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Disney to Test MovieBeam in Salt Lake City

Disney to Test MovieBeam in Salt Lake City

Posted - May 20, 2003 at 8:27 a.m.



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LOS ANGELES (AP) -- The Walt Disney Co. will test two technologies this fall -- movie downloads and self-destructing DVDs -- designed to broaden the distribution of its films and boost profits by cutting out the middleman.

The first service, called "MovieBeam," will beam films to consumers through thin air to boxes atop their TVs.

Disney will launch it in Salt Lake City and two other markets yet to be announced. Viewers will need to rent set-top boxes available at consumer electronics stores that plug into a television like a DVD player.

Pricing of movies will be similar to a rental at a video store.

Viewers will be able to watch a rented film as many times as they wish in a 24-hour period.

MovieBeam intends to offer another alternative for movie fans who can now get video-on-demand from cable companies or via Internet through such services as Movielink.

In August, Disney will also begin selling self-destructing DVDs that will allow viewers to buy a movie such as "The Hot Chick" for slightly more than a video rental. Once the package is opened, the DVD can be played for 48 hours, after which a chemical is released that renders the disc useless.

Both systems, Disney says, are designed to eliminate the inconvenience of visiting a video rental store, such as Blockbuster, to rent and return movies.

Disney says it will continue to distribute films through a number of platforms, including the Internet, cable and video rental stores. Blockbuster may not be too worried about MovieBeam because it is making an increasing amount of money on DVD sales -- and MovieBeam does not plan to make films available until after they have debuted in video stores.

With the rising popularity of DVDs, movie studios are more interested in keeping a bigger slice of the pie. In Disney's most recent fiscal quarter, for instance, revenue from worldwide home video sales contributed the only bright spot as profits from its theme parks, television networks and consumer products divisions all lagged.

"Unlike cable video-on-demand, where the customer gets VOD from his or her cable operator and the studios get paid a wholesale fee, this is a direct-to-consumer retail service where the consumer builds a relationship with us," Peter Murphy, Disney's chief strategic officer, said of MovieBeam.

MovieBeam could allow Disney to reach nearly every home in the country with its signal, giving it an advantage over Web-based systems that only work for subscribers of high-speed Internet through cable or DSL modems.

But with so many households already wired with cable or satellite boxes, VCRs and DVD players, Disney could have a tough time convincing consumers to try its new service.

"It's very hard to see how consumers will make room for that alongside what they've already got," said Josh Bernoff, an analyst at Forrester Research.

Disney officials declined to say how much the company was spending on developing the MovieBeam service, which has been in the works for two years.

Video-on-demand allows consumers to watch movies any time of the day and fast forward, rewind or pause just like a video.

For MovieBeam, a technology called "datacasting" is used that sends a stream of data over the same broadcast signal used to transmit television programs. The data stream can only be received through a MovieBeam box.

While datacasting has been talked about for years as a niche delivery system for data and content to the home, no major company before Disney embraced it. Disney will use technology developed by Dotcast Inc.

The boxes will come pre-loaded with 100 films, and Disney will datacast about 10 new films each week using equipment attached to television transmission towers, most likely those of its own ABC network affiliates. A phone line will allow Disney to collect data and bill for movies rented.

The technology will be designed to discourage hackers from removing the hard drive and hooking it up to a computer in order to send movie files over the Internet.

Disney hopes to have deals to carry movies from other studios in time for the fall launch, according to people familiar with Disney's plans.

"I don't see the other studios being excited about helping Disney build a new distribution platform," Bernoff said.

Ultimately, the marketplace will decide among the competing video services, said Steve Brenner, president and chief executive of inDemand, a company that provides video-on-demand services for several major cable companies.

"In terms of who has the better mousetrap, I like ours." he said.

(Copyright 2003 by The Associated Press. All Rights Reserved.)

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