Apple CEO Steve Jobs is about to set off a scramble for supremacy in the digital video rental business.
Jobs today at the MacWorld conference is expected to introduce a new download rental service through iTunes – marking a significant boost for the movie portion of iTunes.
Details of the iTunes rental service have not been disclosed, but movies are expected to be available for both sale and rental on iTunes on the same day and same date as their DVD release – a feature Hollywood has been unwilling to give to the cable industry thus far.
Cable operators have been trying for years to get Hollywood to open up its vault for so-called “day-and-date” releases on video-on-demand (VOD), but unlike iTunes, the studios have been holding back because they believe VOD could negatively impact DVD sales.
News Corp.’s 20th Century Fox is the odds on favorite to lead the studios headlining Jobs’ announcement today.
Lionsgate, Paramount and Disney are also expected to reach a similar deal with Apple, though it was unclear if those studios would be part of Jobs’ highly anticipated Macworld keynote, which may also include word of a new ultra-thin Mac laptop and updates to the iPhone.
According to Pali Research analyst Richard Greenfield, the main reason why Hollywood is willing to go with iTunes day-and-date rentals instead of cable’s VOD is because the studios don’t see iTunes rentals as a threat to DVD sales. Instead, they view iTunes’ portability – via products like the iPod, iPhone and Apple TV – as a true rental alternative to Blockbuster, Netflix and VOD for consumers.
Apple’s entry into the market also creates increased competition for DVD rental services like Blockbuster and Netflix.
Looking to get ahead of Jobs’ movie splash, Netflix yesterday announced that it would begin offering unlimited online streams of its digital library of 6,000 movies and TV shows to all subscribers with an rental plan of $8.99 or higher.
That reverses a previous strategy of offering subscribers limited allocations of time for streaming movies online based on the size of their subscription plan.
Shares in Netflix fell 2.7 percent to $22.77 while Blockbuster stock fell 5.8 percent to $3.03. Apple shares closed up 3.5 percent to $178.78 ahead of the announcement.
Digital rentals are not new. Select studios have been selling movies as downloadable rentals via Amazon’s Unbox service since last year.
However they are not compatible with the ubiquitous iPod, and consumers have been slow to take to the notion of paying to download movies that expire after a limited time. In Amazon’s service, rental downloads of hits like “Transformers” cost $3.99 and expire after 30 days or 24 hours of total playbacks.