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Apple has signed News Corp’s 20th Century Fox studio to a new online video-on-demand service in a deal that could change the way people pay for online film content.
The agreement will allow consumers to rent the latest Fox DVD releases by downloading a digital copy from Apple’s iTunes platform for a limited time, according to a person familiar with the situation
The launch of iPod-ready films on DVD would “help Apple sell a load more video iPodsâ€, said one studio executive. Apple and News Corp declined to comment.
Several other websites offer films to rent and buy via the internet but none has the mass appeal of iTunes.
wrote:
LOS ANGELES (Reuters) - Apple Inc and Twentieth Century Fox are set to announce a deal that will allow consumers to rent Fox movies through Apple's digital iTunes Store, according to media reports on Thursday.
The agreement will allow rentals of Fox's latest DVD releases by downloading a copy from the online iTunes store for a limited time, the Financial Times said. The Wall Street Journal also reported the deal in its online edition.
Fox's corporate parent, News Corp, had no comment. An Apple spokesman could not be reached immediately for comment.
The reports sparked heavy selling of shares of Netflix Inc, a leading online DVD rental company, and Blockbuster Inc, the largest U.S. movie rental chain.
Analysts were divided about what impact the Apple-Fox deal would have on the $9 billion U.S. movie rental business, which has seen steady declines in in-store rentals and slowing growth online in the past year.
Pali Research analyst Stacey Widlitz said the deal follows a trend of Hollywood studios selling directly to consumers and "cutting out the middleman."
"It's just a sign the studios feel ... that another distribution channel is where they are choosing to go, and incrementally it hurts Blockbuster and Netflix," Widlitz said.
However, Wedbush Morgan analyst Michael Pachter said the deal probably would expand the universe of online renters.
"I don't think that will cannibalize rental for the purpose of viewing at home," Pachter said. "I think that the primary purpose of renting movies is to consume the entertainment in the home. The primary purpose of downloading anything from iTunes stores is to consume on the go."
Reuters wrote:
Pachter said the rental terms and movie release schedule will largely determine how successful the Apple-Fox deal is.
Representatives for Netflix and Blockbuster had no immediate comment on the matter.
Video sales have lagged behind the growth in popularity of music downloads on iTunes. Media companies have wanted more flexibility from Apple in pricing policies.
Shares of Netflix ended down 4.4 percent, or $1.25, at $27.45 on Nasdaq. Shares of Blockbuster slid 6.7 percent, or 28 cents, to $3.90 on the New York Stock Exchange.
BBC Also picked up on the fact that what was particularly interesting is the idea that Fox would sell DVDs with Apple's Fair Play DRM protection, making it possible to put a movie onto an iPod.
Quote:
Of course, millions of people have already found ways of doing that, but this time, it would be legal.
Apple and Fox will be hoping this will have the same impact on consumers as the arrival of the iTunes music store, which encouraged some of the millions who were swapping songs on the internet illegally to start paying for music online, our correspondent says.
And there's more:
Quote:
A digital file protected by FairPlay will be included in new Fox DVD releases, enabling film content to be transferred or "ripped" from the disc to a computer and video iPod. DVD content can already be moved to an iPod but this requires special software and is considered piracy by some studios.
The launch of iPod-ready films on DVD would "help Apple sell a load more video iPods", said one studio executive. Apple and News Corp declined to comment.
Microsoft's DRM (digital rights management) system has enabled rental and subscription services but Apple's FairPlay hasn't. However, ZDNet UK says that "Apple has updated a patent application with the US Patent and Trademark Office called 'Run-time Code Injection to Perform Checks'."
Quote:
In the abstract of the application, Apple describes a digital rights management system that could restrict execution of an application to specific hardware platforms. It says that while an application is running, code is injected that would perform periodic checks on the authenticity of the software. If the software is found to be fake, the application would be closed and made unusable.
It remains to be seen what this might be used for, but it seems that Apple will have to extend FairPlay's functionality if it's going to rent movies....
The deal will mean you can rent digital copies of the latest Fox releases for a limited time.
Apple has reportedly spent months trying to get Hollywood studios to back the rental plan but only Rupert Murdoch's Fox has so far agreed. Disney is the only studio which allows digital sales of new releases while the other majors only release older films.
Studios remain concerned about pricing and increasing piracy, according to the Times. Several Fox TV shows are already available to buy on iTunes.
Details of pricing and whether all new releases will be available remain unclear. But pricing will need to be competitve because Apple and Fox are competing with several other services like Amazon's Unbox service.
Sales of video content on iTunes have been slower than hoped. The deal would also boost the Apple TV device which has not sold well.
Fox will also release DVDs using Apple's Digital Rights Management system so that customers will be have limited rights to put films onto iPods or computers.
Full details of the service are expected to be announced at MacWorld which begins 14 January. The New York Times predicts other studios will also be on stage for the launch.
News Corp and Apple poised to offer Fox films through iTunes QUOTE]Fox is reportedly also planning to release DVDs that use Apple’s digital rights management system, a move that will enable consumers to make legal copies of the disc that could be played on an iPod or other device, such as a computer. News Corp said recently that the media group was in talks with Apple, but it refused to elaborate.[/QUOTE]
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