Apple Computer, which pioneered the online distribution of music and television shows, appears poised to jump into the movie business.
Apple’s chief executive, Steve Jobs, was set to announce the new products at a special media event recently held in San Francisco, that it will soon begin selling movie downloads from Walt Disney Co.’s film studios, aiming to turn its iTunes online music store into a one-stop shop for digital entertainment.
The invitations sent last week had declared simply "It is Showtime," triggering an avalanche of speculation that Apple would soon shake up the distribution of movies as much as it did music with its iTunes store and iPod players.
In a trademark theatrical presentation in San Francisco, Jobs also unveiled beefed-up versions of its popular iPod MP3 players with brighter screens and longer battery life.
Jobs also said Apple planned to ship a device in the first quarter of 2007 that will let consumers’ stream movies, music, photos, podcasts and television shows from the Web to their home entertainment systems.
Code-named iTV, the device will cost $299 and analysts said it could solve the entertainment industry’s dilemma of bridging the gap between the living room television and the computer.
“He has fundamentally closed the loop and Apple has a complete solution,” said Tim Bajarin, an analyst at Creative Strategies, of Jobs. “This is a big winner for Apple.”
Though Apple has kept its typical silence, sources at several Hollywood studios confirmed they were in talks to sell their films through Apple’s iTunes online store. The executives asked to remain anonymous because talks were still ongoing.
A distribution deal with The Walt Disney Co., where Jobs sits as a director, was expected to be among the first to sign on. Deals with other studios were not yet solidified as pricing, copy protection measures, and other issues remained unresolved, the sources said.
Other online movie services already exist but have not attracted many customers. Apple, however, is already being cast as a leading competitor with its expected entry.
Disney First
Apple Computer fired a much-anticipated salvo in its battle to rule personal entertainment by announcing online sales of Walt Disney Company movies.
The films are from Disney, Pixar, Touchstone and Miramax film studios, said Jobs.
Apple’s eagerly anticipated movie service will sell new releases from the Disney, Pixar, Touchstone and Miramax studios for $12.99 if pre-ordered or bought during the first week available. Normally, new releases will cost $14.99 and other feature-length films will cost $9.99.
“Today we are making more than 75 films available on iTunes, and we will be adding more every month,” Jobs said during a press event in a performing arts center. Each film takes about 30 minutes to download for users with high-speed Internet connections. Consumers can view the movies on their iPods and computers, and eventually on televisions with the upcoming iTV player.
“In less than one year we have grown from offering just five TV shows to offering over 220 TV shows, and we hope to do the same with movies,” Jobs said. “iTunes is selling over 1 million videos a week, and we hope to match that with movies in less than a year.”
Jobs said the combination of iTV, its Macintosh computer, the iPod and other Apple products will put Apple squarely in homes, cars and consumer pockets as it looks to stamp its mark on all aspects of the digital lifestyle.
"I hope this gives you a little bit of an idea of where we are going," Jobs said.
As for movie downloads and tying together the Mac computer and the living room, Jobs said he was confident Apple would succeed. Microsoft Corp. and Intel Corp. have pushed media PCs for years, but with little broad-based success.
"Everyone who has tried this before has failed," Jobs said. "We have a pretty different approach and I think we will be successful with it.”
He also suggested more studios would be announcing tie-ups with Cupertino, California-based Apple. "We certainly hope so," Jobs said when asked if more deals were in the offing.
In an interview, Jobs said the transformation of the analog to digital photographs is "very far along," and is progressing in music. He said that Apple is now the fifth-largest reseller of music in the United States behind Wal-Mart Stores Inc., Best Buy Co. Inc., Target Corp. and Amazon.com Inc.
Disney bought Pixar this year in a deal that resulted in Jobs getting a seat on Disney’s board and becoming its single largest shareholder with a stake of about seven percent.
"At the end of the day it is a lot of names, but it is all Disney," Silicon Valley analyst Rob Enderle of Enderle Group said of the iTunes movie service. "The fact they did not have any more could be indicative of a problem with other studios."
Apple has been forging ahead to make its products the digital media hub for consumers. Its iconic iPod player is designed for music and video on-the-go, its iTunes Music Store is a leading destination for getting digital content, and its Macintosh computers are touted for being able to manage all media.
Analysts and industry observers expect Apple to soon take another big step – introducing perhaps an innovative way to unlock digital content so that it can be displayed easily on a television set.
Apple’s push into movie downloads come at a time when the company is facing a growing contingent of competitors in the digital music market, including Microsoft, which plans to launch its Zune digital media player later this year.
There are already competitors in the nascent movie download market, including CinemaNow, Movielink and Amazon.
In a note to clients, Goldman Sachs analyst David Bailey said that iTV highlights Apple’s "ability to consistently lead the industry and create new markets — all of which should contribute to earnings upside over the next year."
Other new devices unveiled include an iPod with the most capacity to date — an 80 gigabyte player that would cost $349. Apple said new versions of the popular digital music players would sport video games such as Pac-Man and Tetris.
The company also introduced a thinner iPod Nano available in five colors with 24 hours’ battery life, which will sell for $149, $199 and $249. It introduced a 1 gigabyte Shuffle that holds up to 240 songs and is nearly half the size of the original version. It will sell for $79.
In any case, expectations for Apple are running high, with some Wall Street analysts upgrading their price targets based on bullish views that new product launches and in coming months will further fatten Apple’s fortunes.
Microsoft was likely to up the ante in the coming weeks by coming to market with a “Zune” brand online content store and MP3 player with an oversize screen, analysts said.