Wal-Mart, the largest U.S. DVD seller, has jumped into the video on-demand services by acquiring struggling start-up Vudu, a service and set-top box that allows instant access to thousands of movies and TV shows without requiring a computer or cable/satellite TV service.

Both companies yesterday confirmed the deal, first reported by the New York Times, but neither would disclose financial terms. Though Vudu put itself on the market last year for about $50 million, sources told the Times the sale price was about $100 million – no doubt helped by rumored interest from Cisco Systems.

The deal gives Vudu – named one of Inc.com's 2008 Smartest Products – a new lease on life. The company's technology was revolutionary when it debuted in 2007, but it ultimately was unable to find customers willing to fork over $400 for its hardware before then paying $3.99 to rent a movie or $19.99 to own it. (After a series of price cuts, the hardware now costs $150 – still more than the similar Roku player, which sells for $99.) Trying to find its footing, Vudu last year put the hardware aside to focus on embedding its technology in HDTV and Blu-ray players. In January, the company announced deals with seven TV manufacturers – LG, Mitsubishi, Samsung, Sanyo, Sharp, Toshiba and Vizio – proudly saying in a statement that its product would arrive "on millions of devices" in 2010.

Of course, the acquisition also puts Wal-Mart – which sells 40 percent of DVDs in the U.S. – squarely in the race to keep pace with home movie market technology, something it has struggled with in the past. 
The retailing giant failed in its attempt to launch a Netflix-ish DVD-by-mail service in 2005, and ended up actually handing over its customers to Netflix. In 2007, Wal-Mart tested a movie download service with HP, but quickly shelved the project.

The deal comes after rival Best Buy announced plans to pair with CinemaNow to provide a digital content service on all compatible devices sold in its stores.

Vudu has licensing agreements with almost every major movie studio and dozens of independent and international distributors to offer some 16,000 movies at the press of a button. The films, available in high-definition, are up for sale the day they arrive on DVD. The service also has applications linking it to Facebook, Flickr and Twitter.

Eduardo Castro-Wright, head of Wal-Mart's US stores, said in a statement that the pairing of Vudu's digital technology and Wal-Mart's retail expertise and size would "provide customers with unprecedented access to home entertainment options as they migrate to a digital environment."

According to the statement, the acquisition will be made final in "the next few weeks," with Vudu becoming a wholly-owned subsidiary of Wal-Mart.