Disney unveils video-on-demand service

Operated by wholly owned subsidiary Buena Vista Datacasting, MovieBeam offers users the ability to download movies from Disney and a number of other major studios for a $6.99 monthly equipment rental fee and a charge of $2.49 to $3.99 per film. The company said there will also be a one-time activation fee of $29.99 that's required in certain areas.

According to Disney, MovieBeam will feature 100 films that can be downloaded at any time, with 10 new titles rotated in each week. Once customers download a movie to the hard drive of the MovieBeam device--a set-top receiver that's manufactured specifically for Disney by Samsung--they gain access to the content for a 24-hour period. The service also features the ability to watch movie trailers and the option to set parental controls and employ weekly spending limits.

MovieBeam plans to launch this week in three cities--Jacksonville, Fla.; Salt Lake City; and Spokane, Wash.--and the company expects to introduce the service nationwide sometime next year.

According to Disney executives, MovieBeam is aimed squarely at the most frequent patrons of traditional video rental outlets. By offering pricing similar to that of rental chains, eliminating the threat of late fees and adding the convenience of in-home selection, the company feels that it can revolutionize the industry. Earlier plans for Disney's own video-on-demand service, in partnership with Twentieth Century Fox Entertainment, ended more than a year ago, when Disney pulled out of the project.

"The key targets are consumers in the heavy-renter class--people going to the video store twice a week or more," said Tres Izzard, senior vice president and general manager at Buena Vista Datacasting. "This is a more convenient way to mimic that behavior and avoid all the late fees and related logistics."

Although Izzard said Disney is focused solely on delivering movies via MovieBeam for now, he did not rule out the idea that the company could offer other forms of content, such as television programming or music videos, via the service in the future. The service will be sold through its own Web site and through retailers such as Best Buy, Circuit City and Sears.

To fill out the library of movies available via the service, Disney signed on a number of Hollywood film studios as partners in the effort. Among the other companies already involved in the project are Metro-Goldwyn-Meyer Studios, Miramax Film, New Line Productions, Sony Pictures Digital, Universal Studios, Warner Bros. and Twentieth Century Fox.

Industry experts observed that Disney brings clout to video on demand that has been lacking in other efforts to deliver content directly to consumers. Greg Ireland, an analyst at Framingham, Mass.-based IDC, said the MovieBeam package may have more potential than other set-top devices, such as the TiVo digital video recorder.

"Coming from Disney, this is something that has a lot more promise than other set-top boxes, and it really brings another different flavor to on-demand accessibility," Ireland said. "Even TiVo, which has had some success, doesn't have the mass market consumer visibility that MovieBeam will have immediately."

Ireland said Disney's movies-only angle, combined with the low cost of getting the service installed, would likely generate the interest of MovieBeam's target audience. The analyst also said the package will have a wider appeal to consumers than have services that deliver movies and other content to personal computers.

"It's a very TV-centric box. It doesn't face the same challenges that PC-based services have experienced, because the content is delivered directly to the living room," Ireland said.

According to Izzard of Buena Vista Datacasting, the MovieBeam signal will have a "significant" amount of encryption technology in place to keep users from trying to make their own copies of the movies they pay to download. IDC's Ireland doesn't believe that hacking should be a major problem for MovieBeam.

"You're always going to have people who try to hack this sort of system, but unlike device manufacturers, Disney has its own interests in mind here."

Earlier this month, Disney unit Buena Vista Pay Television announced a deal with CinemaNow, a service that lets people rent downloadable or streamed movies via the Internet. CinemaNow is marketing viewing for nearly 100 new Disney releases and library films, including those of Disney-owned studios Miramax and Touchstone Pictures. In July, Disney licensed some films to Movielink, a film distribution site five major studios back.