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Little screen or big price

September 13, 2006

THREE YEARS AGO, APPLE COMPUTER kick-started the online music market by offering an easy way to download 99-cent songs from all the major record labels. Fueled by Steve Jobs' marketing wizardry, Apple's iPods and iTunes Music Store dominated the field while sparking new growth in the slumping music industry.

Now, Jobs and Apple are trying to do the same for movies, but it's proving to be a much harder sell. When Apple added films to the iTunes store on Tuesday, only one of the six major studios was represented: Disney, where Jobs serves as a member of the board. By contrast, Amazon.com had films from all six when it launched its downloads last week.

Nor was Jobs able to work the same magic on Hollywood moguls that he did on music industry executives. In contrast to his music store's dramatically lower prices and relatively mild restrictions on copying, Apple's movies sell for almost as much as a packaged DVD (even though they include none of the extras), and they can't be copied onto discs. Getting a downloaded flick onto an iPod may be easy, but watching it on a television is an expensive challenge. For that task, Jobs offered only one solution: a $300 set-top box, due early next year, that bridges the gap between computers and TV screens. That seems too high a price.

These limits drain most of the appeal from the iTunes movie offering, except for those eager to watch films on the credit-card-sized screen of a video iPod. That may be an acceptable way to consume a TV show, but it's not how most people want to view a two-hour film.

The problem for Apple, as for its predecessors in the nascent online movie market, is that the studios aren't ready to compromise yet on prices or security. In spite of the savings that downloads represent -- no discs to press, no cases to buy, no physical products to deliver -- some studio executives fear that low-priced downloads will simply lure movie buffs away from higher-priced DVDs. Some also object to Apple letting buyers transfer a downloaded film onto an unlimited number of iPods. And none of them are willing to let movies migrate to a DVD or home network unless they're scrambled to deter copying. Hence the need for a special set-top box rather than simply letting people plug their Mac or iPod directly into a TV set.

Movie downloads are likely to become more appealing when stores such as Apple's enable shoppers to burn DVDs that can play on a conventional disc player. Given the studios' demand for scrambling, though, burning will have to wait at least until next year. That's when a customized type of blank DVD is due -- one that can be scrambled in a way that's compatible with most DVD players. Until then, Jobs will have to use his vaunted powers of persuasion to make Apple's $300 adapter look like more than just an overpriced way to watch a movie on TV.

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