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Apple close to movie distribution deal with Fox - report

NewsCorp's Twentieth Century Fox is close to striking a deal with Apple to offer digital copies of its major motion pictures through iTunes, according to one Wall Street analyst.

Pali Research analyst Richard Greenfield in a blog posting (activation required) on Monday said the two companies are "actively negotiating" terms of the deal, which could be announced sometime in early 2008. Apple and Fox are reportedly prolonging the engagement as not to tamper with this year's critical holiday DVD shopping season.

The proposed deal, which would end a considerable standoff between Apple and nearly all Hollywood studios over the digital sale of movies, has reportedly been helped by the iTunes operator's sudden willingness to increase the wholesale price of new flicks beyond $15.

The Cupertino-based company currently prices new releases at $12.99 when pre-ordered through iTunes during their first week of availability, and $14.99 thereafter. Older library titles sell for $9.99.

Thus far, however, Apple has only been able to court the likes of Disney to offer its entire catalog at those prices, while MGM, Paramount and independent film studio Lionsgate have agreed to just partial distribution deals.

In his posting, Greenfield refers to an emerging desire — presumably among studios — to sell premium priced DVDs that include a digital copy of a movie for an increased cost of $3 to $4. This, along with growing piracy concerns and the emergence of Wal-Mart's own digital download service, is likely to influence studios into finally embracing an Apple deal, he said.

"While we suspect FOX will be the first studio other than Disney to fully embrace iTunes, we believe others will quickly follow suit," the analyst wrote, explaining that the major fear for Hollywood studios is proving to Wal-Mart and other physical DVD retailers that a lower wholesale price on digital copies is warranted relative to DVDs.

He added that, "the last thing the movie industry needs is pressure on new release DVD wholesale pricing, although the studios probably make more money on an iTunes wholesale of $15-plus, than most DVDs at $18 due to returns."

It should be noted that talks between NewsCorp's Twentieth Century Fox and Apple date back over a year.