Movie Gallery Inc., the second-largest U.S. video-rental chain, acquired MovieBeam Inc. for less than $10 million to allow customers to download films to their televisions for a fee.
MovieBeam charges $100 for a set-top control box, and movie rentals cost $1.99 to $4.99 each. The company is developing other technology that eventually may allow customers to download films onto computers. The exact purchase price wasn't disclosed; Movie Gallery said Wednesday it would spend less than $10 million this year on the acquisition and expenses related to MovieBeam.
Movie Gallery joins a growing number of companies, including Amazon.com Inc., Netflix Inc. and Apple Inc., that have introduced or are working on movie-download services. Blockbuster Inc., the largest U.S. video-rental chain, has said it might take on a partner later this year for its own program.
"This helps close the gap a little bit between Movie Gallery and other competitors who are already doing DVD rental online," said Marla Backer, an analyst with Soleil Securities who rates Movie Gallery shares "hold." Still, "people don't want another set-top box just for movies," she said. "They want less clutter."
Walt Disney Co., which started Burbank-based MovieBeam in 2003, sold an undisclosed percentage of the company last year for $52.6 million in a private placement of preferred stock. Other investors have included Cisco Systems Inc., Intel Corp., Mayfield Fund and Norwest Venture Partners.
Shares of Dothan, Ala.-based Movie Gallery, which also operates stores under the Hollywood Video and Game Crazy name, rose 23 cents to $4.78.