Paramount sells iTunes a library card
Apple also unveils new iPhone
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Par's only the second studio to join iTunes. Disney, in which Apple CEO Steve Jobs is the largest individual shareholder, started offering library and new release movies in the DVD window in October.
By contrast, four months after starting to sell TV downloads from Disney networks in October 2005, Apple had already added full selections from NBC Universal, MTV Networks and Showtime.
All the film studios, however, have thus far balked at Apple's terms for new movie releases. Because it sells them for $12.99 in the first week and $14.99 thereafter, company pays wholesale rates lower than DVD retailers.
That remains a non-starter for most of Hollywood. Sources at numerous studios confirmed they're no more interested in Apple's terms today than they were when iTunes started selling movies.
Par isn't ready to risk alienating DVD retailers by undercutting them for iTunes either, which is why it's sticking with library movies for now.
"We're committed to treating our brick-and-mortar retailers in an equitable way as we license to digital," Paramount topper Brad Grey said. "The vast majority of sales online right now are library titles so we wanted to look at that first as we continue to evaluate new releases."
Par's agreement to provide library pics, which Apple sells for $9.99, about the same as most DVDs, could very well be a model copied by its competitors.
Studios could be more likely to jump on the iTunes bandwagon after Jobs, speaking at the MacWorld confab Tuesday, said iTunes has sold more than 1.3 million movies downloads since October.
Paramount Digital Entertainment prexy Tom Lesinski said that number is more than all other online movie stores, such as Movielink, CinemaNow and Amazon.com, have sold combined.
It's particularly impressive given that Apple reached that milestone with a library of fewer than 100 pics from Disney alone, while most of its competitors have hundreds of pics from numerous studios.
Paramount will add at least 100 movies to iTunes this month and hopes to at least double that number by the end of the year. Lesinski noted that science-fiction and other young male-oriented content has sold best online thus far, and the studio will likely focus on those types of films first.
Jobs also unveiled two digital media devices that could be strong drivers of movie and TV downloads on iTunes.
The first, the much anticipated iPhone, combined numerous technologies that many observers have been waiting for Apple to launch. In addition to putting full iTunes capability on a cell phone, it has a widescreen display bigger than any previous iPods and that should make movies much easier to watch. It also has touchscreen capabilities and Internet connectivity.
It's Apple's second try to put iTunes on a cell phone. A phone manufactured by Motorola that came out in late 2005 sold poorly.
"We learned from that experience that having an iTunes client on a phone isn't as good as having a true iPod," said Greg Joswiak, Apple's veep of Worldwide iPod Product Marketing. IPhone, which comes out in June, will cost $499 or $599, depending on the hard disk size, and work only with Cingular as the carrier.
Jobs also provided more details on Apple TV, which he first introduced as the iTV in October. It plays digital video downloaded from iTunes onto a TV via a wireless connection to the computer. It will cost $299 and ship in February.
Apple TV has hi-definition outputs, indicating that company will likely soon start selling video content on iTunes in HD. Currently, movies and TV downloads are available only in standard definition.
Device is Apple's effort to put itself at the center of the "digital living room," as consumers increasingly start putting content from the Internet onto the TV. There are numerous other products on display at the Consumer Electronics Show this week looking to do the same thing, from Sony's Internet-enabled Bravia TVs to TiVo to Microsoft's Windows Media Center and Xbox 360.
Besides iTunes, Xbox Live, Microsoft's Internet service that connects to the 360, has been the only other successful provider of movie downloads. However, while Apple is only offering movies for sale, Microsoft is focused on video-on-demand rentals. It has had seen the most demand for movies available in hi-def.
