60 second briefing
Why Steve Jobs Is scaring the bits out of Hollywood
(Fortune Magazine) -- Apple recently added movie downloads to its iTunes store. In one fell swoop, Jobs piqued Hollywood, Amazon, and big-box DVD sellers like Wal-Mart. For consumers left scratching their heads on what it all means, here's the plot so far:
Consumers can download a digital copy of a movie over a high-speed connection for use on a PC, TV, or iPod-type device. The first offerings are Disney movies, for $9.99 to $14.99. Apple says it takes 30 minutes to download a "near-DVD quality" movie, although users can start watching before the download is complete.
2 Why so cheap?
Steve Jobs' pricing scheme fights Wal-Mart (Charts) and Best Buy (Charts) at their own game: selling some movies at a loss to drive traffic. It puts pressure on studios to lower DVD prices and squeezes online competitors like Amazon. Apple's movie strategy will mimic its iTunes TV strategy: Start with Disney (in that case, ABC), then bring in the other studios.
3 Why are other studios holding back?
Hollywood sees downloads as a new sales opportunity but hates Apple's pricing, which is generally less than what they get for DVDs from giants like Wal-Mart. If Wal-Mart demands equal treatment, the studios say, they will lose hundreds of millions of dollars.
4 Coming attractions:
Apple also unveiled a prototype device ($299, spring 2007) to stream movies wirelessly from the PC in the den to the TV in the living room. No rival has anything close. Message to Hollywood: Apple has changed the game for music and TV downloads. Movies are next.