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Apple tunes in to movie-rental market

Wed, 01/16/2008 - 6:38am
Wailin Wong, Chicago Tribune

Copyright 2008 Chicago Tribune Company

User-friendly technology? Check. Wide selection? Check. Brand recognition? Check. Looks like Apple's movie-rental service is ready for its close-up.

The Cupertino, Calif.-based technology giant Tuesday unveiled its much-awaited iTunes Movie Rentals. By linking major movie studios with its popular iTunes store and a revived version of its Apple TV device, the company is aiming to get films on to consumers' computers, television sets and iPods - hoping to make movies as universal and portable as digital music.

The online rental market has been hotly contested for years. Both AOL and Wal-Mart abandoned online movie download services last year. Netflix has seven million subscribers and ships 1.8 million DVDs every day but selection at its online streaming service is small.

Newcomers such as CinemaNow offer movies that can be downloaded to rent or own, but are considered niche competitors. And cable television companies such as Comcast want consumers to use set-top boxes to access a wider breadth of on-demand digital content but haven't yet connected the living room with computers or hand-held devices.

Apple, which dominates the digital music space but has had less success with video sales on iTunes, has signed deals with major film studios. New film releases will be offered at $3.99 and older titles at $2.99, on par with competitors. The movies can be played on computers, televisions or portable gadgets such as the iPod and iPhone. And Apple is pushing into living rooms with an updated version of Apple TV, which will allow users to browse iTunes and rent films on their television sets, bypassing the computer. The company reduced the gadget's price to $229 from $299.

"Thanks to its popularity and success in the music market, iTunes is on a lot of computers already," said Heather Dougherty, director of research at Hitwise. "They already have billing set up, their library set up. It's a continued extension for iTunes, and that strength is going to be very good for [Apple]."

DVD rental companies claim they're not worried about Apple's move. Blockbuster spokeswoman Karen Raskopf cited data from Kagan Research showing that of the $36.4 billion that U.S. consumers are expected to spend on movie entertainment in 2007, 68 percent would go toward physical video rentals and retail sales. Only 5.6 percent of spending is projected to go toward video-on-demand or pay-per-view services.

"DVDs are ubiquitous and they will be for a long time," said Netflix spokesman Steve Swasey. "That's what's being overlooked in the discussion of getting to the TV. ... It's a DVD world and will continue to be for a while."

Still, no one wants to be left behind in the race to make content available on as many devices as possible, including the television. Both Netflix and Blockbuster offer streaming, on-demand movies and TV shows.

On Monday, one day before Apple's announcement at the Macworld conference in San Francisco, Netflix made its streaming service unlimited. Previously, customers could get one hour of on-demand viewing for every dollar of their subscription plan.

The industry is "just getting to the point where the technology makes it work - where the quality of video that can be downloaded to your laptop is actually watchable and can be done in a reasonable amount of time," said David Wolf, a managing director for digital media at Accenture.

Netflix is also partnering with LG Electronics on a set-top box, planned for release later this year, that will deliver content directly to a TV set using a high-speed Internet connection. The company is among many linking up with manufacturers of hardware.

CinemaNow's chief executive, Curt Marvis, said he believes consumers' desire to move digital content around many different devices will eventually wear down Apple's stranglehold on the music industry and allow more competitors in the online movie arena.

"We're just starting to see that kind of shift to [a phase] where more open standards and architecture for distribution is where everything's starting to head," Marvis said.

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