Apple close to movie distribution deal with Fox - report

[AppleInsider]

NewsCorp's Twentieth Century Fox is close to striking a deal with Apple to offer digital copies of its major motion pictures through iTunes, according to one Wall Street analyst.

Pali Research analyst Richard Greenfield in a blog posting (activation required) on Monday said the two companies are "actively negotiating" terms of the deal, which could be announced sometime in early 2008. Apple and Fox are reportedly prolonging the engagement as not to tamper with this year's critical holiday DVD shopping season.

The proposed deal, which would end a considerable standoff between Apple and nearly all Hollywood studios over the digital sale of movies, has reportedly been helped by the iTunes operator's sudden willingness to increase the wholesale price of new flicks beyond $15.

The Cupertino-based company currently prices new releases at $12.99 when pre-ordered through iTunes during their first week of availability, and $14.99 thereafter. Older library titles sell for $9.99.

Thus far, however, Apple has only been able to court the likes of Disney to offer its entire catalog at those prices, while MGM, Paramount and independent film studio Lionsgate have agreed to just partial distribution deals.

In his posting, Greenfield refers to an emerging desire -- presumably among studios -- to sell premium priced DVDs that include a digital copy of a movie for an increased cost of $3 to $4. This, along with growing piracy concerns and the emergence of Wal-Mart's own digital download service, is likely to influence studios into finally embracing an Apple deal, he said.

"While we suspect FOX will be the first studio other than Disney to fully embrace iTunes, we believe others will quickly follow suit," the analyst wrote, explaining that the major fear for Hollywood studios is proving to Wal-Mart and other physical DVD retailers that a lower wholesale price on digital copies is warranted relative to DVDs.

He added that, "the last thing the movie industry needs is pressure on new release DVD wholesale pricing, although the studios probably make more money on an iTunes wholesale of $15-plus, than most DVDs at $18 due to returns."

It should be noted that talks between NewsCorp's Twentieth Century Fox and Apple date back over a year.

[ View this article at AppleInsider.com ]

[Wally]

Originally Posted by AppleInsider

... has reportedly been helped by the iTunes operator's sudden willingness to increase the wholesale price of new flicks beyond $15...

If Apple does indeed offer movies for more than $15, then their only plan is to prove to these ass-wads that no one will ever pay that much.

I have never bought a movie from iTunes because I think paying $10 for a movie that lacks close enough quality to a dvd as well as no discrete surround tracks isn't worth it for me. Now I would definitely use iTunes for rentals (as long as they don't cost more than evil Blockbuster).

These studios are ridiculous. $15 or more for an electronic file is robbery.

[Wally]

Originally Posted by AppleInsider

He added that, "the last thing the movie industry needs is pressure on new release DVD wholesale pricing

TRANSLATED: "We don't want Wal-Mart to get butt-hurt and threaten to take all our movies off the shelf"

[Bageljoey]

I am glad to see other studios coming on board.

I'm still not interested at those prices, however. Maybe an occasional spur-of-the-moment thing.

I think I would most want to rent like I do now with NetFlicks. For special titles, I like to own the DVD with its case and transportability. If the iTunes purchase price was significantly cheaper maybe--maybe I would buy from the site, but this isn't headded there...

[minderbinder]

It would be nice to see more movies, but I can't see sales going that well with higher pricing and the same resolution.

The only thing I can see justfiying higher prices would be quality that is full DVD or better (including surround sound). And the other features that DVD's have like bonus extras, multiple audio tracks, and closed captioning.

Right now, a download of a movie gives you less than buying the DVD. The download SHOULD be cheaper since you're getting less.

And what about rentals? A decently priced rental program, particularly a subscription comparable to netflix, would be very appealing.

[Cory Bauer]

Who in their right mind would pay more than $15 for a VHS-quality copy of a film?

[dr_lha]

Originally Posted by Cory Bauer

Who in their right mind would pay more than $15 for a VHS-quality copy of a film?

