Analyst: Apple Ready to Debut Movie Downloads

Apple is planning a glitzy product demonstration that one analyst predicts will bring a digital movie download service and a widescreen video iPod.

Apple Computer is expected to enter the market for digital movie downloads Sept. 12 with a highly publicized "Its Showtime" product introduction at San Franciscos Yerba Buena Center for the Arts Theater.

Apple will expand on its success with the iTunes Music Store, as well as renew the iPod line, perhaps with a widescreen video iPod, predicted one analyst.

The biggest remaining piece of the puzzle is how Apple plans to enable users to move their movie watching from the computer screen to the living room TV.

Apples event comes just days after online retailer announced its Amazon Unbox storefront for movie downloads. However, Amazons service requires users to have the companys own software running on Windows XP, does not allow DVD burning of downloaded content and features stringent DRM (digital rights management) restrictions.

"We know movie distribution is coming [from Apple]," said Charles Wolf, an analyst at the New York office of investment bank and asset management firm Needham & Company.

Wolf agreed with reports published by Variety and others that Disney will definitely be on board with Apple (Apple CEO Steve Jobs also operates Pixar, which is owned by Disney). However, Wolf said, "Its fairly certain there will be more content providers."

"Video content has exploded," he said, noting that Apple was selling a million video downloads a week even six months ago, with more sold each week. These sales included music videos, TV episodes and short films. Wolf estimated that Apple has been netting a similar margin to that of its music sales, of about 30 to 35 cents per dollar.

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Wolf suggested that Apple could provide two resolution options for movie downloads—one for viewing on a large screen, the other for viewing on an iPod. He also said the rumors of a new video iPod had a more than 50 percent chance of being true, and that he has heard talk about a video iPod with a full-body touch-sensitive screen; the trademark scroll wheel would be a virtual one, displayed on-screen. This, he said, could mitigate complaints about watching a 2-hour video on the existing iPod screen.

Still, Wolf said, "watching these on a computer is not the greatest experience," so he said a video-enabled product similar to Apples AirPort Express "would make a great amount of sense." The current AirPort Express is an 802.11g base station that can be used to run a printer wirelessly via a USB port, or stream audio files from an AirPort-enabled computer with iTunes via the AirPort Expresss audio-out port.

Such a product could easily stream video through and connect to TVs through an HDMI (High-Definition Multimedia Interface) port, and use Mac OS Xs Front Row software and wireless remote (included with almost every currently selling Mac) to show movies on a living room TV. Video over HDMI can be coded with DRM restrictions, which may be a vital point in getting agreements from movie studios.

Wolf said he believes the probability of Apple revealing such a product at the Sept. 12 event is 90 percent.

"You can set up ways to watch movies on your TV from your computer, but theyre complex," Wolf said. "Apples DNA is to make it simple."

Wolf added that "its a certainty" that Apple will reveal iPod Nanos with doubled capacity, and perhaps drop the price of the 1 GB Nano to $99. "A $99 iPod Nano would be a huge win at Christmas," Wolf said.

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