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MovieBeam HDTV Service Hits Retail Shelves

MovieBeam, a stand-alone video-on-demand service tested by The Walt Disney Co. two years ago, resurfaced Feb. 14 selling its standard- and high-definition movies through key retailers in the top 29 U.S. markets.

The service, which will be gradually rolled out to other markets, 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. It is also one of the first video rental services to deliver a selection of new releases day-and-date with DVDs.

“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.”

MovieBeam originally ran a trial of the service delivering movies over the air to the home two years ago. 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 offering 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.

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. Parts of each digital movie file trickle out over the air until the entire film is collected in the box.

Each box has a remote control and a small rectangular indoor antenna. The datacasts are collected and stored until a total of 100 movies are available for playback at any one time.

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.

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 also agreed to supply HDTV to the service, said Crabill.

“We are the first video-on-demand 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 player will up-convert standard-definition titles to 720p over the HDMI outputs for HDTV displays.

“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 in the Windows Media 9/VC-1 compression format.

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

Although each set-top box has component video outputs, high-definition titles will be shipped only over digital HDMI connectors with HDCP protection, according to MovieBeam.

HDTV movies are converted to 480p format 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.

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 until its recent launch.

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.

For the rollout, MovieBeam is distributing its service through Best Buy, CompUSA, Sears and a handful of regional chains, in addition to its own Web site. 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 that as part of its investment, his company is co-branding the set-top through a one-year exclusive arrangement.

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

MovieBeam was designed to be compatible with a host of other devices including PCs. 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.