Its a lot better than VHS, but I must admit that I wonder this myself. I just can't see the value proposition of spending $15 on an iTunes movie, compared to spending $15 on a DVD. TV shows for $2 are impulse purchases and there's few other way to buy individual episodes, and iTunes albums are mostly cheaper than CDs, but Movies for $15, I just don't get it.

[MiMiC]

Originally Posted by Cory Bauer

Who in their right mind would pay more than $15 for a VHS-quality copy of a film?

I agree! Yes, when they first came out a picked up a couple to see how they were. But the quality is not worth the price. Period!

[tleary]

Insanity and stupidity. I would NEVER pay that price for a movie, especially with the limited quality available for iTunes. Movie/music execs keep making the same mistake over and over and over and over and over and over again. Lower the price to a reasonable level, make the interface user friendly, get rid of DRM and people will buy your product. Stick to the same outdated and hostile policies of the past at your own peril - I suspect the vast majority of the world would not buy their products at those prices. These people are fossils and the world has passed them by.

[mrjoec123]

Apple can't up the quality without making its movies incompatible with all of the iPods. So that's simply not going to happen until we see iPods that can play higher-quality movies. And quality is just not an issue for most people, anyway. That's why people aren't flocking to HD TVs and Blu-Ray/HD DVD players.

The real issues when it comes to movies on the iTunes store are selection and the option to rent. There are simply not enough movies at the store, making it far more likely that you won't find what you're looking for than that you will. It looks like Apple is about to cave a little to the studios to solve that problem. Hopefully, Steve is adding a rental method, one that works like Netflix only without physical discs to ship back and forth, to the deal.

I say it needs to work like Netflix because the last thing I want to see is a rental scheme based on time-bombed files that self-destruct x number of hours after you download them, or even x number of times you've played them. I've fallen asleep watching movies so many times, I'd hate to wake up the next morning and realize my rental is now gone even though I really didn't watch it. It would be far better if, like Netflix, you could watch as many times as you like, but you just can't check anything else out until you turn that one back in. Have tiered pricing for one, two, three, or five rentals at a time, and make it a recurring monthly charge. That would just about destroy the competition, including Blockbuster and Netflix, if and only if Apple manages to get the selection problem solved as well.

It would also get Apple TV sales off the ground finally. Which would in turn help speed up HD TV sales, which would eventually lead to increased interest in Blu-Ray and HD DVD, which would then, finally, necessitate Apple upping the video quality. One step at a time.

[Ireland]

You can get movies on iTunes? News to me.
TV Shows too? More news.

[reallynotnick]

They need to sell to the hardcore audience first and without good quality DVD will still remain king. I am much more likely to get an HD-DVD player then buy an iTunes movie at the price and quality. Not to mention upping the price, HA!

They make a lot more off iTunes then DVD, no physical product, no ability to resale them (used market), no store placement needed, no licensing fees, just the cut off the top like any store takes.

iTunes videos need to move to rentals to become successful IMO, and that is the only way I would really use it anyway. I like my highquality physical discs for keeping my favorite movies. But I don't need to own every movie I see.

[monkeyastronaut]

"let's sell more expensive electronic downloads. people will surely buy more this way."

idiots.

i'd go for digital movie rentals, no more than 5. maybe 6 bucks if it's a really kick ass movie.
i'd go for digital movie purchases for no more than 10 bucks and with the ability to back them up to a dvd+/-r.

[SpamSandwich]

The studios should absolutely have freedom to price their movies wherever they want. Sales, or the lack thereof will be the best indicator whether or not it makes sense for customers.

[echosonic]

Originally Posted by Wally

If Apple does indeed offer movies for more than $15, then their only plan is to prove to these ass-wads that no one will ever pay that much.

I have never bought a movie from iTunes because I think paying $10 for a movie that lacks close enough quality to a dvd as well as no discrete surround tracks isn't worth it for me. Now I would definitely use iTunes for rentals (as long as they don't cost more than evil Blockbuster).

These studios are ridiculous. $15 or more for an electronic file is robbery.

