MovieBeam Relaunches After Tinkering With Business Model
By Erica R. Davis, 2/14/2006
MovieBeam, the on-demand movie service pulled from the market roughly 10 months ago by Walt Disney Co., is taking on new life today with a syndicate of high-profile backers and a renewed business model.
The newly formed company officially relaunched its service Tuesday, expanding its national coverage and updating its technology with hopes of drawing consumers in the highly competitive movie rental market.
To do this, MovieBeam split off from Disney last month and raised a $48.5 million round from venture capital firms Mayfield Fund, Norwest Venture Partners, Vantage Point Venture Partners, as well as tech giants Intel Capital and Cisco Systems Inc. Disney's ABC television unit also kept a minority stake as MovieBeam's biggest shareholder.
Disney unveiled Moviebeam in 2003 as a proprietary movie service delivering movies to consumers with special TV-top boxes. The service included 100 movies at all times, with a rotation of 10 new movies delivered each week. Instead of an Internet or cable connection, the service used over-the-air datacasting, riding atop the analog broadcast infrastructure used with old-fashioned network television.
The service was originally tested in Spokane, Wash.; Salt Lake City, Utah; and Jacksonville, Fla. However, it was put on hold in April 2005 in an effort to upgrade the network and service amid reports that it may have had a tough time competing with movie companies Blockbuster Inc. and Netwflix Inc.
MovieBeam President and CEO Tres Izzard said that Disney took the service down because "we had to make decisions on where to focus resources."
Following the pull the company spent time expanding the proprietary datacasting service, which requires infrastructure, in preparations for its launch to 29 major metropolitan areas including New York, Los Angeles and Chicago.
Izzard declined to comment on the money MovieBeam lost before it was pulled. After suspending its service, Disney recorded a sizable impairment charge of $56 million during the fiscal year ended October 1, 2005, according to its fiscal 2005 annual report filed with the Securities and Exchange Commission in December.
Disney decided to refinance the company and embrace a broad investor syndicate that offers a wide variety of experience, said Norwest Partner Matthew Howard, who is a MovieBeam board member. "If they didn't think it was a good investment, they wouldn't have reinvested."
With the re-release of the service today, MovieBeam rolled out "day-and-date" rights, meaning it delivers movies on the same day the DVD comes out, a new development for the movie industry. "This is the first time on any VOD platform," Izzard said.
Declining box-office figures and slower growth in DVD sales, along with the emergence of new technology, have prompted talk of collapsing or eliminating the traditional windows between DVD and video-on-demand release.
The MovieBeam System is composed of a set-top box, a small indoor antenna and a remote control. It provides instant access to 100 new releases and popular favorite movies from most Hollywood studios. The selection changes by about 10 each week, and about 10% are being delivered via high definition technology.
MovieBeam's high-definition content is new, as is its business model of charging a fee per movie rather than per month. Movies will cost $3.99 for new releases and $1.99 for library titles. The service offer high-definition titles for an additional $1 instead of a monthly fee. The MovieBeam set-top boxes will be sold at retailers such as Best Buy Co. for $199.99 after a rebate, with an activation fee of $29.99.
"A lot of stars had to align before we arrived at this point today," said Kevin Fong of Mayfield Fund. The timing is on target for electronic movie distribution as movie studios have become more comfortable with the medium and with day-and-date release.
Fong likes the HD component to the service, since more and more people now own HDTVs. He also said investors Cisco and Intel will work with MovieBeam for additional hardware to work with the service. For example, the MovieBeam player is co-branded with Linksys, a division of Cisco, and features Ethernet and USB 2.0 ports that will enable a broadband connection later this year.
MovieBeam has content licensing agreements with Disney; News Corp.'s 20th Century Fox; Lions Gate Entertainment Corp.'s Lionsgate; General Electric Co.'s NBC Universal; Viacom Inc.'s Paramount Pictures; Warner Bros., and Time Warner's New Line Cinema.