An unlikely old-school player in video rentals is stepping up in the digital space. Movie Gallery
It's a good move for Movie Gallery. It's also a bargain for the same company that overpaid for the Hollywood Video chain in a bidding war with Blockbuster
It's not that I'm a believer in the MovieBeam product itself. It's a lousy model, in fact. Consumers pay $100 to $200 for a set-top box that comes preloaded with 100 movies. Owners can then rent any new release for $3.99 and view it over the next 24 hours. Using over-the-air "datacasting" technology, a few of the films are replaced on a weekly basis. That part is intriguing, because it means you don't need to tether the box to a broadband connection or home Wi-Fi system, as you do with most digital services. However, that feature hasn't been enough to offset the model's obvious shortcomings.
Limited selection, high up-front costs, and a clunky set-top box have held back MovieBeam's adoption rate. Several sources have also knocked MovieBeam's picture quality. The service was launched in 2003 by Disney
This doesn't mean that everyone bailed on MovieBeam. Back in November, Blockbuster even singled out MovieBeam as an "interesting model" by which to enter digital distribution. However, the dirt cheap MovieBeam acquisition price and Blockbuster's decision to supposedly chase after Movielink instead speaks volumes.
So why do I think this is a good fit for Movie Gallery? After all, Movie Gallery doesn't have the luxury to throw around even just $10 million at a maker of eventual paperweights. Well, I like the deal because MovieBeam's shortcomings may play into Movie Gallery's strengths.
Movie Gallery's retail presence, especially in rural areas that aren't as broadband-enabled as the rest of the country, is just what MovieBeam needs. Movie Gallery may be able to tackle the $100 price tag by renting the boxes out locally on a monthly basis instead. At the very least, Movie Gallery now has a technological platform to build on to make sure that it doesn't get lost in the digitally delivered future.
No one expects Movie Gallery to have much of a chance in a digital street fight against major players such as Amazon.com
A walk back in MovieBeam history:
- Disney rolled out the service in the fall of 2003.
- Disney was also testing disposable DVDs at the time.
- Blockbuster gave props to the MovieBeam model just four months ago.
Longtime Fool contributor Rick Munarriz owns shares in both Disney and Netflix. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.