Rumor: Has Vudu just raised more than $40M?

We’ve heard a rumor that Vudu, a startup seeking to bring internet video to your television, has raised more than $40 million of funding. Our source says hedge funds are the likely backers.

I emailed the Santa Clara, Calif.-based company a few minutes ago, and I’ll update if they get back to us.

We haven’t heard of too many other fundings in this area, mainly because the market seems dominated by big players like Apple and Comcast. Vudu already raised $21 million back in 2005, so if the rumors are true, the company will have a pretty big war chest.

We’ve heard good things about Vudu — whose big selling point appears to be the speed of its peer-to-peer technology, and whose service launched last September — but it will definitely need all the money it can get to take on challengers such as Apple TV and Netflix (which later this summer is releasing a living room box in conjunction with LG). Earlier this year, Vudu dropped the price of its set-top box from $399 to $295 in a pre-emptive move to take on the newcomers.

The company may also be looking to expand its offerings: Recently, chief executive Mark Jung said he’s willing to “experiment with everything, save just two core things: the user interface and the ability to transmit high-quality video on the turn of a dime,” and that Vudu will try out ad-supported content, according to NewTeeVee.