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Movie Rentals from Apple? iTunes subscriptions?

Despite a recent history of saying it wasn’t interested in subscription businesses, London’s Financial Times and the Wall Street Journal are reporting today that Apple is in late-stage discussions with Hollywood movie studios to offer movie rentals through iTunes. The rumored plan which includes $2.99 video downloads that will expire after one month doesn’t contradict Apple’s anti-subscription position, but other rumors circulating suggest (though much less likely) that Apple might also consider a subscription rental package.

While information on the concept of iTunes rentals is too early and inconclusive to verify with certainty, it’s not an unrealistic rumor. Apple is doing well with DVD sales through iTunes but its growing market share could easily be swallowed by Amazon’s Unbox video download service (partnered with Tivo), or efforts to provide digital rental services from Blockbuster or Netflix, should they materialize. Likewise, pay-per-view services from digital cable and satellite companies could help reshape the market

The movie industry is increasingly moving towards an on-demand world for home viewing. A rental service from Apple, which already has such a strong customer base in iTunes, would likely have a significant early advantage over competitors. It might even help fuel the sales of Apple TV (which by most accounts is not living up to expectations).

It’s hard to peg the odds of the big studios signing on. Thus far, only Disney shows new DVD releases through iTunes. The other studios that have Apple partnerships hold back new titles to protect their DVD sales (Apple’s pricing of $14.99 is at least a few dollars cheaper than newly released DVD titles).

Effective Digital Rights Management (copyright protections) are surely an additional concern. The idea of an “expiring” download may be great in theory, but the technical feasibility and the security of the content are things the studios are going to want to be very comfortable with.

Whether the development turns out to be true or not, one thing that is likely – it will add to the already swirling rumors that Amazon is looking to acquire Netflix. Thus far that talk has been largely brushed off but if Apple does get into the rental business (either with one of pay per view rentals as reported, or subscription based rentals), the marriage of the Netflix customer list with Amazon’s marketing power and web services expertise could make a viable competitor.

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