Apple Gets Rent Check

1/18/2008 7:00 PM Eastern

Steve Jobs hasn’t given up on what he has referred to as a “hobby” — the Apple TV set-top.

The Apple Inc. CEO last week announced that customers will be able to rent more than 1,000 videos from major movie studios, through the company’s iTunes Store, and watch them on their high-definition TVs. And Apple is updating the device’s software to let viewers buy or rent content directly from their TV sets, without having to download the files first to a computer.

“No more driving to the video store or waiting for DVDs to arrive in the mail,” Jobs said in announcing the news.

In addition, Apple, estimated to have sold fewer than 500,000 of the devices to date, chopped the price of the entry-level Apple TV, to $229 for a device with 40 Gigabytes of storage, $70 off its initial suggest retail price.

The over-the-Internet Apple TV rental service could cut into cable’s video-on-demand business, which has become a significant focus for many operators. Comcast, for example, plans to offer 6,000 VOD movie titles by early next year.

“The opening up of rental for video on iTunes is not surprising, given that is how most consumers looking for legal paid movie downloads will choose to acquire them,” ABI Research research director Michael Wolf said. But, he added, Apple will have no pricing advantage, as the studios dictate the same terms to all distributors for rentals.

The iTunes movie rentals are $2.99 for catalog titles and $3.99 for new releases. Apple said it will have 100 HD titles for rent by the end of next month, which will each be a dollar extra.

Netflix, for one, seemed concerned about Apple’s entry into digital rentals enough to announce (prior to the MacWorld show last week) that it would allow unlimited Internet streaming of a library of 6,000 titles to most subscribers. The DVD-by-mail company is working up its own Apple TV-style set-top, with LG Electronics, to be available in the second half of the year.

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