The second largest US retail DVD player, Movie Gallery, must be desperate, because it plans to buy and invest a total of $10 million reviving the still flagging fortunes of the once Disney owned MovieBeam.
While we have been highly critical of MovieBeam for the past 3 years, as it ate up $100 million of Disney’s money, and has now perhaps eaten a further $48.5 million from an investment group that included Cisco and Intel, fundamentally we know that the technology works. Spare broadcasting capacity within the TV signals of terrestrial analog broadcasting, can be used to carry data as an unpredictable broadcast trickle. Over days it can provide enough capacity to deliver multiple films to set tops attached to free to air aerials.
There are issues here in that each TV signal is being moved during 2009 to a digital signal, and this will mean that all US broadcast channels will be compressed into around one sixth of the spectrum, but since most datacasting systems operate within the lines of a broadcast signal on the edge of viewing, this may not affect the MovieBeam system.
The data is actually carried by National Datacast, a subsidiary of the US PBS TV service, which can use more than 300 PBS Television stations across the country reaching around 98% of TV households in the US.
The failure of the service for Disney was mostly political and conceptual. It wanted a delivery mechanism which would prioritize its own films under its control, maximizing revenue for Disney, and it expected customers to pay for the set top as a retail proposition, pay for the service and then again pay for each film they saw, all of which is clearly to much and too confusing.
The set top was $250, the service activation fee was $30 and movies were rented at prices between $3.99 and $1.99.
Until Movie Gallery gives out its detailed plans, we won’t be sure if this is going to be another Disney style failure, or if it has a chance of becoming a genuine attempt at an movie download service.
There is no reason why a company like Movie Gallery needs to make much money out of this. It has existing retail subscribers that have to travel to and from its retail stores on a regular basis. It can subsidize the set tops, and give the service away for free, with some of the content also for free, and some paid for. If this was only available to those members paying a monthly fee for DVD rental, it could add appeal and therefore reduce churn among its existing customer base. That translates into real cash flow in these high churn DVD rental businesses, but it couldn’t have done that for Disney.
But what it must also do is fix the 100 film barrier that Disney set the system up for. While the set top has a hard drive to record up to 100 films, since these were broadcast, it meant that everyone had to have the ‘same’ 100 films. By putting a Ethernet link to the home’s broadband line and offering an Akimbo-like trickle feed over the internet as a narrowcast, Movie Gallery can also give a much wider choice of films. It should only mean a software upgrade to the set tops in the field and it could make it a genuine low cost, no effort movie subscription service.
That way the top 100 films could be broadcast, and a wider selection sent over the internet with perhaps a few hours notice or better still a pre-selection approach, whereby someone subscribes to the ‘Action’ or ‘Thriller’ service and gets additional material to the broadcast 100 films sent automatically over the internet. Customers could still have a few on demand selections too. One improvement might be to send the broadcast content as High Definition, something that MovieBeam said it was already experimenting with.
Movie Gallery said it intends to use MovieBeam’s existing infrastructure to underpin the development of alternative digital delivery capabilities and that means over the internet, which it actually specified. But then again the last round of funding specified that it would look at internet delivery so don’t be too surprised it you hear that this service quietly closes down in the coming months.
Movie Gallery has 4,600 stores throughout the US and the MovieBeam service is available in 31 major metropolitan areas across the US and recently the service cut a retail distribution pact with Radio Shack to put the set top and service on sale at 1,700 stores. Our guess is that Radio Sack found that the service just didn’t sell and cancelled the deal, and that the VCs involve took back most of their money, and that the last $48.5 million wasn’t spent, but partly returned, with the assets sold to Movie Gallery.
Presumably the distribution licenses for all of the big US studios remain in place.