The move puts the retail giant on the cutting edge of the streaming video space, where it’ll compete with Amazon’s Video on Demand and the iTunes Store.

Wal-Mart also could choose to challenge Netflix, with its “free” Watch Instantly service, which comes with the standard snail-mail DVD rental packages.

Vudu streams its high definition content in 1080p, using the kind of state of the art equipment that few would associate with the Arkansas-based big boxer. Vudu’s customers can buy or rent the video titles.

The New York Times, which does a good job of tracking online video news, broke the Vudu story. Wal-mart pushed out a news release on the Vudu buy shortly thereafter.

Vudu’s on-demand service is built in high-definition TV sets and Blu-ray players from home electronics hardware makers such as Toshiba, Samsung, Sanyo, Sharp, Vizio and Mitsubishi.

BetaNews points out that Vudu is the only major streaming service to serve up adult content, via its deal with the AVN network. Wal-Mart, known for pulling CDs with dubious cover art, no doubt will take a hard look at that.

Update: Wal-Mart wasted no time in cleaning up the streets of Vudu. “After Dark” subscribers told told almost immediately that the adult movie services was being axed. The naughty vids were supposed to stop flowing within days, according to the email sent to the premium pervs.

The Vudu buyout, which had been anticipated, is expected to close in a few weeks, Wal-mart said. The price could be as high as $100 million, industry wags say — a ton of money for a small player in the relatively small online video industry. The asking price reportedly was $50 million.

Meanwhile, the Times reported that the iTunes Store is experimenting with renting network TV shows for 99 cents instead of the current $1.99 (for standard def).

And MediaMemo followed up on the move to monetize Hulu (at viewers’ expense) with speculation that its online video offerings could be available on the iPad only via subscription.

Criterion’s online video service started up about a year ago, serving up titles such as “La Strada,” “Grey Gardens,” “Au Revoir Les Enfants,” “Monterey Pop” and “M.” Vudu subscribers can access the films via their box or Vudu-ready TVs and Blu-ray players.

Pretty much everything released by the Criterion Collection is worth watching and owning, but so far the streaming movies contain only a few of the label’s greatest films. For every “L’Aveventura,” there are a a half dozen titles like “Fat Girl,” “Bombay Talkie” and “Hopscotch.” Feeling adventurous? Check out Chris Marker’s “Sans Soliel” or the thriller “The Vanishing.”

On Criterion’s “Online Cinematheque” site, the movies go for $5, but they appear to be $3 on Vudu. The advantage via Vudu is the movies stream directly to your television.

“The Criterion Collection has a long history of delivering the most significant movies of our times from the highest quality video and audio source files available,” press-released Alain Rossmann, CEO of Vudu.

Criterion co-founder Jonathan Turell said the label was “impressed with Vudu’s quality.” Indeed, there is an above-average selection of foreign films on the service, for example.

Of course the highest-quality source for these films remains Criterion’s newish line of Blu-ray discs and its current-version DVDs. But the more Criterion the better, so Vudu subs are plugged into a good thing.

Vudu, a pioneer in high-definition online video, also cut the price of its “Vudu XL” premium box to $499, from $999.

The BX100 still doesn’t come with wireless, so you’ll get a bit of a break on that kit, too: $20 off to the price point of $79.

Apple TV goes for $229, making the Vudu a strong option for those seeking another black block in the living room. Apple’s box has 160 gigs of storage, while the basic Vudu holds 250GB. Vudu says it has more than 13,000 titles, a convenient 1,300 of them in high-def.

Vudu cited a strong holiday season for the ability to make the big MSRP price cuts. The online video service ran a special in December that offered the player for $99 if you sprang for $50 in movie credits. This time, no credits but still the attractive $149 price.

“We are reaping the rewards of success in the retail channel over the holidays, lower component prices and higher movie revenues. The combination of these factors has enabled us to lower the price of VUDU and bring it within reach of more consumers,” said Vudu exec vp Edward Lichty.

Of course, once you own the box, it’s time to buy movies and TV shows. Your basic just-out-of-theaters movie title rents for $4 and sells for $20. Vudu has no monthly fee.

The Vudu box went for $400 a year ago, before a price cut to $295 in response to an Apple TV move.

The company’s line is that the layoffs were “just a normal process” for a start-up, which has to adjust to market conditions in the early lifecycle.

National dealer channel manager Mark Donnigan has made the rounds of the tech sites, denying any internal crisis and pointing out that Vudu is aggressively rounding up high-definition films to feed its premium set-top box.

