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7/18/2006
07:18 PM
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Bloggers: Apple Preparing Digital Movie Rental Biz

The buzz is that Apple will launch the download service with a new video iPod, some say as early as the company's upcoming developer's conference on Aug. 7.

Bloggers are speculating that Apple Computer Inc. CEO Steve Jobs will unveil a movie rental service through the iTunes Music Store at the company's upcoming Worldwide Developers Conference in San Francisco on August 7.

Behind Tuesday's buzz is ThinkSecret.com, which Apple sued in the past in a larger legal assault on breach of confidentiality. But some question whether the timing is right. After all, the conference typically caters to, well, developers. Apple did not return requests for comment.

"Apple has a history of launching products with services, and it would seem strange that the movie download service would launch without having the new larger display hard drive-based iPod ready to go," said Chris Crotty, senior analyst for consumer electronics at research firm iSuppli Corp.

Apple is expected to launch two new iPods this year: one between now and September, and another between October and December. Crotty describes the first as an iPod Nano update, a flash-based successor that supports video. The other video iPod will have a larger display screen.

"It's likely that Apple will launch the movie download service in conjunction with a new video iPod," Crotty says. "Apple operates on a reverse razor blade model. They 'give away' the blades to sell the razor."

That means the iTunes Music Store drives sales for hardware. So launching a new service now without the hardware to drive sales isn't Apple's normal mode of operation.

If not next month, when? It can't happen soon enough for research firm eMarketer senior analyst James Belcher. "I'm quite sure Apple won't pass on the chance to add movies to its slate of downloadable stuff on iTunes," he said. "But what do you get. Do you get a movie that can be burned to DVD and watched in the living room? More likely, you'll get a movie you can watch on your computer or iPod."

For months, Apple had been trying to persuade movie studios, such as Paramount Pictures, The Walt Disney Co., Warner Bros. and Universal Studios, the rental model can work at sites other than Movielink, CinemaNow, and Starz Entertainment-owned Vongo.

The downloadable files will likely have digital rights management code attached to each movie, where you watch it for "72 hours then it self destructs," Belcher said, suggesting they may rent for $2.99 each. For example, digital-rights management (DRM) software comes along with each movie downloaded from Movielink LLC to monitor use and limit the length of time a movie will play back.

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