iTunes Movie Rentals: Winners And Losers (AAPL)

The FT and others report that Apple and News Corp.’s 20th Century Fox are preparing to announce a digital movie rental service via Apple’s iTunes store. The service hasn’t been acknowledged by either company, so it’s a bit early to call it a hit or a dud. But here’s a look at some potential winners and losers if the service ever takes off.


1) Apple (AAPL). Inexpensive digital rentals make sense and could be popular. Apple would see revenue from the rentals themselves, plus any additional iPods, iPhones, or Apple TV units people buy to use with the downloaded movies.

2) Akamai Technologies (AKAM). Movie downloads use a lot more bandwidth than iTunes music downloads, and short-term rentals could mean more downloads, more often. That’s more bits to move for Akamai, and a bigger bandwidth bill for Apple.

3) 20th Century Fox (NWS). The FT says Fox DVDs will include a copy of the movie that can be ripped to a computer for iPod/iPhone playback. This gives us another (small) reason to buy a physical copy of the movie — and could modestly boost disc sales for the studio. Meanwhile, Fox will presumably do nicely via a rev share on the rentals themselves.


1) Other download/mail/store-based movie rental services, such as Blockbuster (BBI), Netflix (NFLX), Amazon (AMZN), etc. Why hasn’t anyone really caught up with Apple in the music download market? One reason: Because until Amazon debuted its MP3 store this fall, no store sold popular music that worked on iPods or Mac computers. Similarly, most non-iTunes movie download services don’t work on Macs or iPods. And a two-hour download beats a two-day wait for a DVD in the mail. (Amazon’s only benefit: it sells a ton of iPods and other Apple gear.)

2) Cable companies, telcos, and anyone else offering video on demand. Why spend $4 for a movie rental that you can only watch on one TV and not transfer to an iPod or computer? (One reason: HD movie rentals, which Apple might not offer for a while.)

Movie downloaders might upgrade their Internet connection to a faster, more expensive service from these companies — a potential gain. But we can’t see AT&T (T) or Comcast (CMCSA) thrilled about becoming an even dumber pipe for Apple’s store.

3) Blu-Ray, HD-DVD. Does anyone actually care about this format war? We’re happy to skip hi-def discs for direct downloads.

4) Microsoft (MSFT). Its iPod-incompatible, Windows Media-based DRM becomes less relevant. And does the Zune store even offer movie purchases yet?

5) Sony (SNE), mobile phone manufacturers (MOT, NOK), and other consumer electronics makers. If Apple and its iPods dominate the portable, digital rental market, competing devices appear even less compelling as movie players.

See Also:
Six Questions About Apple’s iTunes Movie Rentals
iTunes Movie Rentals Coming From Fox?
How Steve Jobs Can Fix Apple TV
Apple At Macworld: Tiny MacBook, No 3G iPhone?