25 August 2010

Disney, Apple Near iTunes Deal

The Wall Street Journal

Apple Inc. is in discussions with major TV companies to offer 99-cent rentals of television episodes, according to people familiar with the situation, as the company tries to reshape the television business around its devices, including a new one for pushing Internet video onto TV sets.

Apple is nearing an agreement with Walt Disney Co. to offer such rentals for some ABC television shows through its iTunes content store, these people said, but the proposal is facing at least some resistance from big TV companies, including CBS Corp., General Electric Co.'s NBC Universal, News Corp., and Viacom Inc., people briefed on Apple's proposal said.

The Cupertino, Calif., company is pushing to reach agreements for its television service—which would give viewers a 48-hour window to view an electronic version of the show—before the new television season starts in September, some of those people said.

At the same time, the company is working on a new device that would allow users to stream video, such as rentals, to their TV sets, according to a person with knowledge of Apple's plans. Unlike Apple's existing Apple TV hardware, which stores downloads users can access on their televisions, the new device would act as a conduit for streaming media more directly, and could be announced as early as September, the person said.

Apple declined to comment.

Lower prices for TV shows, along with the new TV-streaming device, could help Apple in the pitched battle to pipe content into American living rooms. Traditional cable- and satellite-TV providers are already facing competition from companies including Net flix Inc. and Hulu LLC. Google Inc. soon plans to roll out its own Web-TV service, too.

Media companies, however, have been wary of pumping too much content online, worried that they could encourage viewers to cancel their monthly TV subscriptions. The tens of billions of dollars media companies make each year from monthly bills are a key source of profits.

Through iTunes, customers currently can pay to download electronic copies of many cable and broadcast shows, often for $1.99 each for the standard version, to view on iPhones, the iPad tablet computer, Apple TV or other devices. Apple has told media companies that the entertainment offerings through iTunes are too costly, according to people familiar with the matter, and has said the media companies would make more money if prices were lower.

Media companies are weighing the potential revenue they would make if more people paid for TV shows on iTunes against the dangers of eroding their business on traditional TV. But they don't want to be left behind as viewers spend more time online. That has led some to offer some shows on their own websites, or through services like Hulu.

News Corp.'s Fox is receptive towards Apple's pitch of 99-cent TV-show rentals, according to people familiar with the matter, who cautioned that significant hurdles remain to any deal with Apple. News Corp. also owns The Wall Street Journal. Bloomberg News reported Apple's talks with News Corp. Tuesday.

CBS is mulling the Apple proposal, but is unlikely to agree to an Apple service of this type, according to a person familiar with the matter. NBC and MTV-owner Viacom don't currently intend to accept Apple's proposal, according to people familiar with the companies' positions.

The 99-cent rental plan is the latest of several pushes by Apple in the last year to boost consumption of TV shows through its iTunes content bazaar. Apple pushed to get TV companies to participate in a plan to offer television subscriptions over the Internet. Those plans met resistance from several media companies, as did a later proposal to sell TV episodes for 99-cents each, according to people briefed on the proposal.

Electronic rentals differ from sales, in part because they remain viewable for a limited time. But some media executives argue that they would still undercut online sales in iTunes because many people only watch episodes they buy only once. It is unclear which Disney programming would be available for viewers as part of the service. One person briefed on the Disney-Apple talks said a deal is not done yet, but that one is close.

Disney has been seen as a likely Apple collaborator in part because Apple Chief Executive Steve Jobs sits on its board and is the Burbank, Calif., company's largest individual shareholder.

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