The beginning of the end for Wal-Mart’s short-lived online movie download business came when Hewlett Packard announced that it was discontinuing the technology that powered the service.

HP spokesman Hector Marinez announced the move to discontinue the merchant services that provide video-only downloads.  Marinez said the business had failed to meet expectations and that HP had finally decided to pull the plug.  He characterized the online video business as uncertain and rapidly changing, and emphasized that the market is too volatile for HP's continued involvement.

Wal-Mart, left without a service provider, made the inevitable decision on Thursday to pull the plug on the service, less than a year after its inception.  Wal-Mart spokeswoman Amy Colella announced that while the retailer would obviously continue to sell physical DVDs online and in-store, Wal-Mart was out of the download business for good.  She declined to reveal any specific sales figures about the floundering service.

One complaint was the service's restrictiveness.  The service would only allow the purchased movies to be played with Microsoft’s Windows Media Player or the Wal-Mart Video Download Manager and could not be played on any computer besides the one where the content was purchased.

Still, with its market power, Wal-Mart was expected to turn the world of online movie download services such as iTunes and Microsoft LIVE upside down.  Wal-Mart was the first to offer downloads within the same day of physical release, which was thought to be a valuable key to success.  In the end its February debut fizzled out to a whole lot of nothing.

Wal-Mart was in the online video rental business two years ago, which it also pulled out of, directing its former customers to industry leader Netflix.

In 2006 online movie downloads only accounted for 1% of the $24.5 billion DVD and home video market.  Analysts expect this figure to dramatically show, but as the death of Wal-Mart’s service illustrates, the outlook may not be as cheery as some would like to imagine.