April 7, 2003 4:33 PM PDT

Disney preps wireless video service

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LAS VEGAS--Walt Disney plans to begin testing a new video-on-demand film service later this year, company Chairman Michael Eisner said Monday.

Movie Beam will use leftover broadcast "bits" to download recent first-run theater film releases onto a TV set-top box, Eisner said. Customers will be able to store up to 100 feature films at a time using the service and a related storage product, which will include DVD and TiVo-like features.

Eisner discussed the new service at a gathering of the National Association of Broadcasters, which honored the Disney franchise during a luncheon here.

Disney has discussed a video-on-demand service before, but now appears closer than ever to delivering on the promise. Past efforts that failed to bear fruit include a service dubbed MovieBox, revealed in an earnings report in February 2001. In addition, Disney last year pulled out of a joint venture with 20th Century Fox to create an Internet video-on-demand service.

In his talk Monday, Eisner said Movie Beam is part of a string of technology initiatives that illustrate Disney's commitment, as opposed to fear, of the digital revolution. Others innovations include the transition of Disney-owned television network ABC to high-definition, or HD, television, including the broadcast of "Monday Night Football" in HD for the upcoming season.

"We are a conflicted industry," Eisner said. "Hollywood studios spend enormous sums of money encouraging people to see its films and TV shows and then spend more money devising ways to control and limit how people can see its films and TV shows. Disney (is) mindful of the perils of piracy, but we will not let the fear of piracy prevent us from fueling the fundamental impulse to innovate and improve our products and how they are distributed," Eisner continued.

The Movie Beam announcement comes as improvements in online video technology and strong growth in broadband connections are fueling demand for multimedia content. Major Web destinations, including America Online and Yahoo, have begun courting content owners such as record labels and sports leagues to help bulk up their Internet video offers--and movie programming could be close behind.

Studio interest in Internet distribution is heating up. Movielink, a joint venture between six Hollywood studios, launched in November with the aim of delivering feature films to consumers online.

The approach taken by Disney for its new on-demand service signals that the industry has not yet fully worked out the kinks of delivering high-quality video feeds over the Net, a costly undertaking that can suffer quality problems even under optimum conditions.

Disney doesn't intend to have customers use a broadband connection to play movies back live from a central server. Instead, subscribers will use the existing over-the-air television broadcast spectrum to download movies for playback from a TiVo-like storage device. Movie Beam will give customers the option of downloading up to 10 new movies a week, and up to a maximum of 100 at any one time.

Disney will test the service in the fall in Salt Lake City and in two other markets still to be finalized.

Datacasting
Disney said the new service will take advantage of datacasting. The technology has been touted as a cheap alternative to wired Internet connections designed to create a one-way channel for delivering large blocks of data using existing TV infrastructure.

While other wireless technologies, such as Wi-Fi, have taken off recently, datacasting has remained relatively quiet. But that could change if Disney gets its Movie Beam service off the ground.

Since 1999, a number of companies have been developing technology for delivering bits using digital television technology, with little result to date. Top players still in the market include Kent, Wash.-based Dotcast and Los Angeles-based iBlast.

Eisner did not announce partners involved in the Movie Beam project. But Disney is an investor in Dotcast, having joined an $80 million funding round in November 2000 with co-investors Intel, GE Equity and Quantum.

Dotcast President Douglas Evans said his company has no announced partners, and he neither confirmed nor denied any relationship with Disney involving its Movie Beam service.

Dotcast's technology takes an analog signal from an analog TV transmitter and adds a digital data stream of up to 4.5mbps, which is invisible to TV viewers. The company holds patents on its technology and has won approval from the Federal Communications Commission, Evans said.

Evans admitted that several Dotcast competitors, including iBlast, make similar technology targeting digital television. But he said that Dotcast is the only company working with analog and digital signals. Analog datacasting has several advantages over digital datacasting, according to Evans, who said analog signals penetrate walls better, making it unnecessary to use special antennae to bolster reception.

Datacasting does not allow for interactive, two-way communications, meaning it will never replace the Internet. But it offers a niche application that could lower the bar significantly when it comes to delivering large files such as complex software and video to large numbers of customers.

"If you tried to deliver 100 movies to 1 million customers in the same city at once over the Internet, it would swamp the system," Evans said. "We can place that content quite efficiently."

Dotcast provides technology rather than network services. That should not trouble Disney, however, in regard to its ABC network. By installing Dotcast technology in its ABC television network affiliate stations, the company could potentially provide datacasting services for each of its service areas. The company could also partner with other broadcasters in regions where it does not own a TV station.

Although datacasting has some attractive features, Disney is taking a risk by endorsing a technology that has had few commercial tests.

The market for datacasting has been slow in coming, putting financial pressure on companies that are developing datacasting services. At least one high-profile company, Geocast, has failed; and Dotcast has been forced to let go of some staff. Despite those difficulties, Evans said the company is in good financial health.

"There's no doubt we're going to continue," Evans said. "We are adequately funded."

iBlast did not immediately return a phone call seeking comment.

 

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