Disney’s Video on Demand on Hold

Walt Disney Co. said Thursday that it had postponed an expansion of its video-on-demand service while it explored partnerships that could result in a deal to include the service in set-top boxes, computers or other devices.

Disney launched its MovieBeam service in three cities last September and had hoped to add three more cities by the end of this year, with a national rollout as early as next year.

The service transmits movies using a technology called datacasting, which sends a stream of data over the same broadcast signal used to transmit television programs. The movies are stored on a hard drive in a MovieBeam box, which comes prepackaged with 100 feature-length films.

Burbank-based Disney has deals in place with nine studios to offer movies a few weeks after they have been released to video rental stores.

Disney may continue offering MovieBeam as a stand-alone service. But other companies, including cable and satellite TV companies, are looking to video on demand as a lucrative offering. Movie lovers can also download films from such sites as MovieLink and CinemaNow.

A partnership between Disney and another company could allow MovieBeam to expand faster than planned.

“We will postpone the expansion into three additional markets until we resolve exactly what our device strategy is,” said Salil Mehta, Disney’s executive vice president of corporate business development.

The most likely partner for Disney would be News Corp.’s DirecTV satellite service, said Gerry Kaufhold, an analyst for research firm In-Stat MDR.

“I don’t think MovieBeam puts the cable guys out of business,” he said. “But it gives DirecTV the opportunity to deliver video on demand quickly.”

Cable companies have marketed such services heavily, especially as they battle for customers against satellite television companies.