Don't know if this is outside LA or not yet, but you guys should check out redbox.com. $1 rentals per night, just stick an ATM card into the machine and you're off. better than Netflix, imho. Limited selection right now but will hopefully grow.

[echosonic]

Originally Posted by Cory Bauer

Who in their right mind would pay more than $15 for a VHS-quality copy of a film?

I agree. the regular price for any movie should not exceed the average price of a ticket to that movie: $10.

Any studio that thinks folks will pay that much is smoking crack.

[k2director]

How out-of-touch can Fox get? $15 for a crappy, sub-DVD quality movie without any extras, or good audio? Please.

I've bought tons of iTunes music, and a moderate # of TV shows, but never a movie. Wake me up when Apple and the Studios start renting titles for $3-$4 a shot (including an HD encode).

[rosstheboss]

Yet again Murdoch will get his claws in...what next?!

any one else notice how the UK adverts for the iPhone feature the device displaying The Times newspaper website (proprietor: Rupert Murdoch)?

This kind of thing doesn't happen by accident. Money changes hands, deals are struck, free coverage given and News Corp becomes ever more powerful...

For the record...

News Corp =

The Times (London)
Fox News
Fox
20th Century Fox
Harper Collins
New York Post
Sky TV
numerous radio stations, Australian TV/print
Harper Collins publishing


...if this continues, you won't hear a "Fair & Balanced" word said about Apple on Fox.

[JeffDM]

Originally Posted by MiMiC

I agree! Yes, when they first came out a picked up a couple to see how they were. But the quality is not worth the price. Period!

The original round of videos for sale were close to VCD resolution. That has changed. While it's now just sub-DVD quality, it's nowhere nearly as bad as VHS quality.

I think it's incredibly silly to think that iTunes movies can cannibalize DVD sales. Subs, alternate audio, bloopers and such are nowhere to be found on the iTunes versions. Almost no DVDs sold these days are missing those features.

[JeffDM]

Originally Posted by mrjoec123

And quality is just not an issue for most people, anyway. That's why people aren't flocking to HD TVs and Blu-Ray/HD DVD players.

I think HDTVs are in about a third of US households now. The costs are now quite cheap, so I expect it to continue to accelerate. What I paid five years ago for a 27" flat tube SDTV now gets a much larger HDTV.

I think the issue with Blu-Ray/HD DVD is the format split, waiting for the price of the players to go down and hopefully settle out the format differences. The formats are doing OK for its first year, considering the split and all.

[quinney]

Originally Posted by mrjoec123

The real issues when it comes to movies on the iTunes store are selection and the option to rent. There are simply not enough movies at the store, making it far more likely that you won't find what you're looking for than that you will. It looks like Apple is about to cave a little to the studios to solve that problem. Hopefully, Steve is adding a rental method, one that works like Netflix only without physical discs to ship back and forth, to the deal.

I say it needs to work like Netflix because the last thing I want to see is a rental scheme based on time-bombed files that self-destruct x number of hours after you download them, or even x number of times you've played them. I've fallen asleep watching movies so many times, I'd hate to wake up the next morning and realize my rental is now gone even though I really didn't watch it. It would be far better if, like Netflix, you could watch as many times as you like, but you just can't check anything else out until you turn that one back in. Have tiered pricing for one, two, three, or five rentals at a time, and make it a recurring monthly charge. That would just about destroy the competition, including Blockbuster and Netflix, if and only if Apple manages to get the selection problem solved as well.

I notice that Netflix had a market cap of $1.65 billion today. I wonder: if Apple acquired Netflix,
which would only use up about 10 percent of Apple's cash position, if they could obtain all the
distribution agreements of Netflix, as well as the ability to use Netflix's rental scheme (which
may be protected by patents), as well as Netflix customer database... would it be worth the cost???

[McDave]

Without a point of difference (720p, rentals, extras, global store) what is the point? Just buy the DVD and rip it to iTunes for iPod convenience. Unless Apple pull their finger out everyone else will pass/has passed them by.

