Wal-Mart Stores will buy the Vudu movie service in a deal that puts the world`s largest retailer in competition for online delivery of films with the likes of Netflix, the New York Times reported.

The Santa Clara, California-based start-up has thousands of movies from all the Hollywood studios, which it delivers to consumers via the Internet, according to its Web site. Its investors include Greylock Partners, Benchmark Capital, Artis Capital and other institutional firms.

A Vudu spokesman declined to comment immediately, but said the company was working on a response to the report.

The New York Times reported that Wal-Mart, one of the world`s leading DVD sellers, and Vudu have began informing Hollywood studios and television manufacturers of their deal.

Representatives from Wal-Mart could not be reached for comment.

Netflix offers Web streaming through its "Watch Instantly" service, boasting about 12 000 titles. But most of the films are older Hollywood titles, because major studios have been reluctant to make new releases available for digital streaming.

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