Log in

Apple Announces iTunes Movie Rentals

15 Jan, 2008 By: Chris Tribbey

Apple iTunes' much-rumored online rental service launched last week, announced with fanfare in CEO Steve Jobs' keynote at the Macworld Conference & Expo in San Francisco.

Several dozen movies were available for rent at launch. By press time, nearly 700 were available. By the end of February, Apple aims to have more than 1,000 films available, firmly establishing itself as a competitor to other digital movie delivery operators.

The service includes films from all six major studios, as well as Lionsgate, New Line and MGM.

Library titles will go for $2.99 each, while new releases will rent for $3.99, and will be available 30 days after the DVD streets. Once the movie is downloaded, renters have 30 days to start watching the movie, and once the movie has been started, 24 hours before the rental is up. A customer can watch the rental multiple times during the rental period.

In addition to being available on Apple's portable devices, the rental service is available through Apple TV, the digital media receiver box launched last year that moves content from the Web to the TV and can store content or stream it from a Mac or PC running iTunes. Through Apple TV, viewers also can rent more than 100 films in high-definition, $3.99 each for catalog titles and $4.99 for new releases.

A new version of Apple TV is set for release later this month, priced at $229, and new software for current Apple TVs removes the requirement that a Mac or PC be connected to stream or load video, allowing users to download content from the iTunes Store directly from their TV. Two versions of the Apple TV are available, a 40GB and a 160GB model.

“With the new Apple TV and iTunes movie rentals, movie lovers can rent DVD-quality or stunning HD movies from their couch with just a click of a button,” said Apple CEO Steve Jobs. “No more driving to the video store or waiting for DVDs to arrive in the mail.”

Pros and cons

A test of the download gives an option to start streaming the movie just minutes after a rental is purchased, depending on the Internet connection. The average size of a full movie once it's downloaded is only about 1.5GB. The movie, with the same rental time restrictions, can be moved among portable Apple devices and PCs.

There are some things Apple could have done better, industry analysts said. And there are a lot of things Apple's done right, they also agree.

“It is tremendous what they've done,” said Richard Doherty, research director for market research firm The Envisioneering Group. “We weren't expecting anything more than 75% of the Blu-ray camp backing this.” Doherty speculates the service will grow much the same way iTunes did for music.

“A lot of independents are going to show up in the coming months,” he said, adding Apple's scalability of its service deserves praise. “They're going to race to this, much like independent artists raced to iTunes music.”

“I think this is one of many steps toward a revolution that is due,” said Richard Bullwinkle, chief evangelist for Macrovision. He said faster Internet speeds and the fact Apple has a lot of weight to throw around means good things for the online movie industry overall.

“After watching the music industry falter, and watching their revenue slip, studios are looking for creative and secure ways to distribute their content and meet the use-cases consumers are demanding,” he said. “It is time for electronic distribution to go mainstream, but consumers will also want their media to play on more platforms than just Apple's.”

That's one major problem critics have pointed out: The iTunes service still operates on proprietary rules, and can't be viewed on every portable media device.

The other major issue involves the Apple TV device.

HD movies are available only via Apple TV, and not on computers. And by high-def, Apple means 720p, not the movie industry's top 1080p, possibly making it less of a threat against Blu-ray Disc and HD DVD.

“The picture quality isn't as good,” said Kevin Collins, director of HD DVD evangelism for Microsoft. “Also, the audio quality doesn't match what is being delivered on HD DVD with Dolby True HD/Digital Plus. Simply put: From a video and audio perspective, HD DVD is superior.”

Andy Parsons, SVP of industrial solutions business group for Pioneer Electronics and marketing director of the Blu-ray Disc Association, said download models such as that from Apple don't foretell the end of packaged media.

“Download models are close to the video-on-demand and near-video-on-demand models that have been available for a long time from cable and satellite providers,” Parsons said. “These have long provided convenient, spontaneous access to content, but they have not affected the success of the DVD format at all, since the two usage models are very different and are quite compatible.

“I think both distribution models can both coexist for a long time because they appeal to us in different ways.”

Then there's the space issue for Apple TV hard drives.

“If you look at it from a straight HD DVD and Blu-ray angle, take Time Cop (on HD DVD) as an example, which just came out,” said Adam Gregorich, administrator with Home Theater Forum, discussing how much space a high-def movie takes up on optical media. “It was on a 15GB disc.”

HD video will take up more space than standard definition, 1.5GB movies, Gregorich pointed out. For comparison, he said his Comcast digital video recorder can hold 17 hours of HD video on its 120 GB hard drive, compared to 160 hours of standard definition. People who rent HD movies on their low-end Apple TV may find the 40GB hard drive taxed quickly.

“It's just a matter of what that's going to do quality wise when you watch it,” Gregorich said of Apple's HD video compression. “There's compression, and then there's compression.”

Industry impact

Another issue, should Apple start looking at expanding its service, is that the company might find allies hard to come by.

“Apple faces a further challenge in that they won't get support from other [consumer electronics] manufacturers or MSOs [multisystem operators],” Bullwinkle said. “Look at deals like CinemaNow's relationship with Echostar [Dish Networks], or the recent holiday offer of a free Vudu with the purchase of a Sharp LCD TV.

“Apple has alienated the MSOs, satellite companies and CE vendors, and they won't get partnerships like that.”

Also, some analysts contend the mode of getting content to the TV is too cumbersome.

“Our sense is that only a small number of consumers would be willing to pay the extra cost and add another set-top box to their living rooms,” JP Morgan analyst Barton Crockett, said in a research note.

Michael Pachter, media analyst with Wedbush Morgan Securities in Los Angles, said the studios see downloads in the short term as incremental revenue at best.

He said the studios know they have the power to keep digital downloads from developing while maintaining DVD sales or developing cable VOD.

“It is not collusion, DVDs are always going to be more profitable because they allow for an impulse purchase,” Pachter said. “There is no such thing as an impulse purchase of a download.”

Still, even Apple's competition is finding more positive than negative with the new service.

“We view the Apple announcement as positive news,” said Randy Hargrove, spokesman for Blockbuster Inc., which acquired the digital movie company Movielink in August. “Apple's move should accelerate consumer awareness and usage of movies via digital downloading, and we believe Blockbuster is well positioned to take advantage of this potential increased demand by way of our Movielink service.”

Netflix's Steve Swasey said Apple joining the digital movie rental game doesn't threaten his company. Netflix, just a day before Jobs took the stage in San Francisco, announced that its customers on unlimited rental plans would also have unlimited streaming access to the company's movies at Netflix.com.

“It's a big market and a big prize getting from the computer to the TV, and that's what Netflix has been working toward,” Swasey said. “When you get a great company like Netflix and a great company like Apple making these big announcements, it raises the public awareness of the entire industry.”

Add Comment