iTunes Movie Rentals and Old Media

Word on the street is that Apple is about to unleash iTunes Movie Rentals. If this turns out to be true, what will be the socio-economic impact of Apple’s latest move? Will iTunes dominate the movie industry as much as it has the music industry?

Obviously, Hollywood is wary of this recent development. The movie industry was wary when Apple made a deal with executives, in late 2005, for television shows to be downloaded for $1.99/each in the iTunes Store. Again, they worried when movies could be purchased for $9.99/each via the iTunes Store. Their fear is that purchasing movies will somehow cannibalize movie theater and DVD sales.

How exactly can this happen? It seems that their theory is that a DVD, HD DVD, or Blu-ray can demand more profit than a movie download. That theory is actually flawed. Movie theaters will continue to make money, as most home owners don’t have massive displays and amazing sound systems. As for disc sales, a physical disc has to be produced, packaged, shipped, and requires shelf space. A movie download only requires storage space and bandwidth. Also, as the current picture quality of a movie download is significantly worse than HD DVD or Blu-ray, Hollywood executives need not worry about competition in the premium high-definition market yet. In fact, with DVD prices plummeting to make way for HD DVD and Blu-ray, a lot of people are hesitant to purchase a movie download from iTunes when a DVD is about the same price and includes bonus features and a slightly better picture quality. Eventually, iTunes will improve their resolution and quality of their videos to be on par with DVDs making it a little more competitive.

The movie industry will lose profit margins per download, as Apple will try to lower prices. The convenience of downloading a video anytime, anywhere will allow consumers to watch MORE videos than they would normally have time for. (Remember, iPods and iPhones can display downloaded videos). What the studios lose in profit per movie, they make up for in volume. This has happened in the music industry and will happen again in the movie industry. No use in fighting it. Consumers want this and Apple will deliver.

While Hollywood and movie studios have little to fear, movie rental stores, such as Blockbuster and Hollywood Video, will feel the pressure. Netflix will also feel the pain, almost immediately. With an iTunes Movie Rental service there is no need to return a physical disc. No need to drive to a brick and mortar store or drop off a package at the post office. No late fees. The simplicity and convenience of this will put Apple in direct competition with old media

Additionally, this will present a challenge to cable television providers and their on-demand and pay-per-view services. Like their music collection, Apple can hold every movie or television show ever created. While a brick and mortar building might not hold unpopular videos due to wasting shelf space, Apple can hold every movie or television show ever created, regardless of popularity or viewing frequency. This give consumers more selection options and more opportunities to determine what they want to see. Again, this is part of Steve Jobs’ Master Plan and Apple’s dominance in the media industry.

Old media has been sitting pretty and collecting monopoly money with no real challenger for quite some time. The latest iTunes feature changes the delivery and cost-effectiveness of movie rentals. The race is on. Every way you look at it, Apple’s latest move can only benefit the consumer.

Are you looking forward to Apple iTunes Movie Rentals? Do you think you would actually use the service? Leave us your thoughts below.

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