The studios fear Apple is using a similar strategy with movies: Sell them for cut-rate prices so people buy more hardware. Senior studio executives say Apple could turn movies into a commodity.
That would turn the home-video business on its head. The studios have managed to keep the price of a DVD pretty constant in the decade since the DVD player was introduced. In 1997, consumers paid about $19 on average for a major film released on DVD, compared with about $22 today, according to the DVD Release Report, an industry trade publication based in Escondido, Calif.
With DVD sales growth slowing, Hollywood is now pushing high-definition Blu-ray and HD-DVD movie discs that cost an average of $22 to $23. That makes studio executives less than enthusiastic about embracing new, inexpensive digital distribution that would depress the price of new releases.
Home video purchases and rentals brought in $24.9 billion last year, according to Adams Media Research. In comparison, the firm said people spent $29 million for downloaded movies and $83 million for TV shows last year. Price isn't the only concern. Studio executives are using Apple's desire to offer more film downloads as an opportunity to press broader concerns about digital piracy.
Their major gripe is with the iPod, which plays pirated versions of movies and television shows that can be obtained at illicit file-trading sites or transferred to computers using software that pries the content off DVDs. Piracy experts say Apple TV could work the same way to transfer bootlegged movies and shows from the computer to the TV.
Apple says it trusts its customers to do the right thing, but movie studios don't think that's enough. So some are holding up licensing deals, trying to pressure Apple to take more aggressive steps to combat piracy. For example, they want Apple's devices to look for a unique identifying code, known as a watermark, on digital video to certify that it is a legitimate copy -- and to refuse to play the film when that watermark is absent.
"Our position is, if you want our content, you have to protect our business," said a movie-studio executive, who, like every other entertainment executive interviewed for this article, requested anonymity because he is involved in negotiations with Apple.
Apple executives declined to comment for this story because of the continuing talks. Speaking at the D: All Things Digital conference last month, Chief Executive Steve Jobs jokingly referred to Apple TV as the company's "hobby."
