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Thursday, August 31, 2006, 09:00 am PT (12:00 pm ET)

Report claims iTunes movie service due in September

Apple Computer in mid-September will announce that it plans to start offering movie downloads through its iTunes Music Store, according to BusinessWeek.

Citing unnamed sources, the publication on Thursday said Apple will charge $14.99 for new releases and $9.99 for older movies. The multi-level pricing tier was reportedly a compromise between motion picture studios and Apple chief executive Steve Jobs, whom had hoped to sell all flicks at a fixed rate of $9.99.

But so far, only one studio is reported to have committed to making its content available for the initial service launch. That company is none other than Walt Disney, where Jobs is the largest shareholder following the entertainment conglomerate's purchase of his Pixar Animation Studios earlier this year.

According to BW, News Corp.'s Fox Entertainment Group may join in later, as might independent Lions Gate Entertainment. However, their involvement is said to be contingent on other studios joining the iTunes bandwagon. The remainder of the studios have reportedly passed on joining the service.

Posing as a roadblock for Apple and potential deterrent for the studios is retail heavyweight Wal-Mart, BW claims. As the largest reseller of DVDs, it will account for roughly 40 percent of the $17 billion in DVDs that will be sold this year. Earlier this year, the retailer threatened not to sell Disney's High School Musical after Disney initially released the film through iTunes.

In order to play nice, Wal-Mart is reportedly demanding that it be supported by studios when it launches its own planned download service. It wants Hollywood to trim the current $17 wholesale price for DVDs, which would allow it to slash its own prices to the same $15 or so that Apple would charge.

But as BW notes, a large wholesale cut for Wal-Mart would amount to hundreds of millions in lost studio revenues each year at a time when DVD sales are slowing.

Jobs declined to comment on the report. Meanwhile, Wal-Mart acknowledged that it's talking with studios about starting its own download service but disputed that it is "dissuading studios from conducting business with other providers."