Movie Gallery acquires MovieBeam

Rental market could see new phase of competition

By Paul Sweeting and Cindy Spielvogel -- Video Business, 3/7/2007

MARCH 7 | With all eyes trained on Blockbuster’s possible acquisition of Movielink, Movie Gallery unexpectedly acquired substantially all of the assets, technology and operations of MovieBeam, a near-on-demand movie service owned by Walt Disney Co., Cisco Systems and Intel Capital, among other investors.

The move comes less than a week after reports surfaced that rival Blockbuster was in advanced talks to acquire Movielink, the Internet-based video-on-demand service owned by a consortium of five major Hollywood studios.

Both rental chains face growing competition from Web-based rental services, such as Netflix, as well as the growing popularity of cable and Internet-based VOD. If both acquisitions go through, it would set the stage for a new phase of competition in the video rental market.

Available in 31 major metropolitan areas, MovieBeam provides movies from most of the major studios via a set-top box.

Movie Gallery said it plans to develop the service beyond the set-top arena for use in downloading and streaming movies over the Internet in both standard and high definition.

Although terms weren’t disclosed, Movie Gallery said the initial acquisition cost plus any ongoing development expenses will amount to less than $10 million this year.

It cost its previous investors more than $100 million.

The company plans to begin merchandising MovieBeam in its Movie Gallery and Hollywood Video outlets, as well as on its Web site, in the near future.

A spokesman for Movie Gallery said the company will have no further comment before its fourth-quarter earnings conference call later this month.

In the past, Movie Gallery chairman and CEO Joe Malugen has said he has no plans to enter the online rental via mail delivery business, which Blockbuster and Netflix are engaged in, saying he doesn’t believe it would ever grow large enough to be worth getting into.

Read the official press release from Movie Gallery.

« Back | Print