ITUNES, AMAZON Turn Heat Up In Online Download Market

(From Cynopsis -- By Daisy Whitney)

APPLE finally let the cat out of the official bag earlier this week with the public announcement of the worst-kept Internet secret -- that STEVE JOBS had cemented another groundbreaking deal with his friends at DISNEY.

At a press event in San Francisco that had been shrouded in the typical Apple "hush hush" mode, Jobs announced that ITUNES now includes more than 75 movies from WALT DISNEY PICTURES, PIXAR, TOUCHSTONE PICTURES and MIRAMAX FILMS for purchase and download for $9.99 to up to $14.99.

In one short year, APPLE has come to dominate the download-to-own market for TV. The company sells about
1 million videos a week and offers more than 220 TV shows,
up from five at launch.

APPLE hopes to work the same magic with movies, but will face a much tougher battle for various reasons.

That's because the downloadable movie market is less promising because of higher prices for content and because APPLE will face fresh competition from AMAZON's new download-to-own service AMAZON UNBOX, introduced last week, and
AOL VIDEO's download-to-own service that launched in August with both TV shows and movies.

Apple does command about 70 percent of the portable video player market, according to KAAN YIGIT, analyst with SOLUTIONS RESEARCH GROUP.

The selection of titles and pricing will determine how much traffic any services draws, but the market for movie downloads has been tepid so far.

"MOVIELINK and CINEMANOW have been doing it for a few years now, with limited success," said TODD CHANKO, media analyst with JUPITER RESEARCH.

User experience will be critical with issues such as speed of downloads and ease of transactions playing a key role in potential success.

Also, because Hollywood movie studios aren't going to engage in exclusive deals, download-to-own services may need to duke it out with promotions and marketing, he said.

Meanwhile, Amazon will face some challenges too because its films are pricey and the service doesn't let users burn movies to a DVD, Yigit said.

Still, Apple's addition of movies and Amazon's new service
both provide greater legitimacy and momentum for the download-to-own market.

"In the fall, we think the market will look like a hot part of town experiencing a real estate boom -- we'll see many entrants into the market driven by the fear of being left out," Yigit said.