Apple Bets on Online Movie Rentals

By MAY WONG AP Technology Writer
SAN FRANCISCO January 16, 2008 (AP) The Associated Press

Apple Inc. has redoubled its effort to distribute movies online, gaining a foothold in a promising but unproven business that could eventually bolster its other core products.

Apple CEO Steve Jobs gestures as he talks about online movie rentals during his keynote at the...

Apple CEO Steve Jobs gestures as he talks about online movie rentals during his keynote at the MacWorld Conference in San Francisco, Tuesday, Jan. 15, 2008. Jobs confirmed the tech giant's foray into online movie rentals, revealing an alliance with all six major movie studios to offer first-run films over high-speed Internet connections. (AP Photo/Paul Sakuma) The tech giant launched a movie rental service at its online iTunes Store Tuesday and won the alliances of all six major movie studios to supply content.

Under terms similar to those at other online movie providers, rental prices range from $2.99 for library titles, $3.99 for new releases, and $1 extra for high-definition versions. The movies are ready to watch almost instantly over a high-speed Internet connection, and users have a 24-hour period to watch each movie once they start it.

The service, which launched in the U.S. on Tuesday and will roll out internationally later this year, will work on Macs, Windows-based machines, iPhones, iPods or the Apple TV set-top box.

But Apple and its rivals all face the challenge of making Internet delivery easy and affordable enough to drive a massive change in the habits of the movie-watching public.

Many analysts give Apple high odds of surviving what will likely be a long, bloody battle to dominate the digital living room.

Even though Apple's stock suffered Tuesday, some investors appeared to agree. Shares of Blockbuster Inc. plunged nearly 17 percent after Apple CEO Steve Jobs, speaking at the Macworld Conference and Expo in San Francisco, announced the new threat to the world's largest chain of movie-rental stores.

"Movies are really a big part of people's lives, just like music. And being able to do this on Apple's platform is an intriguing alternative to running out to the video store or getting DVDs through your mail," American Technology Research analyst Shaw Wu said.

Apple investors, however, seemed underwhelmed by Tuesday's parade of product announcements, which also included an ultra-slim notebook computer called the MacBook Air and a backup storage drive dubbed Time Capsule.

Shares of Apple slipped, losing $9.74, or 5.5 percent, to close Tuesday at $169.04. They fell another 3.6 percent, to $163.01, in after-hours trading.