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MovieBeam HDTV Service Comes To Retail

Burbank, Calif. — MovieBeam, a stand-alone video-on-demand service tested by The Walt Disney Co. two years ago, resurfaced today with an announcement that it has taken its offering to retail.

The service is billed as a low-cost, easy to use and set up system that delivers “the back wall of a video store” to the home electronically on a pay-as-you-go basis, without the need to return discs or tapes to a store or a mailbox.

“Of the $10 billion that are spent on video rentals each year in the United States, a vast majority of those are done in the video rental store,” said Carl Crabill, MovieBeam’s sales and marketing VP. “That’s our target. Almost every one of the video renters today has some kind of a video-store horror story.”

Netflix, he added, is an improvement over the store model, but it still has problems with titles being out of stock, scratched discs and the need to mail discs back.

MovieBeam originally surfaced as a trial service delivering rental movies over the air to a set-top box in the home. Its model has been improved to include both standard- and high-definition movies, an assortment of titles released day-and-date with DVD releases and a subscription-free model that lets users rent movies for 24-hour viewing periods for $1.99 for catalog titles and $3.99 for new releases. An extra $1 fee is charged for HDTV titles.

Users must purchase a set-top box for $199 after a $50 rebate and pay a $29.99 activation fee. The box needs to be connected to a telephone jack, periodically, but there is no need for a broadband connection.

MovieBeam will cache 100 movies – both catalog and new releases – for playback at any time to a 160GB hard drive. The company said titles will be supplied by most major Hollywood studios, including Disney, 20th Century Fox, Lions Gate Entertainment, Universal Pictures, New Line Cinema, Paramount Pictures and Warner Bros. Studios.

Sony Pictures was not among the participating studios.

Among the first titles available on the service will be: “The 40-Year-Old Virgin: Unrated Version,” “Wedding Crashers,” “Flight Plan” and “March of the Penguins.”

Disney and its affiliate studios agreed to supply MovieBeam with new releases from its Disney, Miramax and Touchstone studios day-and-date with new DVD releases. Those studios and Warner Bros. have agreed to supply HDTV to the service, said Crabill.

“We are the first video-on-demand video service ever to get day-and-date content rights from a major Hollywood studio,” he added.

Ten movies are delivered to each unit’s hard drive each week, and 10 titles are removed at the same time. At least 10 of the titles on the hard drive at any one time will be offered in 720p HDTV format for people who own HDMI/HDCP-enabled HDTV displays. The remaining 90 titles are offered in standard definition.

For HDTV owners, the MovieBeam player will up-convert standard-definition titles to 720p over the HDMI outputs. MovieBeam uses Windows Media 9/VC-1 compression for its content, the company said.

“We believe that 720p offers a great high-definition movie experience,” said Crabill, adding that MovieBeam encodes all of the titles used by its service.

A wide selection of connection ports are offered including HDMI/HDCP, component video, S-video, composite and audio connection ports including digital coaxial, SP/DIF, HDMI and left/right stereo audio.

MovieBeam supports Dolby Digital 5.1, widescreen formats and closed captioning, as features spending limit and parental controls.

Careful steps were taken to ensure movies cannot be illegally copied or transmitted over the Internet, Crabill said.

Although each set-top box has component video outputs, which could be made capable of relaying digital signals in unprotected analog form, the HD titles will be shipped only over digital HDMI connectors with HDCP protection, according to MovieBeam.

HDTV movies will be converted to 480p format over when shipped over the analog component video jacks, Crabill said. Files are also encrypted using the Windows Digital Rights Management system for future networking applications that may evolve.

Each box has a remote control and a small rectangular indoor antenna that is used to receive the broadcast signals. The datacasts are collected and stored until a total of 100 movies are available for playback at any one time.

Disney first announced MovieBeam two years ago as a trial program conducted in Salt Lake City, Jacksonville, Fla., and Spokane, Wash. Although the company said the trial went very well, the service was kept dark and has not been heard from until today.

In the meantime, Disney spun off the venture, keeping a stake and garnering investment partners including Cisco Systems, which co-brands the set-top equipment through its Linksys subsidiary; Intel; and tier-one venture capitalist firms Mayfield Fund, Norwest Venture Partners and VantagePoint Venture Partners.

Unlike a number of IPTV ventures that are offering video streaming or download services over the Internet, MovieBeam is broadcasting movie data over the air to TV set-top receivers using portions of the analog NTSC broadcast spectrum of PBS affiliates. The datacast system, which was developed for MovieBeam by Dotcast, is able to efficiently transmit large volumes of data over time.

Parts of each digital movie file trickle out over the air a little at time until the entire film is collected in the box. MovieBeam transmits each movie at least three times to ensure the files arrive in their entirety.

MovieBeam began selling the set-top boxes today in the country’s 29 largest markets through its Web site and through a number of CE retail chains including Best Buy, CompUSA, Sears and a handful of regional chains. The company is also talking with both Circuit City and to carry the product.

Retailers earn an undisclosed commission, which MovieBeam calls “a bounty,” for signing up customers to the service. MovieBeam boxes are shipped to each purchaser two to four days after signing up. This allows the company to download 100 movies on each unit’s hard drive, complete with the most recent week’s lineup, to simplify setup and enhance the user experience, Crabill said.

“We value our retail relationships,” Crabill said. “We know they are key to our success, and that was demonstrated to us through our market tests. People want to be able to go into a store and see and experience MovieBeam live.”

On sales floors, MovieBeam is supporting the system with a special kiosk equipped with a player and LCD screen. Also, a number of accounts are placing the player in home theater vignettes, Crabill said. MovieBeam is working on a program that will allow retailers to use the HDTV content on the hard drives for demos to sell HD sets, he added.

To promote the service, the company is advertising in various newspapers and magazines as well as on the Web. The service will also be featured in an upcoming Best Buy circular, Crabill said.

Chris Stevens, VP of Linksys’ new consumer electronics development unit, said his company is co-branding the set-top with MovieBeam through a one-year exclusive arrangement.

Linksys hopes the product will be the starting point in a family of in-home networking products planned for later in the year.

MovieBeam, which uses standard technologies, was designed to use PC-compatible digital movie files, and to be compatible with a host of other devices. Although at launch the player will not support networking, Intel and MovieBeam were said to be “collaborating to develop a USB peripheral that will, in the future, bring the MovieBeam service to other devices.”

Linksys’ Stevens pointed out that MovieBeam was designed to allow downloaded software upgrades to support future capabilities and functions. Included in each player are both Ethernet and USB 2.0 ports, which will enable broadband connectivity later this year, giving MovieBeam the ability to add additional content to the service, MovieBeam said.

As part of Cisco’s invenst in MovieBeam, Linksys, a home networking products leader, is exploring future joint development opportunities, Stevens said.