 employees including technical support, marketing and sales.
• Dealers bring [on the Vudu line] so there are tons of Vudu dealers but sell-through does not exist.
• Was bummed to see Jez and Patrick and everyone else I know get kicked to the curb.
• My 2 cents is they are either going to close or sell to a larger company.
• Every movie studio currently is upset with them because they have not sold even a fraction of what they planned to sell!
• The biggest problem has been the sell-through.

The Other

• [T]hat sucks if they go under, we just signed on about a month ago, but have yet to sell one. Apple TV doesn't have the control features, but the music and photos make it. Plus Media Center Extenders are easier now and the PPV features have promise to improve and offer a more Vudu ATV "like" experience.