Apple Gets Earlier Access to Movies

All you need to know about where money gets made in the movie business are the three letters "DVD."

Studios make 14 percent or less from theatrical showings and about half their revenue from DVD rentals and sales. Less than 10 percent is earned from all cable, satellite and telco payments, including content shown as premium channels such as HBO and video on demand.

DVD is where the money is, and studios aren't going to make any really significant changes they think will damage those revenues. So they must have concluded that "the times they are a changing."

After years of negotiating with the movie studios, Apple finally has gotten the major studios to allow rental of iTunes movies on the same day they release new DVDs. That's a big change, and suggests studios now have evidence that they will make no less money, and possibly more, if they do so.

Disney has had that arrangement with Apple since September 2006. Now Apple will be able to distribute movies from 20th Century Fox, Warner Bros. , Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studios.

New movies can now be purchased for $15 or rented for $4. Older movies cost $10 to buy or $3 to rent.

For any number of practical reasons, such as the fact that hard drives always die, it is likely iTunes will get more revenue traction from rentals than from sales. Up to this point Apple movie sales have been pretty low, volume-wise.

Rentals are not only are cheaper, but are congruent. Most movies are not compelling enough to watch more than once, and owning makes most sense for movies one thinks one is going to watch several times or more.

So the issue everyone now will be watching is how revenue shares move around within the movie ecosystem. Studios wouldn't be taking this move unless they think they'll make more money from downloads and streaming than from selling discs.

Sure, downloads probably will negatively affect DVD rentals and sales. But the profit margins on downloads are much higher than for DVD sales or rentals. So if all downloads do is cannibalize DVD sales and rentals, the studios win.