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Company trials films on flash

Importantly, the system erodes the desirability of downloading movies. While great in theory, movie downloads have yet to become a big hit. Consumers have complained about long download times with some services, while others only let you watch a movie on a PC. PortoMedia rentals can be for one, or multiple viewings, depending on the fee and service selected. Because the company can control access to the box and makes the devices for downloading movies, viruses become less of a worry.

A physicist by training, Armstrong claims the Internet can't handle movie downloads anyway. He did the math on last year's release of Shrek 3. In the first three days, 11 million copies got sold. That's 66 petabytes of data.

Movies from PortoMedia can be watched on TVs or PCs. To prove his point, he transferred Spider-Man from a portable hard drive to an iPod touch. It took six seconds.

"And I didn't need permission from Apple to do that," he said.

But what about piracy? "It will never be perfect, but we are going to make it as hard as we can," he said. Movies rented from the service will comply with Microsoft DRM standards.

If anything, the company has lined up legitimate technology partners. IBM helped it developed the transaction system. The drives come from Seagate Technologies -- which has said for about a year that we will see video rental kiosks with hard drives -- while Samsung provides the flash memory. Toshiba is fabricating the chips that make up the high-speed interface. Investors include former film execs like Jay Emmett and Lindsay Gardner.

PortoMedia's interface emphasises sustained, rather than peak downloads. USB 2.0 can provide peak bandwidth at 480 megabits per second. "But I've never seen anyone achieve that and I'm in the industry," Armstrong said. Average speeds are far lower.

The company claims it can hit a sustained bandwidth of 95 megabits per second or higher. Some venture capitalists advised him to turn the company into an interface chipmaker that would licence technology to other semiconductor manufacturers, but Armstrong decided to stick with movies.

The hardware will be sold in bundles with movies. The starter pack, which will sell for around $60, comes with a flash key, a dock and six movies. At the high end, users can spend around $160 and get a handheld with a 1.8-inch hybrid hard drive with 240GB of storage, a fancier dock and 12 movies.