Only four months ago, the New York Times hailed the online movie service under the headline “Vudu Casts Its Spell in Hollywood.” Perhaps, the author wrote, the black box meant a “goodbye to laborious computer downloads, sticky-floored movie theaters and cable companies’ much narrower video-on-demand offerings.”

Chris Watts, formerly of eBay, has just come aboard as CFO, with his predecessor leaving for “personal reasons.” The layoffs were reported as 16 or 18 staffers out of 100. At the same time, the Vudu jobs page cites various positions “coming soon” and eight current jobs in marketing and sales.

Vudu slid into the porno business earlier this month, partnering with AVN for VOD sales of SD and HD movies from Vivid, Hustler and Wicked, the big-name creators of adult content. Some tech bloggers cited that move as one of desperation, but it seems more like giving the heavily male early adopters what they want.

The layoffs come a few weeks after movie-download service Vongo bit the dust.

Download service Vudu, in its latest set-top box software upgrade (1.5), slipped into a model in which rentals can be extended beyond the 24-hour frame — for a price, of course. Certain, um, restrictions apply.

Call it a digital late fee.

So if you’re trying to muddle through the metaphysics of “Revolver” and time has run out, you’ll pay a buck less than the original price for the renewal (this can only be done once). That’s $2.99 for a standard extension. (You get $2 off on the high definition.) The renewal has to selected within a week of the first expiration. Then you have 30 days to re-engage with the video. Once you’ve hit play (again), the movie can be viewed for up to 24 or 48 hours, depending on the film.

Of course Vudu consumers pay something like $300 for the box. To start with.

Vudu, to its credit, probably achieved some kind of breakthrough with the studios in getting them to agree to this. The 24-hour cap is a prime source of grumbling among you early adopters — like a return to the bad old days of Blockbuster late fees.

Still, it’s hard to get too excited when you’re paying twice for the same movie to be watched once. And that combined price is almost as much as buying the film from, say, Apple’s iTunes Store download service.

The studio-mandated 24-hour rule is another of those head-shaking eyeball-rolling policies from the old-media elite in Hollywood. My geezer ears are hearing Peter, Paul & Mary: “When will they ever learn, when will they eh-ver learn?”

The Vudu box had sold for $399, although last fall you could get one for $250 as a special deal. The new price includes shipping.

Vudu’s “Bourne Identity” special continues, for now: buy a box and get the first two movies in the trilogy on HD, as permanent downloads.

The Vudu box comes with a 250 gigabite hard drive, good for about 100 SD movies. Output via HDMI goes to 1080i/1080p24.

There is no monthly subscription cost but you do have to pay up front, using an automatic credit card charge to keep, say, $20 in an account. Then your rental movies cost $3.99 for new releases (30 days max/24 hours once started, same as iTunes rentals). Purchased movies, when available, run up to $20. Here’s the movie set-top box’s FAQ.

The new-breed Apple TV looks like a serious threat to Vudu at $229, given its many synergies with iTunes and the Internet. Stay tuned for more Vudu discounts and program revisions.

Read the Vudu service review from our friends at last100.

Sponsored link:

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Hulu, the new online video site from NBC Universal and News Corp., is operating at least somewhat in the spirit of the web. Its beta search function produces hits on shows from rival networks such as CBS, ABC and A&E. Advertising Age has the Hulu story. …

“Why are fewer viewers watching the new fall television series?” the New York Times asks. “Perhaps because they are too busy watching video online.”

More Hulu: NBC Universal vows something like 3,600 hours of Olympics coverage on its nbcolympics.com video site, most of it live. That’s the spot to check out the weird Olympic sports like badminton that no one will touch on network TV. Oh yeah, the network said, some clips might will find their way to Hulu, the New York Post reports in a story on online Olympics ads. The B-status doesn’t sound good for Hulu, Silicon Alley Insider reports.

Miro, the new open-source video player, was released midweek. TechCrunch lists the advantages over Joost thusly: “Miro is open-sourced, DRM-free, friendly to all content creators, connected to all the popular video sharing sites like YouTube and blip.tv, high definition, full of content, and BitTorrent-enabled.” Mark Hendrickson calls it a “purer” player worth checking out.

High-definition: YouTube plans to serve up HD videos in the next few months. Reel Pop says streaming HD movies would contribute significantly to the video playground’s overhead costs. Meanwhile, Vudu, the set-top box download system, is conjuring up high-definition titles from Paramount and Lionsgate. The P2P-driven player went on sale last month. Read some of the early reviews on Vudu.

