Disney rethinks video-on-demand

/ Source: The Associated Press

The Walt Disney Co. has postponed an expansion of its video-on-demand service while it explores partnerships that could result in a deal to include the service in set-top boxes, computers or other devices.

Disney launched its MovieBeam service in three cities last September and had hoped to add three more cities by the end of this year with a national rollout as early as next year.

The service transmits movies using a technology called "datacasting" that sends a stream of data over the same broadcast signal used to transmit television programs.

The movies are stored on a hard drive in a MovieBeam box, which comes pre-packaged with 100 feature-length films.

Disney has deals in place with nine studios to offer movies a few weeks after they have been released to video rental stores.

Disney may continue offering MovieBeam as a standalone service. But other companies, including cable providers and satellite television companies, are looking to video-on-demand as a lucrative offering.

Movie lovers can also download films from such nascent Internet sites as MovieLink and CinemaNow.

A partnership between Disney and another company could allow MovieBeam to expand faster than planned.

"We will postpone the expansion into three additional markets until we resolve exactly what our device strategy is," said Salil Mehta, Disney's executive vice president of corporate business development.

The most likely partner for Disney would be News Corp.'s DirecTV satellite service, said Gerry Kaufhold, an analyst for research firm In-Stat MDR.

"I don't think MovieBeam puts the cable guys out of business," Kaufhold said. "But it gives DirecTV the opportunity to deliver video-on-demand quickly."

Cable companies have marketed such services heavily, especially as they battle for customers against satellite television companies. Video-on-demand, which allows viewers to rewind, pause and fast forward films, requires the kind of high-speed data capacity that satellite services do not yet have.

Being able to offer a video-on-demand service would boost DirecTV in the fight for customers, Kaufhold said.

"Having a video-on-demand capability makes their product look sweeter," he said.

MovieBeam could also be attractive in international markets such as India and China, where cable television is almost nonexistent, Kaufhold said.

Disney said it will upgrade the service in its three test markets of Salt Lake City, Jacksonville, Fla., and Spokane, Wash. The service will soon include free content, such as short films, as well as move trailers.