updated 02:35 pm EDT, Fri May 2, 2008
Same-day movie loss leader
Apple's new deal with major movie studios to offer downloadable movies on iTunes the same day they are released on DVD is currently costing the company more than it would make on the sale. According to The Wall Street Journal, Apple is buying movies for a wholesale price of around $16, while only charging $14.99 for the content. iTunes' popularity has so far earned the company a solid reputation, helping change the face of digital media distribution by increasing overall market revenue to $175.8 million from almost nothing two years prior.
"This is a game changer," said Craig Kornblau, president of General Electric Co.'s Universal Studios Home Entertainment and Universal Pictures Digital Platforms. "For all the studios to offer all their movies [on the same date] as DVD, with the most influential marketing company in the digital space, is a very exciting development."
Apple hopes its success with iTunes music – such as its recent surpassing of Walmart as the number one music retailer – will transfer to movie sales. The combination of not having to pay for distribution, coupled with the lack of returns, will help boost studio revenue, despite a lower wholesale price.