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.

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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.