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Thursday, May 01, 2008, 05:00 am PT (08:00 am ET)

Apple announces same day as DVD release iTunes movie sales [u]

According to an article in Hollywood Reporter, Apple is expected to announce as early as Thursday a new deal with a wide array of major and mini studios to offer many new movie releases, including a broad slate of top-shelf films, for direct purchase at its iTunes Store at the same as their DVD release. [Update: Apple has formally announced the deal.]

The movie sales deal is an expansion of the January announcement that presented movie rentals in iTunes from all the major studios. Only a few movie studios, including Disney, had earlier agreed to sell their movies in iTunes starting in 2006, with the others cautiously testing the waters only in movie rentals beginning earlier this year.

Rental only titles now for sale

Apple originally only offered direct movie sales, not rentals, in a strategy that hoped to replicate the success of iTunes in selling music. The other studios were apparently worried that direct movie downloads would eat into physical DVD sales and anger high volume DVD movie retailers such as Wal-Mart. While Apple now sells more music than any other retailer, its movie business is still brand new. Fears of upsetting the current DVD retailers, who saw Apple as a looming threat in movies after having eaten up the lion's share of music sales, were certainly valid given the market power those retailers wield over existing DVD sales.

However, the popularity of Apple's iTunes has demonstrated an enthusiastic demand for digital downloads, which has reportedly been dramatic enough to prompt all the majors to offer their movie catalogs both for sale and for rent. The studios expected to be included in the movie sales announcement are Fox, Walt Disney Studios, Warner Bros., Paramount, Universal, Sony Pictures, Lionsgate and New Line. The deal reportedly will not include new titles from MGM but does extend to boutique firms such as Magnolia and Image Entertainment.

The movie rentals deal announced in January was tied to the release of the Take Two software update for Apple TV and updates for iTunes, the iPhone, and current iPods to allow users to rent titles for a 30 day period for $3 to $4, with select titles being offered in high definition from Apple TV. The new studios' titles have only available for rent, not for sale, which resulted in some confusion for iTunes users.

No business like show business

Today's announcement is also expected to release new numbers outlining the success of Apple's movie revenue to date. Back in March, Disney CEO Bob Iger publicly stated that its studios had sold 4 million movies via iTunes since partnering with Apple to become the first movie studio to sign up in 2006. Outside of Disney, MGM, and Paramount, a few major new releases from other studios have already been offered for sale in recent weeks on iTunes, including Fox's "Juno."

Apple originally announced plans to have a thousand movie titles available for rental, but many of those titles were held up by complications in establishing the digital rights required to offer them outside of DVD releases. Many writers and other talent have historically only signed off on royalties involving theater and DVD releases, so progress in digital downloads has hit some snags as the business adjusts to support iTunes' direct download distribution.

Convincing the movie studios to follow Apple's lead has apparently been a little more difficult than signing on music labels or lining up TV content. Many of the download-to-own titles offered by the early participating movie studios were limited to older titles. Apple's ability to sell those titles has encouraged the studios to expand their offerings both in the scope of their library selection and in the option to buy movies directly rather than only renting.

Time Warner CEO Jeffrey Bewkes announced yesterday that Warner Bros. will experiment with video on demand releases simultaneous with DVDs. Apple's new movie deal was originally expected to be announced earlier in the week at the fifth anniversary of iTunes on Monday. The announcement will put significant pressure on other online movie rental services as well as Amazon's Unbox and Microsoft Xbox Live Marketplace, which both rent and sell movies but have not been able to report significant movie downloads.

Update: Apple in an official press release has now confirmed that releases and catalog titles will be available from 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studios.

"We're thrilled to bring iTunes Store customers new films for purchase day-and-date with the DVD release," said Eddy Cue, Apple's vice president of iTunes. "We think movie fans will love being able to buy their favorites from major and independent studios."

New releases available for purchase on the iTunes Store this week, concurrent with their DVD release, include "American Gangster" and "The Diving Bell and the Butterfly." Other popular titles now available for purchase include "Juno," "Cloverfield," "I Am Legend," "There Will Be Blood," "Alvin and the Chipmunks" and "Walk Hard: The Dewey Cox Story."

Movies purchased from iTunes can be viewed on an iPod with video, iPhone, Mac or PC or on a widescreen TV with Apple TV, with new releases priced at $14.99 and most catalog titles at $9.99.