Apple Goes To The Movies

Apple Computer launched its long-awaited online movie service Tuesday with minimal participation from Hollywood and showed off a device that will make it easier for consumers to watch the videos on television.

This is Apple's attempt to bring together the computer, the iPod and the TV, CBS News correspondent John Blackstone reports.

The iTunes Music Store will only carry movies from The Walt Disney Co. studios, where Apple CEO Steve Jobs is a board member. The question becomes how quickly other movie studios will get on board, CBS News technology analyst Larry Magid said.

"In the area of movie downloads, Apple does have competition. There are other download services, such as Amazon.com and Cinemanow has been around a couple years already," Magid said.

By contrast, Amazon's movie service launched last week with distribution deals with seven studios — but not Disney.

At a media event Tuesday, Jobs also showed off a compact gadget, dubbed iTV, that will allow consumers to watch movies purchased online — as well as other digital content stored on a computer — on a connected television set.

Blackstone reports that iTV, which will sell for $299, won't be available until early next year. Because iTV isn't available yet, it serves as an assurance that iTunes movie customers will be able to view their purchases on a screen larger than that of an iPod or their computer, according to Magid.

"I think what Apple is trying to say is, 'Look, we are not locking your content into a computer or an iPod.' Apple is signalling its intention to be part of your living room ... to link your computer to your tv set, as well as your iPod," he told CBSNews.com.

It will also have the capability of loading the user's mp3s onto their television sound system, Blackstone reports.

Jobs said more than 75 films will be available from Walt Disney Pictures, Pixar, Touchstone Pictures and Miramax. New releases will be priced at $12.99, when pre-ordered and during the first week of sale, or $14.99 afterward. Library titles will be sold for $9.99 each.

Robert A. Iger, President and Chief Executive Officer of Walt Disney, said 75 movies will be available immediately, and that the success of downloaded TV shows indicates that the download sale of movies will be just as big.

The invitations to the media event, sent last week, had declared simply "It's Showtime," and triggered an avalanche of speculation that Apple would soon shake up the distribution of movies as much as it did music with its iTunes store and iPod players.

Jobs' first announcement of the day ticked off the new products Apple will offer. The new fifth-generation iPod has a lower price — $349 for 80 gigabytes of space.

Jobs also announced a new iPod nano with a 24-hour battery life and new games for the portable media player. The new iPods will come in five colors, and will sell for between $149 and $249.

Blackstone also reports that a new second-generation iPod Shuffle will be roughly square and will be the smallest MP3 player on the market. It will hold 2 gigabytes and will be priced at $149.

Disney, where Jobs sits as a director, is among the first to sign a distribution deal with Apple. Deals with other studios were not yet solidified — pricing, copy-protection measures, and other issues remained unresolved, sources said.

Apple has been forging ahead to make its products the digital media hub for consumers. The company's iPod player is designed for music and video on-the-go, its iTunes Music Store is a leading destination for getting digital content and its Macintosh computers are touted for being able to manage all media.

Analysts and industry observers expect Apple will soon take another big step — perhaps by introducing an innovative way to unlock digital content so that it can be displayed easily on a television set.

Crossing that final frontier into the living room marks one of the toughest challenges for existing online movie services such as CinemaNow, Movielink, Guba, and now also Amazon.com, which introduced movie downloads Thursday. Until now, online movie services have not attracted a lot of customers.

Relatively few PCs are hooked up to TV sets — a process that usually means wiring your television to a home PC or network. Although companies such as cable providers and startups like Akimbo Systems Inc., have introduced set-top-boxes and services to deliver on-demand videos and TV shows through a broadband Internet connection, full-length feature films from major Hollywood studios either aren't in their libraries or are only available on a rental basis.

So-called media center computers, such as ones from Dell and Hewlett-Packard, are designed to play and record TV shows. But many still look like they belong under a desk in an office instead of on an entertainment rack in the living room.

Forrester Research analyst Josh Bernoff earlier predicted that Apple would introduce a product by the end of the year to marry PC-based digital content to a TV. Apple's first attempt could be adding TV features to its small, book-sized Mac Mini computer, he said.

Some Mac-enthusiast sites have also speculated that Apple may use wireless technologies to stream digital content from a Mac to the TV.

"Adding movies to the iTunes store won't supercharge the online movie market, and watching movies on the small screen of an iPod won't either," Bernoff said. "But with a device that hooks up to the TV — now you've got a very interesting package."

In any case, expectations for Apple are running high, with some Wall Street analysts upgrading their price targets based on bullish views that new products launched on Tuesday and those to be launched in coming months will further fatten Apple's fortunes.