Disney to Shutter Video on Demand in 3 Cities

Walt Disney Co. is pulling the plug from MovieBeam – at least for now.

The company plans to close its experimental video-on-demand service this week in all three of its test cities. Disney spokeswoman Michelle Bergman said the shutdown was necessary to upgrade systems as the company seeks potential partners to explore MovieBeam’s “next phase.”

It is uncertain, however, when – or even if – the service will be relaunched.

The decision comes nearly two years after Disney unveiled MovieBeam in Jacksonville, Fla., Spokane, Wash., and Salt Lake City in a bid to use television airwaves to create new revenue streams and establish a direct pipeline to consumers.

In contrast to services that use the Web or cable, MovieBeam uses television airwaves to load movies wirelessly into a set-top box, giving viewers dozens of on-demand titles from which to choose.

But the venture, championed by then strategic planning chief Peter Murphy, faced doubts inside and outside the company. Some studio executives feared the service could cut into Disney’s lucrative home video sales.

Murphy was removed from his powerful post last month and placed in an advisory job in a sweeping overhaul of his department.

Some analysts say the service has faced a tough time getting consumers to buy set-top boxes to put on their already crowded TV sets. It also has faced stiff competition from cable operators and online companies such as Netflix Inc.

“We always thought it was an uphill climb for a product you have to rent,” said Josh Bernoff, principal entertainment analyst with Forrester Research Inc. in Cambridge, Mass. “There are so many ways to get movies cheaply.”

Bernoff speculated that MovieBeam could reemerge as part of a satellite TV service or be built into high-definition television sets.