The battle for Internet movies: Apple vs. Walmart?

Apple is currently holding strong as the dominant company when it comes to selling movies online, as a new report from the research company iSuppli shows.

Apple’s iTunes is so far the number one service for selling movies—in the U.S., it accounted for 64.5 percent of all movie purchases online in 2010—but the company is going to have to deal with a new contender: Walmart.

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This is the prediction that iSuppli is making. Even though Walmart’s presence in the segment is minuscule now (it doesn’t even show on the charts yet,) the retail giant is not to be underestimated as it will become a major player if its momentum continues, according to research director Arash Amel of iSuppli.

“The company already represents a critical source of revenue for the major Hollywood studios because of its massive sales of Blu-ray and DVD movies—and now is expanding this business into the online realm”, says Amel.

The statement is not an exaggeration: Walmart generated over $3.5 billion in revenues to the studios through sales of physical movies last year.

Still, the online movie business could be a hard nut to crack for the retailer. Walmart began an aggressive push into the online movie business last year after it acquired Vudu, the online movie service. Walmart introduced a $0.99 promotional pricing on downloadable movies, and the service supports a variety of devices, like Sony‘s PlayStation 3, meaning it could be a go-to movie service across different platforms. Walmart’s eventual impact will be seen as it becomes more established in the arena, but it is sure to make waves.

As it is now, Apple’s toughest competition comes from Microsoft, which holds the number two position with a 17.9 percent market share. (Netflix leads the online movie rental business, and a subscription-based model or rental could be what the consumers are vying for, in the end.) Sony came in third with 7.2 percent, and there are others for Apple to watch out for, such as Amazon. However, Apple was the only service with a declined market share: the service went down from a 74.4 percent market share, while Microsoft’s share grew by six points, as did Sony’s, by 1.5 points to 7.2 percent.

[Photo credit: Robert Couse-Baker]