Apple, Amazon to Offer Movies Online
By Dawn C. ChmielewskiTimes Staff Writer
8:23 PM PDT, September 5, 2006
The movie business is about to change: Apple Computer Inc. and Amazon.com Inc. are in the final stages of building online services that allow easy and legal access to potentially thousands of movies on demand.
Apple, which invigorated online music with its iTunes Music Store, will reveal plans next week to offer downloadable movies from the Walt Disney Co. And Amazon has agreements with at least three of the other major studios to offer movies at its online store, expected to be announced as early as Thursday.
Apple and Amazon declined to comment Tuesday; their plans were confirmed by several people familiar with them. Details such as pricing and title lineups were unclear Tuesday, as was information about how the rival services will work.
But the entry of Apple and Amazon is significant because the companies are adept at making the masses comfortable with big technological shifts. Apple popularized legal music downloads and Amazon did the same for online shopping — both by making the process easy, fast and reliable for even the most technophobic users.
Analysts said the new services will almost certainly accelerate a race toward digital distribution that is at once threatening and tantalizing to Hollywood.
Online revenues make up a tiny — but growing — fraction of box office receipts. The Internet threatens to undermine the industry's established economics that rely on big opening weekends followed by robust DVD sales and lucrative broadcast deals. Yet traditional media companies have little choice but to follow as audiences move online and demand greater control over when and where they are entertained.
"We're basically on the cusp of a mobile on-demand video market," said Aram Sinnreich, managing partner of Radar Research entertainment consultancy.
Reinforcing that notion, two other companies also revealed new video-on-demand offerings Tuesday.
Digital recording pioneer TiVo Inc. said its 4.4 million subscribers will be able to watch the new CBS comedy "The Class" a week before the show debuts on network TV. TiVo's set-top boxes already connect over phone lines or the Internet to the company's computers to get programming information. They also have hard drives to store recorded shows. The deal hints at TiVo's long-term aspirations to deliver more customized programming on demand.
And Sprint Corp. on announced a pay-per-view movie service for mobile phones. Sprint Movies streams full-length movies — including film from Buena Vista, Lions Gate Entertainment, Sony Pictures home Entertainment and NBC Universal. The movies can be viewed all at once, or divided into chapters and watched over time. Prices range from about $4 to about $6.
To be sure, the rise of online movies has been forecast for years. The first services debuted as early as 1999, but were expensive and imposed restrictions to thwart piracy. Plus, movies could take days to download over slow dial-up connections. Not surprisingly, few people signed up.
More popular have been online rental services such as Netflix Inc., which charges a flat monthly rate of between $5.99 and $29.99. Subscribers choose their movies online and Netflix ships them DVDs in the mail. Users keep the DVDs as long as they want and then send them back in prepaid envelopes to get more.
Recently, though, the growth of high-speed Internet connections has spurred renewed interest in online video. Sites such as YouTube attract millions of visitors and sales of portable video players such as Apple's iPod and Sony Corp.'s PlayStation Portable are brisk — demonstrating that people are eager to be entertained outside theaters or their living rooms.
News Corp., for instance, said last month that it would start selling movies from its 20th Century Fox unit on MySpace, the popular social networking site it bought last year for $580 million.
"Digital distribution and the age of it becoming a true business has finally arrived," said Curt Marvis, chief executive of CinemaNow, one of the original Internet movie services. "It's only been seven years I've been waiting."
Apple plans to unveil its movie service Sept. 12 with full-length features from Disney, the same initial partner it chose to inaugurate downloadable television shows last fall. Apple Chief Executive Steve Jobs is a Disney board member, a position he assumed when Disney bought his Pixar Animation Studios earlier this year.
Since Apple started offering video last fall, the company has sold 35 million clips -- including music videos, classic TV shows and new installments of popular shows such as "Desperate Housewives" and "The Office."
Disney declined to comment Tuesday and Apple spokesman Tom Neumayr said only that "we do not comment on rumors and speculation."
In tandem with the movie service, Apple is expected to unveil a new version of the its popular iPod media player.
Other major studios are still in talks with Apple, according to people familiar with the discussions. The studios have reservations about the digital locks Apple uses to prevent unauthorized copying. They also don't like Apple's refusal to charge higher prices for new releases.
That issue has also been a contentious one between Apple and the record labels that sell their songs for a flat 99 cents on iTunes. Apple has long insisted that flat prices make things easier for customers. It does the same with its video offerings, charging $1.99 per clip. Labels and studios, however, argue that new songs or movies are more valuable than older material in their catalogs.
Amazon, meantime, has struck deals with Warner Bros. Sony Pictures and NBC Universal to offer features on its video service, which the company plans to announce this week.
Industry watchers said Amazon enjoyed more initial success than Apple, in part, because it has deep relationships with the studios through its online DVD sales.
A spokesman for Amazon declined to comment Tuesday as did representatives for the studios.
Although the major studios are fearful of moving too quickly and cannibalizing DVD revenue or alienating powerful retailers, they recognize that DVD sales are slowing and hope to find new revenue streams.
They are also mindful that the major record labels were widely seen as moving too slow to counter the rise of online piracy after 1999 with reasonably priced and easy-to-use alternatives.
"There's a lot of talk out there along the lines of we don't want to make the same mistake the music industry made," Sinnreich said.
