By Sue Zeidler
Apple shares rose more than 3 percent after the news as
investors hoped the new movie sales would boost purchases of
Apple's portable iPod media player and Apple TV, as well as
fuel growth for iTunes.
Privately-held CinemaNow and Blockbuster Inc's Movielink
already offer similar services for downloading movies on the
same day as DVD release, but Apple's entry is expected to
expand that market.
"Apple will increase awareness of digital downloads and
it's clearly a good thing for the studios who want to offer
viable digital alternatives," Craig Kornblau, president of
Universal Studios Home Entertainment, told Reuters. "We think
this is a game changer."
ITunes will offer new releases and catalog titles from
Universal, 20th Century Fox, Walt Disney Studios, Warner Bros.,
Paramount Pictures, Sony Pictures Entertainment, Lions Gate
Entertainment Corp, Image Entertainment and First Look Studios.
Movies available this week include "Juno," "American
Gangster" and "I Am Legend." New titles will sell for $14.99
each and catalog titles for $9.99 each.
Apple launched a service for iPod and iPhone users to rent
and download some movies earlier this year, but offering new
releases could help it attract more consumers to video content
on its devices, analysts said.
"It's actually a big deal, because when they were able to
get parity (with CD release dates) on the music side, they were
able to drive music sales," said analyst Shannon Cross of Cross
Research.
Movies purchased off the Web represented 1.2 percent of the
entire $36 billion paid movie industry market in 2007. That is
expected to grow to 4.2 percent of the projected $40 billion
market by the end of 2009, according to industry estimates.
BLOCKBUSTER, NETFLIX DROP
Apple's entry through its popular iTunes service could
ultimately threaten the physical rental market led by
Blockbuster and Netflix Inc
"This poses a big long-term competitive question for
Netflix and Blockbuster," said JP Morgan analyst Barton
Crockett.
Shares in both companies fell more than 3 percent.
Blockbuster spokeswoman Karen Raskopf said it hoped Apple
would help create a larger market that would benefit its own
Movielink service.
Netflix declined comment on Thursday, but has said it
expects to lead the market for movies delivered over the Web,
despite competition from Apple and Amazon Inc.
The biggest challenge to such services is that most viewers
do not have a simple way of taking a movie download and
watching it on a television set rather than a computer screen.
Apple has sought to bridge that gap with its Apple TV
hardware. Netflix will soon roll out a set-top box with LG
Electronics Inc and said it will announce three more
partnerships to let viewers watch films streamed from the Web
to TV. Microsoft Corp is widely expected to be one of those
partners.
(Additional reporting by Michele Gershberg, editing by Dave
Zimmerman and Andre Grenon)
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