McD

[McDave]

Originally Posted by JeffDM

I think HDTVs are in about a third of US households now. The costs are now quite cheap, so I expect it to continue to accelerate. What I paid five years ago for a 27" flat tube SDTV now gets a much larger HDTV.

I think the issue with Blu-Ray/HD DVD is the format split, waiting for the price of the players to go down and hopefully settle out the format differences. The formats are doing OK for its first year, considering the split and all.

The question is will the slow uptake help or hinder HiDef downloads? Will the studios admit a failure to launch and look to iTunes 720p downloads to assist or will they try to preserve their existing, albeit unsuccessful, distribution model? Given it will also have an impact on & ultimatley replace the DVD model they're so keen to preserve I'm not sure it's going to happen.

McD

[Rot'nApple]

Originally Posted by rosstheboss

...if this continues, you won't hear a "Fair & Balanced" word said about Apple on Fox.

or about anything else, maybe?

What outside source keeps tabs with these "news" outlets, cable or otherwise and their salacious claims when it comes to their slogans.

Everyone just saw how CNN "the most trusted name in news" can't be trusted to run a debate filled with so called "undecideds" when it turns out that these undecideds could have been vetted if CNN ever heard of Google and did a quick search to find that these so called undecideds were fans of Clinton, Obama and Edwards.

Where in the world does one go to get honest news from objective reporters and news directors????

Regarding pricing, yeah, let the market dictate. If a larger price is what it is wanted by the studios and sales drop, then maybe they will allow Steve to go back to $12.99 / $14.99 scheme.

But to everyone who says I wouldn't pay "x" amount for a digital download, someone else might. Just as that someone else might not pay "x" amount to see a rock concert or "x" amount for a sporting event ticket, or "x" amount for clothes, electronics, computers, watches, jewelry, cars etc, but you would.

Live and let live and to each their own.

[McDave]

Originally Posted by monkeyastronaut

i'd go for digital movie purchases for no more than 10 bucks and with the ability to back them up to a dvd+/-r.

But you can backup your movie files to DVD ?! (as files of course)

McD

[crentist]

Originally Posted by minderbinder

It would be nice to see more movies, but I can't see sales going that well with higher pricing and the same resolution.

The only thing I can see justfiying higher prices would be quality that is full DVD or better (including surround sound). And the other features that DVD's have like bonus extras, multiple audio tracks, and closed captioning.

Right now, a download of a movie gives you less than buying the DVD. The download SHOULD be cheaper since you're getting less.

And what about rentals? A decently priced rental program, particularly a subscription comparable to netflix, would be very appealing.

Rentals would be a real hit, and I feel that movie purchasing could be big as well at that price point as long as the price was right for the content. Let me preface my must-have feature list with the fact that I don't think that a >$15 would be much of a success regardless of the content simply because I have a hard time paying more than $10-12 for a movie as it is.

To succeed, I would suspect that Apple will soon add:

- Higher video file quality is a must (at least 720p, right)
- Selection needs to be great enough (ie more Studios) that someone can feel confident to start "collecting" digital movies. Who wants a library of DVDs and also one or two digital movies?
- Downloads must have more than just the straight video file. This means bonus material, commentary, out-takes, etc. This also means that iTunes will need to handle the video file a little differently, which takes me to:
- iTunes v. 8.0 released to handle HD content, rentals, possible swarm downloads, and new features in the "Movies" portion of the iTunes library (and Front Row) to display the video file and the options to play, watch special features, watch with commentary, etc. (with an interface *similar* to the DVD menu). The new iTunes would also (dream-app) allow for legally importing DVD video for play through iTunes/Apple TV (files would be marked with the users Apple ID for security or even some way to make sure those files could only be played through iTunes/Apple TV registered with the owner's individual user ID and not shared over the internet).
- Apple TV update would launch simultaneously to allow greater storage capacity, the iTunes "Living Room" Store for "from the couch" purchases and downloads (on a side note Apple would most likely launch Apple TV widgets at the same time for weather checking, stock quotes, news clippings, and possibly a few more).

