The Walt Disney Co. launched its direct-to-consumer MovieBeam service last week in Jacksonville, Fla., Salt Lake City and Spokane, Wash., using the terrestrial signal of local TV stations to transmit movies to MovieBeam receivers within consumers' homes.
Samsung Electronics Corp. makes the receivers, which Disney rents to consumers for $6.99 a month. New movies cost $3.99 to rent, with full pause, rewind and fast-forward capability. Old releases rent for $2.49.
Consumers have 24 hours in which to watch the movie. The receiver contains a 160-Gigabyte hard drive, which Disney says can store 100 movies.
"We're going after a very specific target," said Buena Vista Datacasting senior vice president and general manager Tres Izzard.
The target: "People who love movies and rent a lot of movies. They love the convenience of MovieBeam and the ability not to go to and from the video store."
Izzard said these consumers typically spend $15 a month in late fees alone, which more than justifies the $6.99-per-month lease fee. That target audience, Izzard said, is as large as 30 million homes.
Why is Disney leasing the receivers? "The goal is to make this service affordable," Izzard said.
MovieBeam plans to expand to most major markets in 2004. Ten ABC owned-and-operated stations will transmit movies via a secure data stream as part of their over-the-air signal to the Samsung receivers.
Elsewhere, ABC will use PBS stations to transmit the movies.
Disney said the costs to outfit existing broadcast-tower transmitters to send out the MovieBeam signal will be $250,000 per market.
"All the content is encrypted," Izzard said. The movies themselves are digital data bits sent within the station's analog signal. No line of sight to the consumer's home is required, Izzard said.
"The receiver has smart card-like technology built in," he added.
The receiver itself has a small airplane-like propeller antenna, which receives the signals. Izzard said consumers will be able to see the service at Sears, Best Buy, Circuit City and Ultimate Electronics, among other retailers.
Consumers can sign up at those stores or through a Web site (www.MovieBeam.com).
Disney said it will ship the MovieBeam receiver, remote control and small antenna within two days, via Federal Express.
The receiver plugs into a standard wall outlet for power and into the back of a TV, just like a DVD. The device also plugs into a telephone line. The Samsung receiver places a phone call every two weeks to report back to Disney as to which movies have been watched, for billing purposes.
Izzard said the set-up process shouldn't take longer than five minutes. Once the MovieBeam box is turned on, a menu screen appears on the TV, showcasing a list of movies, box cover art and ordering information.
"The video channel will play trailers and lets you know what's on," Izzard said.
The screen will highlight the top 15 movies on the service, with rankings based on box office receipts.
"All studios are treated equally," Izzard said. The guide allows viewers to choose movies by category, title, actor, director or rating. Parental controls and weekly spending limits are also available.
All the major studios — DreamWorks SKG, Metro-Goldwyn-Mayer Inc., Miramax Films, New Line Cinema, Sony Pictures Entertainment, Universal Studios, Warner Bros., 20th Century Fox and Walt Disney Studios — are supplying product to MovieBeam, except for Viacom Inc.'s Paramount Pictures. All movies are released in the VOD window.
Disney said the service will always feature 100 movies on the receiver's 160-Gb hard drive. "The box is loaded with a hundred movies" when it's shipped to consumers, Izzard said.
Ten new movies will be sent out each week, replacing 10 older titles on the service.
"Each batch of new movies will be sent to every Samsung receiver and will be stored there for consumers to view," Izzard said.
To some, MovieBeam is an ultimate end run around various platform providers — home video stores, cable and even direct-broadcast satellite. But Disney views it as just another opportunity for movie lovers.
"This is about providing a great movie service," Izzard said. "MovieBeam is an additional way for consumers to get movies. For us, it is additive and appeals to the segment of consumers who love movies."
MovieBeam is an outgrowth of several broadcaster attempts to develop new over-the-air services using new technology. Disney is using underlying datacasting technology from DotCast to transmit the service.
Some analysts covering cable VOD vendor stocks weren't overly concerned with MovieBeam.
"We expect Disney's new MovieBeam service to spark more aggressive VOD deployments by cable operators," Erik Zamkoff, an analyst with Independent Research Group, wrote in a research note last week.
"We see a limited market for a standalone box primarily for movies," he added. "VOD gives consumers more choice in an interactive format."