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September 12, 2006

Apple Movie Store: Does It Make Sense to Buy Movies Online?

posted by MR WAVETHEORY at 9/12/2006 05:29:00 PM
With today's announcement that Apple Computer Inc will be offering downloadable movies through iTunes, it still amazes me that companies like Apple are charging so much for downloading movies online.

The iTunes Music Store, however, will initially carry movies only from the studios of The Walt Disney Co., where Apple CEO Steve Jobs is a board member. By contrast, Amazon.com Inc.'s movie service launched last week with distribution deals with seven studios -- but not Disney.

Jobs said more than 75 films will be available on iTunes 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.

The prices of movies online doesn't reflect the economic fundamentals of an online business. Rather they reflect the fundamentals of an offline business where production, distribution, sales and marketing, and inventory add significantly to the costs of providing a snailmail business.

$12.99 is the cost of a new release in stores today. $9.99 is the cost of a library title from BlockBuster when you walk in. It was the price 10 years ago!

With the online business, I find it uncompelling to buy movies online if not for the convenience factor.

Update: Video of Steve Jobs Announcing iTunes 7

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