New releases will cost $14.99, older movies $9.99

With the lion's share of the market in digital music downloads and a portable video player that has become so recognizable even your grandmother knows what an "iPod" is, Apple officially threw its hat into the movie arena with the announcement of movie downloads from the iTunes store in mid-September - and retail juggernaut Wal-Mart couldn't be unhappier about the news.

BusinessWeek's Robert Grover reports that Apple plans to begin offering full-length movie downloads via iTunes beginning in September. New releases will be sold for $14.99, and older films for $9.99 - an increase from Job's initial hope of a flat-rate $9.99 per film. Movies will be protected under a similar FairPlay-style agreement, where users are permitted to play the content on a limited number of devices. The ability to record to DVD will likely be provided as well.

Recently, Walt Disney Studios signed on to distribute their movies digitally with iTunes Movie Studio - not a surprise given Steve Job's shareholder status after the Pixar purchase. Fox Entertainment may join at a later date, as may Lion's Gate Entertainment, but only if other studios come along for the ride.  Part of the studio's reluctance to hop on the iTunes bandwagon might be related to Wal-Mart's massive share of DVD sales, approximately 40% of a $17-billion-per-year market. Judging by history, Wal-Mart isn't afraid to play hardball with Hollywood - earlier in 2006, they threatened not to sell Disney's High School Musical after the studio released it initially as an iTunes exclusive.

In exchange for "playing nice," Wal-Mart executive David Porter is asking for a reduction of the wholesale DVD price - currently $17 - to compete with Apple's lower costs. In addition, they want marketing help when they launch their own movie download site in the future to supplement their existing music download site.

Of course iTunes isn't the final word in movie distribution either.  Disney already has its own in-house distribution method set up for online purchases.  GUBA has also done its fair share of getting people excited for $0.99 online movie rentals. However, being first to market is only a slight advantage when competing with the ubiquitous iTunes -- including Microsoft's Zune distribution system.

"There's no chance that the iPhone is going to get any significant market share. No chance." -- Microsoft CEO Steve Ballmer
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