Apple has signed News Corporation's 20th Century Fox studio to a new online video-on-demand service in a deal that could change the way people pay for online film content.
The agreement will allow consumers to rent Fox releases as they come out on DVD by downloading a digital copy from Apple's iTunes platform, according to a person familiar with the situation.
Walt Disney is the only Hollywood studio selling its new releases on iTunes but these are available to buy rather than rent.
Paramount, Metro-Goldwyn-Mayer and Lionsgate sell older library titles.
The Apple-Fox deal, likely to be announced at the Macworld show on January 14, has the potential to transform film distribution.
Apart from letting people rent online, Apple will also for the first time extend its FairPlay digital rights management system beyond its own products.
A digital file protected by FairPlay will be included in new Fox DVD releases, enabling film content to be transferred or "ripped" from the disc to a computer and video iPod. DVD content can already be moved to an iPod but this requires special software and is considered piracy by some studios.
The launch of iPod-ready films on DVD would "help Apple sell a load more video iPods", said one studio executive.
Apple and News Corp declined to comment.
Other websites offer films to rent and buy via a digital download, but none has the mass appeal of iTunes.
"Fox and potentially other -studios are coming around to the idea that there is nobody out there to challenge iTunes," said Jonathan Weitz, a principal with IBB Consulting, which focuses on cable, media and mobile companies. "This deal is a sign that media mobility is coming to the mainstream."
Apple, whose shares hit $200 for the first time yesterday in intra-day trade (though they fell back to $198.95), is understood to have been in talks with Sony Pictures Entertainment, Paramount and Warner Bros about making their new releases available on iTunes to buy and rent.
Talks are also believed to have covered the DVD-FairPlay initiative, although it is unclear whether a deal with other studios will be signed before Macworld.
Sony, Paramount and Warner Bros declined to comment.
