One of the more popular Apple rumors to circulate since the introduction of the video-capable iPod has been the possibility of the company offering a movie-download service. Movie industry trade magazine Variety reports that Apple has a movie download service all primed and ready to go before the end of the year, but its insistence on a flat US$9.99 pricing scheme for all releases is holding up its debut, as it is a turnoff to the movie studios.
The one-price-fits-all model has worked very well for Apple with the iTunes Music Store, but the record labels have called for a tiered pricing scheme. For a time, it looked as though the labels might get their wish, but the latest agreement between the iTMS operator and the music industry keeps the flat 99¢-per-track rate intact.
Movies are a different animal, at least according to the studios. Variety reports that they want a tiered pricing scheme, where new releases would be priced as high as US$19.99 and older movies would be available for US$9.99.
"We can’t be put in a position where we lose the ability to price our most popular content higher than less popular stuff," said a studio exec close to the negotiations.
According to Variety’s sources, Steve Jobs has been personally involved in the negotiations and there are signs that he may decide to bend a bit on movie pricing. It would not be entirely unprecedented: since the iTMS began selling TV shows late last year, some more recent features have been priced higher than the usual US$1.99 per show price. The Battlestar Galactica miniseries goes for US$19.99 while the movie "High School Musical" from the Disney channel costs US$9.99.
In contrast to the music business, Jobs is a big player in Hollywood. Once Disney completed the acquisition of Pixar, Jobs became the largest stockholder in Disney. Despite its recent lackluster performance, Disney is still a force to be reckoned with. His position within the industry does not appear to be doing much to advance his argument for flat-priced movie downloads, if Variety is painting an accurate picture of the negotiations.
Assuming there is a movie download section coming to iTMS, there are still a number of unanswered questions. Will they be 320×240 movies like the TV shows, suitable for play primarily on iPods and standard-definition television sets? If not, is Apple planning on introducing something along the lines of the fabled touch-screen iPod with a larger screen? Perhaps the most interesting question is whether those who buy the movies be able to burn them to DVD like music downloads can be burned to CD? That is an innovation the movie studios have resisted so far, out of fears of piracy.
The bigger question is how readily consumers will pay US$19.99 for a movie that will be of much lower quality than they could easily get from Blockbuster and Netflix. The attractions of digital music are the low price, convenience, and ability to cherry pick particular songs off an album. At ten bucks a movie, the low price and convenience factors are there. Double it, and many people are likely to just head over to the video store or wait for the film to make it to the top of their Netflix queue.
Old models for content distribution are falling by the wayside. The music industry and broadcast television networks have finally grasped that reality and are reacting to changing consumer expectations around pricing, availability, and delivery. As we have pointed out, the movie industry has been slower to adapt. If Apple and the studios are able to reach common ground on pricing, the iTMS may be able to nudge the movie industry into the 21st century.