The biggest challenge with any new technology is adoption by the consumer. People are creatures of habit and often they don't use the best, but more likely what they know. This explains why so many people still go to the Video store or use the Windows "Classic Menu". Unless they can be convinced that the new technology is noticeably better than the old, they won't try it. There are early adopters that long to try new technology, but MovieBeam is not setting themselves up to please these people either.
The main problem I see for normal people is the upfront cost and the selection of movies. Most already have a DVD player or VOD available from their main content provider, so right out of the gate it's going to cost them at least $200. This for a box that has no other purpose than to rent movies, when their DVD player can do that and be used to play the movies they own. The Cable or Satellite box can be used for VOD or be used to watch normal TV.
Selection: The video store and the cable company have more than 100 movies available to choose from, so there is something for everyone. MovieBeam does have an advantage with the new movies that are in high demand. I believe MovieBeam would be more successful with a subscription based revenue stream; they should give the boxes away for free with a 1 year commitment and charge $30 a month to watch all the movies you want. I think this would entice people to try the new service and spend more. If you consider that at $4.00 a movie, most wouldn't accrue $30 a month in charges, which would be about 2 movies a week. This would however guarantee $360 a year per subscriber for at least the first year. This works for Netflix now and before I signed up with Netflix, I never spent $240 a year renting movies.
Now for the early adopters, there is a real opportunity here for HD considering current options for HD movies are slim to none. MovieBeam is not enticing as an HD option, because according to the MovieBeam site only 10% of their content is HD. So that means 10 movies are shipped on the box and you get one new movie per week in HD. This is no better than the HD VOD offering from most cable companies. On top of that, the land-line requirement is another sticking point; I don't know about anyone else, but I haven't had a land line in years, plus how hard would it be to support WiFi or Ethernet? I would try the service despite everything else, if it weren't for that requirement. I would bet that many other potential early adopters are in the same boat.
The last reason is picture quality. Although most people aren't hard to please, some (early adopters) demand high picture quality. I will admit that I haven't seen the box in action or read any accounts of it, but here's why I think the picture quality won't be that great. The STB is reported to have a 160GB hard drive. Current DVDs can hold ~8.5GB, at this rate the box could hold 20 to 30 movies. We can assume the box uses the latest and greatest codec and we know it comes with 100 movies pre-loaded. So if we pretend that all the movies take up the same amount of space, that is 1.56GB per movie and that is assuming you can use the entire 156GB. I have seen some good DivX rips, but never DVD quality at 1.56GB per movie, let alone any form of HD quality.
Only time will tell if this is the case, but I for one will not be the one to try it out.