Dothan, Ala. - Movie Gallery, the nation's second-largest rental chain behind Blockbuster, announced on Tuesday plans to launch an online video rental service in mid-to-late 2007, entering a market dominated by Netflix and Blockbuster.

"After considerable research and testing, we believe that we can enter into the online space in a cost-effective manner without spending significant resources on advertising to acquire new customers," said Movie Gallery chairman, president and CEO Joe Malugen.

The company will initially offer a "friends and family" pilot of the online DVD rental service for existing customers.

Movie Gallery also announced plans to extend its movie kiosk program, which currently counts 74 automated DVD rental kiosks, and will add another 200 units during 2007.

Earlier this month, Alabama-based Movie Gallery acquired the Disney-backed Moviebeam service, which delivered movies to set-top boxes in consumer homes over unused portions of the broadcast spectrum.

The company has not yet announced plans to integrate the Moviebeam technology into its business.

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