Disney's warming to the digital times

Like many a movie buff, Dee Schwab hates the inconvenience of driving to the video rental store almost as much as paying the hefty late fees that inevitably spark arguments with her husband.

She's precisely the consumer Walt Disney had in mind for its new video-on-demand service, called MovieBeam. It delivers 100 movies to a box on top of the television set. All consumers need to do to rent a movie is click the remote control.


"I don't have to worry about getting it back on time," said Schwab, a mother of three who lives in Jacksonville, Fla. "And the fact that there are 100 movies in the library at any one time, if you're home and it's a rainy Friday night, there's going to be something that you want to see."

Disney is testing MovieBeam in Jacksonville, Salt Lake City and Spokane, Wash., and plans to make it more broadly available sometime later this year. The service - which competes directly with video stores and cable video-on-demand services - is just another example of Disney's willingness to embrace digital distribution.


The studio had been branded a Luddite by some Silicon Valley technologists, in part for its support of government-mandated copy protection in an array of consumer and computer products.

"There seems to be a sea change. It could be my wishful thinking, but I've kind of noticed a little different attitude among the Disney people," said James Burger, a Washington lobbyist who represents large computer companies in discussions with Hollywood.

"There are small indications. The seeming desire to be more cooperative than in the past all seem to be signs that they recognize that this new technology could perhaps make them more money." Those perceptions - and the rhetoric - have changed since those tense days when the studios and record labels initially struggled with Internet piracy.

The greatest challenge for Disney has been grappling with technology it doesn't incubate or control - such as digital television. It lobbied hard for the Federal Communications Commission to adopt a technological stop-gap to prevent people from copying broadcasts of movies or television shows and distributing them over the Internet.

Studios and networks can insert a special digital marker, or "broadcast flag," into the video and audio stream transmitted over the airwaves. The digital marker sets the rules on whether a movie or TV show can be copied.

Such safeguards have helped Disney and other studios feel more comfortable about digital distribution, said Intel's chief lobbyist, Donald Whiteside. But there's also a dawning recognition that the Internet represents a new business opportunity.

"We're all in the midst of crossing the chasm," Whiteside said. "I think there are many studios who are leading the charge and there are still studios we're waiting to see take definitive action. I'm confident that Disney will become one those leading the charge toward embracing the digital home."

MovieBeam is just one example of willingness to use technology to bring content to consumers. Disney distributes movies over the online video-on-demand service MovieLink and provides news, sports and TV shows delivered to Japanese television viewers over the Net.


"My mantra, as a company as well as an industry, is that we need to be playing offense as well as defense," said Peter Murphy, Disney's senior executive vice president.