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Wednesday, December 26, 2007, 07:20 pm PT (10:20 pm ET)

Report: Apple, Fox sign movie rental deal for Macworld

Apple is likely to use Macworld as the venue for an announcement which will see 20th Century Fox license its movies for an iTunes on-demand rental service, according to an article by the Financial Times.

The report — which cites only a "person familiar with the situation" — alleges that the deal will follow the pattern of similar rental services, which allow users to download a complete copy of the movie that only lasts for a set amount of time before it becomes unplayable.

As an exchange, Fox DVDs will include a copy protected version of the movie that can be transferred to a computer and, ultimately, an iPhone or iPod. This will help users watch the movies in portable form without having to break the DVD's copy protection, which occupies a legal gray area, the Times says.

No mention is made of whether either the rentals or DVD copies will sport enhanced quality. Apple has not increased the resolution of videos on iTunes since fall 2006, when it began selling videos at NTSC television resolution (640x480) or lower. Viewers have complained that image quality suffers when viewed on HDTV sets and that the iPod maker is underusing the Apple TV, which can play back video at an HD-grade 720p (1280x720) resolution.

Other studios are said to be in talks for similar deals, but may not strike their agreements in time for Macworld's mid-January keynote speech.

Regardless of the output quality, the business model is expected to help drive sales of Apple hardware due to the lower cost to watch videos. It will "help Apple sell a load more video iPods," a studio executive has purportedly told the paper.

Expectedly, neither Apple, Fox, nor other studios have been willing to comment on the matter.