SAN JOSE, Calif. – Could the company that helped catapult the legal music download market with iPods and iTunes now kick-start the online movie market?
The media event scheduled for Sept. 12 is set in San Francisco and coincides with the opening day of the Apple Expo in Paris.
Sources at several Hollywood studios confirmed Tuesday they were in talks to sell their films through iTunes.
But substantial disagreements between studios and Apple remain to be resolved, and Apple's movie service could launch with a limited number of films, according to two studio executives who asked to remain anonymous because talks were still ongoing.
Speculation of the iPod maker adding full-length feature films to its online iTunes Music Store have swirled for months. Already, the Cupertino, Calif.-based computer company has become a multimedia powerhouse with its song and TV show downloads. Analysts said it would only be a matter of time before Apple started distributing movies online.
Apple CEO Steve Jobs became a board member and the largest stockholder at The Walt Disney Co. (DIS) earlier this year through its acquisition of Pixar Animation Studios Inc., which Jobs also headed. That connection provides a natural toehold for Disney to be among the first to sign a distribution deal.
Apple's first experiment with a full-length TV movie on iTunes was last March when it started offering the Disney Channel's original TV movie, "High School Musical," for $9.99.
Apple and Hollywood studio representatives refused to comment on the speculation of a movie licensing deal.
Also, analysts and industry observers expect Apple to soon introduce a new iPod player with a widescreen display — which would be better suited for viewing movies.
Several studios are balking at Apple's demands, including selling all films for one price and making all films available for download the same day they are released on DVD, according to studio sources.
Studios also have some concerns about the digital protection offered by Apple. Other deals use Microsoft Corp.'s (MSFT) Windows Media software, which more tightly controls how many times films can be transferred to various devices.
Studios want to retain more control over their product, believing, as the mantra goes, that "content is king" and that Apple needs big studio fare to sell any new video player more than studios need to sell films through iTunes.
One studio executive said Tuesday that deals being struck for a similar download service planned by Amazon.com are more flexible and allow for higher profit margins.
But watching movies meant for the big screen on a small portable display is still not ideal. Neither is watching video on a computer screen.
An AP-AOL Video poll released Tuesday found that only one in five online video viewers have watched or downloaded a full-length movie or television show. And fledgling online movie services such as CinemaNow and MovieLink have acknowledged that one of their biggest challenges remains the difficulties consumers face if they were to try to hook up their televisions to play videos from their computers.
Apple, in the meantime, 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 store is a leading destination for getting digital content, and its Macintosh computers are touted for managing all the multimedia.
Josh Bernoff of Forrester Research is one of many analysts who expect Apple to enter the living room soon with a product designed to connect to televisions.
Bernoff predicted in a report in January that Apple was creating a new set-top box and will unveil video licensing deals. Such an integrated hardware and software package would rattle video distribution similar to how its iPod-iTunes franchise transformed the music industry, he said.
"If Apple is successful here, they will really open up the online movie market," said Rob Enderle, an analyst with the Enderle Group.
Analyst Tim Bajarin of Creative Strategies added that competitors are sure to be closely watching Apple's next move, including Microsoft, which has said it plans to introduce its own branded online store and Zune portable media player later this year.
Apple shares rose $3.10, or 4.5 percent, to close at $71.48 on the Nasdaq Stock Market.