By Gina Keating

LOS ANGELES (Reuters) - Wal-Mart Stores Inc quietly canceled its online video download service less than a year after the site went live, a company spokeswoman said on Thursday.

Wal-Mart shut down the download site after Hewlett Packard Co discontinued the technology that powered it, Walmart.com spokeswoman Amy Colella said in an e-mail. She added that it will not look for another technology partner.

HP spokesman Hector Marinez said the company decided to discontinue its video download-only merchant store services because the market for paid video downloads did not perform "as expected." He noted that the Internet video business remains uncertain and is changing rapidly.

Wal-Mart will continue offering physical DVDs for sale at its stores and online, but would not continue the online downloads business, said Colella, who declined to disclose the number of downloads sold on the site.

A message at www.walmart.com/videodownloads said the service was stopped on December 21 and Wal-Mart offered no refunds for the downloaded videos.

Videos purchased on Walmart.com can be played using the Microsoft Windows Media Player or the Wal-Mart Video Download Manager, but cannot be transferred to a computer other than the one used to download them, according to the site.

The giant retailer's foray into online video downloading began in February and was hailed by media industry experts as a "game changer" that could introduce millions of DVD buyers to the practice of downloading.

Wal-Mart was the first major retailer to partner with all of the major Hollywood movie studios and TV networks to offer downloads the same day titles were released on DVD.

Wal-Mart's attempt at downloading came two years after it pulled out of online DVD rental and directed its subscribers to Netflix Inc , and months after it protested Walt Disney Co's move to sell movies on Apple Inc's iTunes online music store at below-retail prices.

Download sales equaled about 1 percent of the $24.5 billion in DVD and home video sales and rentals in 2006, but industry experts expect downloads to grow to 10 percent within a decade.

The news of the Wal-Mart download service's demise comes on the same day that reports surfaced of an agreement between News Corp's Twentieth Century Fox and Apple to offer the first movies for rent at the iTunes store.

Shares of Wal-Mart closed down 1.3 percent, or 61 cents, at $47.77 on Thursday on the New York Stock Exchange.

(Reporting by Gina Keating, editing by Richard Chang)
© Copyright 2007 Reuters.