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Movie Gallery Acquires MovieBeam

Movie Gallery, the nation's second largest video rental business, has purchased the assets, technology, network operations and customers of MovieBeam Inc. Terms of the transaction were not disclosed.

Launched in 2003, MovieBeam--which uses a portion of the analog signal of PBS' national datacast network--has had a checkered past. Originally backed by Disney, the service was halted in 2005 due to lackluster interest. It was relaunched as a hi-def movie download service in 2006, with additional backing from Cisco, Intel and several venture capital firms. The service is currently available in 31 markets. Customers pay $199 for the MovieBeam box, which can store up to 100 movies per month, starting at $1.99 per view.

Movie Gallery says that it plans to use MovieBeam's "existing infrastructure" to expand digital delivery capabilities beyond what is already offered, including streaming movies over the Internet, IP-based content delivery and "other developing channels."

Movie Gallery's rival Blockbuster--the nation's largest movie rental service--is reportedly in talks to acquire Movielink, another movie download service.

"We believe the MovieBeam service provides the best video-on-demand service available in the marketplace today and is a strong compelling complement to the consumer retail video store experience," said Joe Malugen, chairman and CEO of Movie Gallery Inc. "Our acquisition of MovieBeam is the first phase of our long-term strategic plan to provide digital content to consumers. We will begin merchandising the MovieBeam service in our Hollywood Video and Movie Gallery stores and on our Web sites in the near future and we have exciting plans to build upon the existing content digitization and broadcast platforms."

Movie Gallery expects that the total incremental expense related to MovieBeam, including the initial acquisition cost and any ongoing development expenses, will be less than $10 million in 2007.