Movie rental service MovieBeam, once backed by Walt Disney, Intel and Cisco Systems, closed down last weekend. Backers invested some $50 million in the venture before selling it a year ago for $10 million to Movie Gallery, the movie rental store chain, now in Chapter 11 bankruptcy reorganization.

The service was to launch last year in 29 markets representing nearly half of US homes with its core service of a $199 MovieBeam settop box that holds 100 films customers can rent for $1.99-$3.99 each. The box was to be updated with as many as 10 new films each week, datacast via a digital signal carried over the broadcast television spectrum.

The collapse of MovieBeam follows the recent sale of Movielink, a movie download Web site backed by big Hollywood studios that pumped $148 million into the money-losing venture. Blockbuster bought it for $6.6 million.

The collapse of MovieBeam puts an end to eight years of effort by Hollywood and technology startups trying to do an end-run around cable and satellite TV firms by selling movies and TV shows direct to consumers via over-the-air broadcast or internet technology.

Time will tell what the killer application for downloading and watching video will be. Some companies are pushing a PC-to-TV solution. Others are looking at Internet-enabled TV sets; still others maintain an Internet-connected TV set-top box is the way to go.

Along with Movielink, CinemaNow pioneered the movie download market, offering users the ability to rent movies for as little as $3.99. These services never caught fire. In the first half of 2007, Movielink says it lost $10.2 million on revenue of $1.9 million.

Among the problems with the services, analysts say, is that movie studios wouldn't dish up their top movies, it took too long to download movies and some flicks had viewing restrictions – users had to watch downloaded movies within a certain time – that proved too onerous for customers.

Story filed 17.12.07