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Apple to Take on Movie DVDs
ITunes to Start Selling Films Same Day Discs Are Released

By Ville Heiskanen and Connie Guglielmo
Bloomberg News
Friday, May 2, 2008

Apple, maker of the iPod media player, said yesterday that it would start selling movies through its iTunes online store the same day they are released on DVD.

New releases from studios, including Paramount Pictures and Warner Bros., will cost $14.99, Apple said in a statement. Previously, customers had to wait several weeks after the DVDs debuted. The service will start with such movies as "American Gangster" and "Juno" this week.

Chief executive Steve Jobs is counting on movies to increase sales of iPods, Macintosh computers and Apple TV devices, which let users watch downloaded films on their widescreen televisions. In January, Jobs said customers had bought 7 million movies, which was below his expectations. Apple began selling movies and television shows on iTunes in October 2005.

"People want to watch a movie as soon as it comes out, and they don't want to have to wait," said Michael Gartenberg, an analyst at JupiterResearch in New York. "What Apple is doing is knocking down one more barrier for why you wouldn't want to buy a movie from them."

New titles will also be available from News Corp.'s Twentieth Century Fox, Walt Disney Co., Universal Studios, Sony Pictures, Lionsgate, Image Entertainment and First Look Studios.

The studios are betting that Apple will repeat its success in music with films, Gartenberg said. "They are feeling that iTunes is an important venue."

ITunes, with more than 6 million songs, is already the most popular site for legal music downloads, according to NPD Group in Port Washington, N.Y. Apple said last month that iTunes had surpassed Wal-Mart Stores as the biggest music retailer in the United States. Apple has sold more than 4 billion songs since opening the iTunes store in April 2003.

Apple offers more than 1,500 films, including 200 in high definition. Studios now sell older movies for $9.99 each and provide films for rental under a service Jobs introduced in January. Apple said yesterday that it has 1,000 movies for rent.

"The Internet is a growing channel and one that many believe is the ultimate future of entertainment distribution," said Ross Rubin, an analyst at NPD. "For Apple, it's another step in reaching parity with the retail DVD market."

With digital downloads and rentals, the studios still need to figure out how to make movies available without jeopardizing the more lucrative DVD sales, said Steve Diamond, an entertainment-law professor at Santa Clara University in Santa Clara, Calif.

At the same time, the studios want to put films online to stem the demand for pirated copies, he said.

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