MovieBeams $1.99 online rentals takes a dive

What will it take to make a business in online video? MovieBeam seems to have proven that throwing money at the problem won’t work.

As you may recall, MovieBeam’s idea was to allow secure online movie rentals at $1.99. They’ve since expanded and clarified the pricing to $1.99 for popular movies, $2.99 for HD popular movies, $3.99 for new releases, and $4.99 for HD new releases. Before you say it, I’ll throw that out – where’s the compelling value? In order to rent these movies, you need to “buy” a device to watch the movies, and for that priviledge, you pay somewhere around $100.

Is this adding up yet?

Somewhere along the line, the usage model wasn’t calculated correctly and included in the business model. Let’s say a user has the patience to download one new release a week, that’s $3,99 x 52, or $208 in rental fees, then add the cost of the box to kick it up to $300+. Now how does that compete with Netflix and their $4.99 a month plan, or $50 a year equivalent, and … you don’t need a high speed connection.

I like the concept of a $1.99 rental, but for this transaction to transpire, you need a high-speed internet connection, be willing to wait the hours for your video to download, and drop $100 for a box which you must trust w/o ever seeing it. The trust and customer experience seem lacking.

The overall proposition is a tough one, and the timing may not have been right, however, I never really saw MovieBeam anywhere. Where was the market development? Where was the customer development? Where was the validation? What was the behaior profile of the target customer? Where was all that money spent?

Venturebeat has a good story on it, discussing the >$100M investment in the company and its sale for ~$10M. In the end, MovieBeam’s $1.99 micropayment model appears to be one of the most expensive in the space.