Report: iTunes May Hang Out Movie Rental Shingle

Apple's (Nasdaq: AAPL) iTunes online music and video store may soon add the option to rent rather than buy movies for download, according to a Financial Times report.

If Apple is indeed close to offering online movie rentals, a big question facing its customers and competitors is whether the films will have restrictions similar to those obtained from other pay-per-view sources.

The potential deals between Apple and several studios at first sound substantially similar to other pay-per-view or video-on-demand arrangements: Customers pay a small amount -- in this case, the reported fee is US$2.99 -- and get a movie they can watch for a limited period of time.

The downloaded films will come as "a 30-day rental," according to the report, and will be shrouded in digital rights management software that would prevent the burning of copies but would allow them to be transferred from a computer to another device.

Devil in the Details

However, it remains unclear whether or how often consumers will be able to repeatedly play back downloaded rental films. Apple did not return a message seeking comment.

With typical pay-per-view scenarios, once a customer begins playing a movie he or she has 24 hours to watch it, noted Eric Becker, a spokesperson for Starz Entertainment. "Pay-per-view is intrinsically a difficult value proposition for the consumer," Becker told MacNewsWorld. "They don't know if they are going to enjoy it and they have 24 hours to do it. They only have 24 hours from the moment they start viewing the content."

Becker wouldn't speculate about whether there would be a firestorm in the industry if studios allow Apple to operate differently, but he stressed the 24-hour restriction has been a constant part of the playing field. "That's the business rule everyone's been operating under," he said. "And that's what is not in the (Financial Times) story. My assumption is it would be the same rules for Apple that everybody has operated on for years."

Should the studios allow Apple to offer 30-day rentals of downloaded movies that can be played repeatedly, Apple will have scored an industry coup. "If they are pushing 'You can watch it over and over again for 30 days,' it would be be ... different than all the others," said Becker.

A Vast Corps of Apple Lovers

Even if it is held to the same restrictions as others that rent films, Apple -- which already sells movies through its iTunes Store -- has a competitive advantage due to its large base of customers. It also has millions of Apple hardware users that might want to try watching films on their units. Also, the company this year released its Apple TV device, designed to send iTunes video content to the user's television.

However, Apple will be entering a market that's far from wide open. "It will be yet another competitor, in this case a very well-known one, but just another purveyor getting into the broadband pay-per-view market," said Becker. "By my count this will be at least the ninth purveyor of pay-per-view content. This is clearly the biggest market player that will be getting in. But it's also clearly a crowded place."

Video-on-demand is offered by cable and satellite TV companies and by online entities including Microsoft's (Nasdaq: MSFT) Xbox Live, Movielink and Amazon's (Nasdaq: AMZN) Unbox.

Demand for On-Demand

"I think that, in the end, all this stuff we are talking about -- this vast new revolution of communication with the Internet, the cell phone, the laptop and all the rest -- when the smoke all clears, what this is is just a distribution revolution and much less than a content one," said Bob Thompson, director of the Center for the Study of Popular Television at Syracuse University.

"This is a new way of doing the pay-per-view thing, of having a menu of things people can access, pay for on an a-la-carte basis and have delivered for use wherever they want," he told MacNewsWorld. "It's the kind of thing I think you are going to see more and more of."

There are some potential hurdles and glitches to the whole downloadable movie rental concept. For one, movies -- even those not in high-definition -- are huge files that could take a long time to download and might push customers to the ceiling of their broadband providers' download limits.

"The value of on-demand video is just that: It's on demand," said Thompson. "Your kid comes up and asks, 'Can we watch a movie tonight and make popcorn?' If it takes two hours to download it, the moment's dead."