Hollywood Execs Pooh-Pooh Apple Movie-Rental Rumors

Apple Inc.'s (AAPL) rumored plans to enter the nascent online movie rental business drew skepticism on Monday from Hollywood executives who questioned pricing, copy protection and the timing of a possible launch.

Sources inside and outside the major movie studios confirmed news reports that the maker of computers and iPods was considering online film rentals to complement digital movie downloads that are already sold at Apple's iTunes store.

But the sources, who declined to be named because film-licensing talks are preliminary, questioned Apple's desire to fight copy piracy and the reported $2.99 price per rental.

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Some said that, because the film download market remains small, the studios do not need to rush into a deal with Apple.

Several companies already rent digital movies to Web customers, including CinemaNow, Movielink and Amazon.com Inc. (AMZN).

"It just feels like the ball is in our court," said one source.

Apple declined to comment.

Two publications recently reported Apple was talking to all the major studios about licensing films for a rental service, and that the service could launch as early as this fall, with movies available for a 30-day period at a cost of $2.99.

But that price raises questions for the studios because it would significantly undercut what consumers now pay for online rentals of new releases, which can cost up to $4.99.

Moreover, the price might cannibalize pay-per-view revenues the studios already receive from cable and satellite TV.

Among several issues involving copy protection, some movie executives expressed concern that Apple's digital rights management software would not adequately protect against unauthorized copies made for the video iPod and other devices.

Given Apple's history, however, several sources said entering the movie rental market was likely just a matter of time, although autumn 2007 was too soon.

At iTunes, consumers already download and buy movies made by The Walt Disney Co. (DIS) and Viacom Inc.'s (VIA) Paramount Pictures. Rentals would complement that service.

More important, Apple is now launching a digital set-top box for televisions, called Apple TV, which allows consumers to download and play movies, TV shows and other video content on television sets more easily. Being able to buy and rent movies at iTunes could help spur sales of Apple TV.

Early in the evolution of the iPod, the popular music listening device, Apple employed much the same strategy when it began offering downloads of songs at iTunes.