An unlikely old-school player in video rentals is stepping up in the digital space. Movie Gallery (NASDAQ:MOVI) is acquiring on-demand pioneer MovieBeam, and it won't even cost the video-renting pioneer very much. The initial acquisition costs and ongoing development expenses won't run more than $10 million.

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 (NYSE:BBI) a couple of years ago.

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 (NYSE:DIS), but the family-entertainment giant ultimately tired of the fledgling service and its apparent limitations.

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 (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Apple (NASDAQ:AAPL). At this point, it doesn't have to. It still commands a respectable retail audience in the bricks-and-mortar world, and just nipping at the ankles of the giants is a good first step. It's good to see the company take steps to address digital delivery before its customers do.

A walk back in MovieBeam history:, Netflix, and Disney have been recommended to Stock Advisor subscribers. Find out why with a free 30-day trial subscription today. Don't worry -- it doesn't come with a clunky set-top box.

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.