Just a few thoughts.

[CharlesP2009]

I feel the prices for movies are already too high on iTunes. It's not worth $15 to get a low quality digital copy of a movie which is limited in what it can be used on when I can buy a DVD for $20 and get bonus features and the freedom to use it on any of the millions of DVD players out there. Screw Hollywood, I'm not paying more. I guess I'd be happier with an iTunes rental service since I only buy movies that I already like (on DVD) and stick to renting ones I might not like.

[Cory Bauer]

Originally Posted by mrjoec123

And quality is just not an issue for most people, anyway. That's why people aren't flocking to HD TVs and Blu-Ray/HD DVD players.

I agree that the vast majority of consumers aren't willing to pay extra for special high-quality movies and players, but I really doubt they're willing to pay DVD prices — only without the DVD, the extras, the packaging, or the video and audio quality. They won't pay more for more, but they also won't pay the same for less either.

Originally Posted by JeffDM

The original round of videos for sale were close to VCD resolution. That has changed. While it's now just sub-DVD quality, it's nowhere nearly as bad as VHS quality.

If you look at an iTunes film blown up on an HDTV, and compare it to the same film on DVD, calling the iTunes stuff "sub-DVD quality" is very generous, IMO.

[city]

Originally Posted by quinney

I notice that Netflix had a market cap of $1.65 billion today. I wonder: if Apple acquired Netflix,
which would only use up about 10 percent of Apple's cash position, if they could obtain all the
distribution agreements of Netflix, as well as the ability to use Netflix's rental scheme (which
may be protected by patents), as well as Netflix customer database... would it be worth the cost???

Netflix will soon be on the decline. Have you tried "On Demand" with FiOS?

[Bageljoey]

Originally Posted by city

Netflix will soon be on the decline. Have you tried "On Demand" with FiOS?

I have.
It is a pain in the ass to find movies with that idiotic scrolling. And I didn't see any list of movies available on the net, so the only way to find movies is wandering through that idiotic scrolling.
Look at the "info" on a movie as you are browsing/scrolling and you have to return to the beginning of the alphabet and scroll down again.
Maybe with a different cable box they have a better interface, I don't know.
Besides, the selection is miniscule compared to Netflix.

Did I mention I did not like the interface?

[Bageljoey]

Originally Posted by Bageljoey

Did I mention I did not like the interface?

OK, just went to their website. It looks like they have a new interface being rolled out. They say I should have it by October 2007. Maybe I will revise my opinion when that date comes...

[Brock]

I really think the movie execs mindset is that someone is going to buy Spiderman 3. Wether they buy it on DVD, Blu Ray or download is the customers choice. They assume there is a guaranteed sale if one format is not adequate, the customer will buy the movie on another format. They want as many formats out there as possible. Its one more copy to sell someone. Anyone know a friend that has the movie Alien on VHS, Laser Disc, DVD and probably now BluRay (and maybe ever HD-DVD too!)?

But Just as CDs were priced more than albums, and DVDs are priced more than VHS. Digital downloads will be priced more than physical media. Why would I pay $14.99 for Wedding Singer when I can buy the DVD for $7.99? You're paying for the convenience to be able to download the movie instantly (kind of instantly). You're also paying for the pre-converted computer friendly format. I'm playing devils advocate of course.

There is the Gen Y factor too. Teens tend to spend money much more freely than others no matter the decade. Gen Y is happy to pay $4.99 for 30 second ring tones for crying out loud. Why would they not want to spend 3x that for an entire movie? They are the future customers and conditioning those customers that a download is $14.99 is the first order of business. They are the future revenue base. It wouldn't suprise me if many folks under 25 feel DVDs are dinosaurs, and obsolete, so of course they should be cheaper.

Lets face it, as more and more media is going digital this is the future of entertainment distribution. The studios don't care how fast that transition occurs as long as they make lots of money. They are not in it to help along a distribution revolution or make the customer happy or for the art of movies even. They are only in it for money.

