Wal-Mart discontinued its video download service on December 21 with little fanfare. Users will be able to keep their purchased movies and television episodes but, as before the shutdown, can’t transfer them to other computers.

Reuters was first to report on the news today, nearly a full week after the shutdown. Guess not too many people were using the crippled service, which offered a wide variety of titles but only worked on Windows, with limited portable devices (not even the Microsoft-made Zune), and didn’t allow for burning videos onto CDs or DVDs for playing anywhere else than the computer on which they were downloaded.

Back in February, the store had launched to great fanfare, with 3,000 movies and TV shows available, compared to the 1,000 or so available on Apple’s iTunes, and studios agreeing to release new movies online on the same day they come out on DVD.

Perhaps Wal-Mart customers aren’t savvy enough to deal with the inevitable problems that arise from such a limited service. The store helpfully states alongside the shutdown notice on its home page, “To avoid seeing this message in the future, please delete this page from your favorites.”

Wal-Mart reportedly shut the store after its technology partner, Hewlett-Packard, discontinued its video download tools due to poor returns. paidContent points out that HP had announced 30 new customers for its video tools just two months ago. Apparently something changed since then.

Even Google wasn’t immune from the hardships of launching a paid video service that didn’t fit the market; it shut down its video-selling business in August. Just last month, AOL suspended its own paid download service and outsourced it to Amazon.

So are paid download services the problem, or something else? I’m inclined to say it’s the crappy incompatibilities, limited libraries, and crippled portability to the living room or handheld devices that prevent even interested customers from a seamless paid video experience. Not to mention there are pretty good alternatives. Tech-savvy people will go to BitTorrent; tech-lite people will go to the movie store (or Wal-Mart proper). Both are usually cheaper.

But maybe there is something inherently wrong with paid video. What do you think?