New Disney Video Technology

Discussion in 'Disney Rumors and News' started by DancingBear, Sep 29, 2003.

  1. DancingBear

    DancingBear DIS Veteran

    Jul 2, 2001
    From today's Wall Street Journal:

    No Late Fees: Disney Will 'Beam'
    Rental Movies Directly Into Homes

    Staff Reporter of THE WALL STREET JOURNAL

    With a new movie rental service called Moviebeam, Walt Disney Co. is betting that consumers' intense dislike for paying video-rental late fees will trump their resistance to attaching yet another electronic device to their TV sets.

    Disney Monday began rolling out Moviebeam, a low-cost effort to deliver movies from most of the Hollywood studios directly into homes, where they can be watched on demand. The service -- which is being launched initially in Salt Lake City; Spokane, Wash; and Jacksonville, Fla. -- works like this: Consumers pay a monthly fee of $6.99 to use a device containing a 160-gigabyte hard drive that holds 100 movies, which is plugged into the back of a TV set. A charge also is assessed for each movie that is watched. A phone line must be plugged in to the box for billing purposes. In one market Disney will experiment with a $29.99 activation fee as well.

    The Moviebeam box will be regularly refreshed with new digital movies that are delivered to it not via digital cable, satellite or the Internet but through the old-fashioned pipeline of broadcast airwaves. Manufactured by Samsung Electronics, the receiver has a small but powerful antenna that resembles a tiny propeller. Through a process known as datacasting, Moviebeam perpetually transmits movies to the device's hard drive in tiny bits of data that travel alongside the normal broadcast stream of a local ABC or PBS station, without interfering with regular TV broadcasts. While the service currently uses the analog broadcast spectrum, it is equipped to take advantage of digital broadcasts when they become more common.

    Disney's new service will use a Samsung box.

    Each film can be viewed for $3.99 for new releases or $2.49 for older titles, with DVD functionality that allows it to be paused, rewound and the like. The film can be viewed for a 24-hour period, and obviously doesn't need to be returned anywhere afterward. Moviebeam has deals to use films from all the major studios except Viacom Inc.'s Paramount Pictures. New releases will be available on Moviebeam about the same time they are on other pay-per-view services, which is several weeks after they are released to be rented or sold in retail outlets. Roughly 10 new titles will be added each week, replacing 10 older titles.

    Disney ultimately will invest more than $100 million in Moviebeam and the underlying technology, with plans to expand the service nationally next year. The project is just one of several Disney is pursuing aimed at delivering the entertainment company's content straight into homes without going through the gatekeepers that historically control access to distribution systems. Disney is also in discussions to offer branded cellphone service over existing networks, so that it could one day beam ESPN content, for example, to consumers' ESPN-brand phones.

    Disney strategic planning chief Peter Murphy says that new technologies like Moviebeam offer the company an opportunity to "not only create the content and package the content, but also deliver the content directly to consumers."

    Moviebeam, for instance, allows Disney to launch its own video-on-demand service without spending billions of dollars to acquire cable systems or satellite operators. Expanding the service further will cost Disney up to $250,000 per market in equipment to enable the local TV station to deliver the content. Because the capital investment is relatively modest, Mr. Murphy says, Moviebeam "can be as big as a cable network from a profitability standpoint." Disney plans later to use Moviebeam to distribute other kinds of content, such as TV shows or music.

    To get Moviebeam off the ground, Disney is aiming its ads at big video renters who are upset by how much money they spend on late fees. Disney says that about 10 million households rent eight or more movies a month; while they represent only 10% of U.S. households, they account for 43% of all video rentals. According to Disney's research, heavy renters report that they can spend up to $15 per month in late fees. Disney's marketing pitch is that it can save those people not just the cost of extra fees, but also the hassle of driving to a store.

    But in doing so, it is entering a crowded field of ventures that aim to do the same thing. Digital cable systems are increasingly pitching video-on-demand as a key feature. Meanwhile, Netflix mails DVDs to homes for a $19.95 monthly fee, without the pressure of due dates or late fees. And a consortium of movie studios is now operating Movielink, a service that downloads movies online that can be viewed for a 24-hour period after a film is initially started. Blockbuster Inc., which at one time derived about 15% of its revenue from late fees, is experimenting with in-store subscription plans that eliminate such penalties.

    And then there's the difficulty of persuading movie lovers to add a new device to an array of set-top boxes, TiVo personal video recorders, DVD players and other gear that is already too confusing for many consumers' tastes.

    Some analysts who have seen demonstrations of Moviebeam say they like the product, especially the simple plug-and-play design that makes the "out of the box" experience easy for consumers to navigate. Disney has also struck deals to market the product through retailers like Best Buy and Circuit City, using kiosks that emphasize the system's ease of use.

    The analysts also caution that the experience of TiVo and other products, which have low consumer penetration despite several years of marketing and good word of mouth, show how difficult it is to get a new venture like Moviebeam off the ground. "There are a lot of people fighting for those customers," says Adi Kishore, media and entertainment analyst for Yankee Group, adding that Disney is "going to have to nail" the marketing to break through the clutter.

    Salil Mehta, executive vice president for corporate new business development at Disney, says that Americans have added more than 250 million new devices to their lives since 1998, from game consoles to DVD players. He adds that when consumers find new products "that add value to their lives, they find space for it."

    Copyright 2003. The Down Jones Company

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