Apple in downloads deal with big studios

Apple has struck a deal with Warner Brothers and other big film studios to sell film downloads through iTunes on the same day that titles are released on DVD.

The move marks the latest step in a revamp of Apple’s film download strategy. This year the company said it would begin offering film rentals over iTunes after Steve Jobs, chief executive, admitted its paid download strategy had not worked as well as had been hoped.

The inclusion of Warner, which has the biggest film library in Hollywood, significantly bolsters the video content available to buy on iTunes.

Other studios involved in the deal include 20th Century Fox, Walt Disney Studios, Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment and Lionsgate.

Warner was a notable absentee among Apple’s first deals with Hollywood studios but, following the deal, the company’s hit titles such as I am Legend will be available to buy, as well as to rent.

The new arrangement could have big implications for the DVD industry as the format will no longer enjoy a window of exclusivity before films are released to buy on other platforms.

DVD sales declined in 2007 for the first time in a decade. Revenues from sales and rentals were $23.7bn, about 3 per cent less than the 2006 figure, according to the Digital Entertainment Group.

While income from rentals in 2007 was broadly comparable with 2006, revenues from sales fell by about $600m. The release of films to buy on iTunes on the day they are made available to buy on DVD is likely to put further pressure on sales.

The market for film downloads is set to grow from $250m this year to $1.05bn by 2012, according to Screen Digest, a market research group, with digital rentals set to eclipse download-to-own as the industry’s dominant business model.

Sales of films, music and iPod accessories accounted for about $881m of Apple’s $7.5bn in sales last quarter. Shares of Apple rose 3 per cent on Thursday to $179.18.

Additional reporting by Tim Bradshaw in London