Apple, Fox Poised To Offer Fox Films Through iTunes

December 28, 2007 0

“Apple is reportedly planning to get into the movie rental business and license its digital rights management technology; and it could announce a deal within the next few weeks…”

iTunes will soon have movie rental option, if a report in a UK newspaper holds true. 20th Century Fox is said to be Apple’s first partner in the venture. Such a service would reportedly incorporate a DRM system that would allow the movies to be played for only a limited time after download, but would also allow them to be transferred to an iPhone or video-capable iPod. 

In a deal struck between the maker of the iPod gadget and News Corporation, the parent company of The Times and owner of Fox, consumers will be able to rent the latest Fox DVD releases by downloading a digital copy from Apple’s iTunes platform for a fixed period.

It is understood that Apple has been trying for months to persuade Hollywood studios to sign up to a digital rental model, in which subscribers would be able to download and view films for a set period, but until now no studio has agreed to a deal. Studios are understood to have had concerns over issues such as pricing and piracy.

A number of Fox television shows, such as 24, and Walt Disney programs are available to buy on iTunes. Apple chief executive Steve Jobs is a board member and major shareholder of Disney.

The agreement, reported first by The Financial Times and later by The Wall Street Journal, would launch Apple into the online movie rental business.

The computer and gadget maker sells movies for people to keep from Disney, Viacom’s Paramount, Metro-Goldwyn-Mayer, and Lionsgate. Disney, however, is the only studio to sell new releases.

The reports also says that as part of the deal, Fox is also going to use Apple’s FairPlay digital rights management technology on its DVD releases, which would allow DVD buyers to rip their movies onto their computers using iTunes and also move those store-bought movies to iPods and iPhones.

Rumors of Apple getting into the movie rental business have been swirling all year, as it has become clear that the per-song pricing strategy that worked so well for Apple in the music business has not worked as well in video.

The movie studios want the same thing the record labels want–variable pricing, and more control over it–and people want the option of either buying or renting. There are lots of films I would pay $4 or so to rent, but not $15 or $20 to buy.

“This represents the future of the movie rental business, and if Apple is serious about AppleTV — they are rumored to have a refresh out next year – they will need this [Apple-Fox deal],” Rob Enderle, principal analyst for The Enderle Group, said in a statement.

“Apple tends to have a cow when stuff like this is leaked, so I would guess they may be less likely now to have this announced at Macworld than they were — they like to punish partners who leak — but I would expect something in the first half of the year regardless,” he added.

Part of the problem, of course, is that only Walt Disney, which counts Jobs as a member of its board of directors, sells its first-run movies on iTunes. Adding Fox’s movies would provide a significant boost to iTunes, not to mention a lineup of iPods that has been almost completely redesigned around making it easier to watch video.

The latest deal could help Apple to boost its video offering. Sales of video on iTunes have failed to grow at the same pace as the site’s music downloads. Apple TV, the network device designed to play digital content originating from any Mac OS X or Windows computer on to an enhanced-definition television, has been a poor seller.

A rental service from a new movie studio would give Apple TV owners another easy-to-access source of entertainment to watch on their big-screen televisions. Right now, they are restricted to buying movies and TV shows on iTunes, or watching skateboarding bulldogs on YouTube, and that gets old.
News Corp. declined to comment on or confirm the accuracy of the report to MacNewsWorld, and Apple did not respond to requests for confirmation and additional detail. The Times report cited only a “person familiar with the situation.”

However, if the reports are right, Apple has come to grips with the idea of licensing FairPlay in spite of those concerns. So is FairPlay now up for grabs? Licensing FairPlay to companies like Microsoft or SanDisk would allow the Zune or Sansa to play songs and videos purchased from the iTunes Store; right now, you can play iTunes Store purchases only on iPods.

In any event, it sounds like Macworld will once again involve more than just Macs. Apple’s stock is at an all-time high, and it went up further Thursday on reports of the movie rental deal.

In all likelihood, if the report is indeed accurate, both Apple and News Corp.’s Fox will keep the deal under wraps at least until Apple CEO Steve Jobs has a chance to reveal it at the Macworld Conference & Expo during his keynote speech on Jan. 15.