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Brakes Applied to MovieBeam as Disney Seeks Partners

10 Sep, 2004 By: Erik Gruenwedel

The recent halt to the projected three-city expansion of MovieBeam, the TiVo-like video-on-demand (VOD) subscription service launched last year in Salt Lake City; Spokane, Wash.; and Jacksonville, Fla., would not appear to signal a change of seasons for the nascent VOD market, according to industry observers.

MovieBeam parent The Walt Disney Co. has said it issued the stay while it looks for strategic partners for its reported $68 million investment.

MovieBeam allows subscribers to download up to 100 films (at $4 per new release; $2.50 per catalog release) into a set-top box via over-the-air TV broadcast spectrums. Each film can be viewed repeatedly over a 24-hour period.

“MovieBeam's vision has always been to have a national footprint,” said Disney spokesperson Michelle Bergman. “What has happened is that we have been approached by a number of technology and consumer electronics companies about working with MovieBeam. We think it's important to have those discussions, make decisions about our device strategy and then continue rolling out after those decisions have been made.”

Liberally touted as an imminent threat to video rental, VOD services offered by cable operators have spearheaded the market.

Disney's reluctance to establish a VOD foothold on its own could provide an opportunity for satellite companies such as DirecTV and EchoStar to enter the fray, according to Michelle Abraham, senior analyst with In-Stat/MDR, Scottsdale, Ariz.

“Basically, [Disney] needs a set-top box with a hard drive in it,” Abraham said. “Disney doesn't send you the movies in real time like some of the cable operators do. Their VOD content is stored on a large server and then sent to you on a per-title basis.”

Abraham said Disney is currently absorbing the entire cost of the MovieBeam set-top box in addition to establishing an infrastructure in the areas it wants to offer the service.

“It's mainly a cost of the box product,” she said. “If they combined with DirecTV, for example, there would probably be some type of agreement where the consumer would incur some of the cost, and DirecTV and Disney would split the rest of the subsidy.”

DirecTV has 13 million subscribers.

“To a certain extent, it is a delay to their earlier plans. But it may be that when looking at the business plan, it made more sense to have partners and penetrate their customer bases,” Abraham said. “This may just be a re-evaluation.”

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