Of course along the way they are making paramount (no pun) mistakes that are going to come back to haunt them. Because unlike when CDs were priced too high there was just no other choice. Now there are file sharing networks. Because of those networks the game will be different this time.

[ascii]

People laugh at some of their lowbrow content, but one thing about Fox, they're not afraid to shake things up.

[palegolas]

Yes, the $15 price tag is too high. If it really is premium material at that price tag I'd expect 720p, surround sound and some little extra material such as audio commentary and a subtitle tracks.
But if they're allowed to raise prices for new material, they should be allowed to lower prices on older material. That would kind of balance it. No such luck though I guess. Rental at lower prices would be awesome. I'd definitely use that over buying.

And of course.. world distribution of the iTunes movie services would be great.. then I could actually take it for a test drive... and see if I really stand by my comments.

[BRussell]

Originally Posted by SpamSandwich

The studios should absolutely have freedom to price their movies wherever they want. Sales, or the lack thereof will be the best indicator whether or not it makes sense for customers.

I agree. What better place for competition than the iTunes store? Let the music labels and the movie studios set whatever price they want. It will be so easy to compare prices, that the consumers will sort it out for them.

[GregAlexander]

Originally Posted by McDave

Without a point of difference (720p, rentals, extras, global store) what is the point? Just buy the DVD and rip it to iTunes for iPod convenience.

Agreed.
Given Fox are talking about an early January announcement - lets hope it's in combination with an Apple MacWorld announcement of HD resolution & movie rental options, at the very least.

[city]

Originally Posted by Bageljoey

I have.
It is a pain in the ass to find movies with that idiotic scrolling. And I didn't see any list of movies available on the net, so the only way to find movies is wandering through that idiotic scrolling.
Look at the "info" on a movie as you are browsing/scrolling and you have to return to the beginning of the alphabet and scroll down again.
Maybe with a different cable box they have a better interface, I don't know.
Besides, the selection is miniscule compared to Netflix.

Did I mention I did not like the interface?

FiOS On Demand may have only 2,300 titles now, but has the capacity to have every title Netflix has and in HD. All between free and $3.99. Nothing to download, wait for or mail back. Beat that model! The interface is not the control box. It's all software based. They can download a better one at ant time.

[McDave]

Originally Posted by BRussell

I agree. What better place for competition than the iTunes store? Let the music labels and the movie studios set whatever price they want. It will be so easy to compare prices, that the consumers will sort it out for them.

I thought the retailer should decide what price they wish to buy for and what price they wish to sell at like everyone else.

Unfortunately Apple have a lot more riding on the content sale than the profit margin on those products, if the pricing doesn't make sense the video-capable iPods and AppleTVs i.e. the whole platform will fail which is clearly their main concern. They can't adopt a cost-absorption model for post-sales products (the reverse model is more successful) so I can see why they are pushing back.

The notion that the technology is just a delivery mechanism for content is changing. As people become more used to, and enchanted with, HOW the content is delivered, WHAT the content is becomes less important - if I can't watch NBC shows on the train to work, I'll watch something else ultimately shifting away from NBC. This unfortunate commoditisation can be seen by the popularity of lower quality content from YouTube and even in the consumer acceptance of iTunes 128kbps AAC audio. Technically the content isn't as good as CD but actually people can't get enough of it.

McD

[JeffDM]

Originally Posted by McDave

I thought the retailer should decide what price they wish to buy for

Why? They don't just set their purchase price. They might be able to negotiate one that's different from the standard wholesale price, but there is no unilateral setting on this side, maybe unless you're Wal*Mart or maybe Apple.

and what price they wish to sell at like everyone else.

What price they sell for is generally their business, unless they negotiate a deal with the wholesaler.

[McDave]

Originally Posted by JeffDM

Why?

Because they're a business - if the price isn't right, they don't buy.

Originally Posted by JeffDM

price they sell for is generally their business, unless they negotiate a deal with the wholesaler.

So that's an agreement?

This is just a case of the wholesalers trying to fix prices which isn't acceptable anywhere else so why media?

McD