iTunes feature film service by year\'s end?

The report, which offers very little new information on the Apple initiative, reiterates the popular consensus that the iPod maker and major picture studios are locked in debate over pricing.

Apple chief executive Steve Jobs is reported to have been involved in the talks, initially proposing to sell all films at a flat price of $9.99 — an offer the studios flatly rejected.

"We can't be put in a position where we lose the ability to price our most popular content higher than less popular stuff," said a studio exec close to the negotiations told Variety.

Apple has historically charged a standard fee for its online downloads, such as 99 cents for music tracks and $1.99 for TV shows.

According to the report, there are signs Apple may bend and allow price points ranging from $9.99 to $19.99 in order to differentiate older titles from new releases.

Nevertheless, the report states that sources within the film industry expect "an iTunes movie store to debut by the end of the year at the latest."

"Every studio wants to have broad distribution in digital, and we all know that having Apple as part of that is very, very important," a studio exec said.

Analysts also believe it is only a matter of time before Apple introduces film downloads through its iTunes service. However, Gene Munster, an analyst for PiperJaffray, says the company doesn't see the rush.

"Ultimately, we expect that iTunes will offer feature length movies on iTunes, but we do not believe this is a top priority for the company at this time," Munster recently told clients. He notes that consumers can easily find any movie they want on DVD or on-demand.

"Apple has focused on TV shows because unlike full length movies, there is a clear value proposition to the consumer and the networks in offering TV shows," the analyst said. "For a consumer, if you miss an episode (or entire season) of a show, iTunes is the only way to see it unless you want to wait until the episode comes out on DVD. The benefit to the networks is that this is a new way to monetize original TV content."