AT&T’s investment in Vobile — maker of “VideoDNA” technology for tracking videos as they cross networks — could lead to the telco blocking subscribers’ dubious downloads, Silicon Alley Insider speculates. Bitstreamers could counter with a shift to VPN services, the site says. Virtual private networks keep the snoops away from your online streams — but anyone who’s wrassled with one of these pain-in-the-ass connections would seek other remedies.

The eSATA drive — going by the tag of My DVR Expander — bulks up the TiVo’s storage capacity by 500 gigabytes. That’s roughly 600 hours of standard definition or 65 hours of high-def programming, TiVo says. The hard drive has to be bought at Best Buy or on TiVo’s web site, apparently.

All of the four upgrades announced earlier this week are limited to networked-in owners of Series 3 DVRs.

The DVR pioneer also unveiled a multi-room viewing feature, in which the advanced TiVo boxes can stream content to another TiVo box, including Series 2 (sorry, SD only to the 2s). The boxes must be part of the home’s Internet-connected computer network.

“TiVo to Go,” another it’s-about-time feature, allows programs to be ported over to PCs. From there, the video files can watched elsewhere or burned to blank DVDs. Yes, that means they can be sent to iPods and other handheld devices. The PC needs TiVo Desktop software for Windows, Roxio Toast 8 or, for Macs, Popcorn 3.

TiVo also has joined Vudu in the progressive-downloading game. Instead of waiting for movies or TV shows from Amazon Unbox to fully render before playing, owners of TiVo’s high-end boxes now can launch the video files as downloading progresses.

(This capability is one of Vudu’s main sales pitches. The 2-month-old service just lowered the price of the Vudu box from $399 to $250, taking a cue from Steve Jobs.)

Here’s the word on how the TiVo progressive downloading is supposed to work, direct from the company’s antenna-wearing PRists:

When a download begins, the TiVo box checks the speed of the download, and calculates whether you can begin playback. If the download speed is going faster than playback speed, it will let users start playback immediately.

If the download is slower, it will wait until users have enough of the program “buffered” on disk to be able to play it from start to finish without hitting the end of the buffer, and then let you start playback.

None of these are breakthroughs, except in the TiVo universe. While well past due, it’s good to see the upgrades, which signal to company is working hard to justify its existence.

Read the TiVo press release.

Silicon Valley’s Vudu made its debut a few weeks back, offering thousands of studio films in a box (sort of). Actually the movies stream over the Internet, summoned by an impressive menu set-up.

Unlike Vudu’s high-profile competitors, no outside PC or game system is required. Just a $400 (ouch!) Vudu box. (UPDATE: The price was cut to $250 in late October.) Here are some of the early reviews, summarized.

Daniel Langendor got his hands on a Vudu set-top box and did a weeklong test drive. His findings were posted in a Vudu review on last100.com

Plus:

“Setup is as easy as hooking up an AppleTV.

Vudu’s remote is functional art that’s a joy to use.

The quality of the video was as good as any DVD I own.”

Minus:

“You need an Ethernet connection near your television.

Vudu’s (movie/TV) selection is erratic and hard to figure out.

You pay for your movies in advance rather than pay-as-you-go.”

Gizmodo did a similar piece last month. Here’s what Wilson Rothman had to say in his Vudu walkthrough and review:

Plus:

“I love browsing and watching movies on this thing—the instant gratification is awesome!

I never once had more than a tiny video hiccup. … And the picture looks stupendous.

Vudu’s remote is incredible, with five buttons and a clickable jog dial that you can intuit in record time.”

Minus:

“Vudu is selling these things for $400. So you can pay more money to buy or rent movies from them.

You could save the money by connecting your PC to your TV and renting from CinemaNow or Movielink.

there just aren’t enough good hits when you go searching.”

Then there’s CNET’s review of Vudu:

Plus:

“Closest thing to ‘Netflix in a box’ that we’ve seen to date.

Solid movie selection includes major Hollywood studio titles in the same week they hit DVD.

Very good video and audio quality.”

Minus:

“Can’t stream media from networked PCs.

No built-in Wi-Fi.

Rentals limited to 24-hour viewing period.”

Download Movies 101 won’t be an early adopter on this system — we still wake up in a cold sweat thinking about MovieBeam — but frequent video renters would do well to consider Vudu as an alternative to long lines and mailbox watching.

The Vudu box looks like the real deal, with HDMI ouputs (1.1) and 1080p/24 capabilities. (Check out the specs). Still, all of the reviewers complained about the price of the box, so give this a try:

If you decide to buy a Vudu box, enter the code VUDUROCKS during checkout. Should be good for $100 off.