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MovieBeam video service launches nationwide

With financial backing by Disney, Cisco and Intel, over-the-air service goes beyond traditional video on demand, for a price.

The MovieBeam video-on-demand service tested for several years by Disney in three small markets will be relaunched around the country on Tuesday, with new financial backing from Cisco Systems and Intel.

The service, which uses the wireless television airwaves to send movies to a hard drive in the home, is aimed at high-volume movie renters who want to avoid the hassles of video stores.

At $199 for the set-top box required for the service, plus a set-up fee, plus $3.99 to watch a new release, it's not a cheap proposition. But the newly independent company, now spun off from Disney, has nevertheless sparked interest from investors and big technology companies to the tune of more than $48 million in venture funding.

"Think of us as the back wall of the video store, where all the new releases are, but in a box connected to your TV," said MovieBeam Chief Executive Officer Tres Izzard.

Whatever its reception by consumers, the new MovieBeam has broken through a few of the barriers that have kept video-on-demand services as second-class digital citizens.

Former parent company Disney is breaking with tradition to allow movies to be shown on the same day they're released on DVD. That addresses one of the biggest complaints of today's on-demand services such as MovieLink or CinemaNow, which typically aren't able to show new releases until they've been in movie stores for weeks or even months.

Disney and Warner Bros. Entertainment will also provide high-definition versions of some films to the service, for people with HDMI connections to their televisions.

Those are potentially big plusses, but the high price tag is still likely to be a hurdle for many customers, analysts say. Movies are increasingly available through cable companies' on-demand services and elsewhere online, they note.

"I think it is challenging, because it is in an increasingly crowded space for distribution of movies," said Yankee Group analyst Mike Goodman. "I'm not a big fan of having to have a separate set-top box just to watch movies."

Matthew Howard of Norwest Venture Partners, a MovieBeam director, says the price tag isn't high compared with the ongoing subscription fees of older competitors like Netflix or cable company fees.

"Actually, I think we're less expensive than most other services," Howard said.

Beginning Tuesday, MovieBeam will be available in 29 of the biggest media markets in the U.S. Customers will be able to sign up for the service online or at big retailers such as Best Buy or Sears, and the company will send the set-top box, preloaded with 100 movies, by Federal Express.

The service will use spare television broadcast bandwidth, usually that of a local PBS station, to send data to the box. About 10 of the 100 movies stored on the drive will be replaced each week through this process, Izzard said.

Once the movies are stored on the device, customers can order them with a click of the remote control, and they will be immediately viewable for a period of 24 hours. New releases will cost $3.99 to watch, while back-catalog films will cost $1.99. High-definition films will cost an extra dollar.

The service will launch with films from all the major studios except Sony Pictures, which Izzard said is expected to join the service soon.

The set-top boxes will be co-branded with Cisco's Linksys division, and the two companies are working on a new product, Izzard said. He declined to provide details on that new project.

Originally unveiled in late 2003, MovieBeam initially charged a monthly fee to rent equipment, and was distributed only in three small test markets. Service in those markets was stopped last April in preparation for the upgrade and spin-off of the company.