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Originally published September 7, 2006 at 12:00 AM | Page modified September 7, 2006 at 12:34 AM

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Buzz in the biz: Amazon, Apple close to offering movie downloads

If rumors are true, Amazon.com has helped to crack a Da Vinci-like code for Hollywood. The online-retail juggernaut and Apple Computer are...

Seattle Times business reporters

If rumors are true, Amazon.com has helped to crack a Da Vinci-like code for Hollywood.

The online-retail juggernaut and Apple Computer are both reportedly on the verge of unveiling services that would allow consumers to purchase and download movies from the major film studios — a move that could fundamentally alter the way films are distributed and consumed in the United States.

"Consumers are already there," said Aram Sinnreich, managing partner of Radar Research, a Los Angeles-based research and consulting firm. "They're just waiting for the pieces to fall into place."

Amazon is expected to unveil the movie-download service Amazon Unbox, possibly as early as today, while Apple is expected to sell movies through its iTunes store in tandem with an updated iPod music and video player that features a wider viewing screen.

Both companies declined to comment on future announcements, but speculation has been building for weeks in blogs and published reports.

The major Hollywood film studios have faced increasing pressure to sell movies online, as box-office receipts steadily decline and peer-to-peer networks offer illegal movie downloads for free.

Domestic box-office receipts last year were the lowest since 1997, falling 6.2 percent to $8.83 billion, according to industry tracker boxofficemojo.com.

Selling downloadable movies is nothing new, but Apple and Amazon are aiming for a mass appeal that other companies have yet to hit upon. Existing services such as Movielink and CinemaNow, which rent and sell downloadable films, have been plagued by viewing restrictions and other hassles that have discouraged mass adoption.

Movielink's pay-to-own films, for instance, cannot be burned onto a DVD or moved to a portable video player for viewing, and rentals must be watched within 24 hours of first hitting the play button.

Downloading movies can take at least an hour, even with a high-speed Internet connection. Neither service offers the types of new releases carried by movie-rental companies such as Blockbuster and Netflix.

Industry experts, meanwhile, speculate that Amazon and Apple would provide services that allow consumers to burn DVDs and transfer movies to portable devices.

"Movies are where music was a couple years ago," said Michael Gartenberg, an analyst with Jupiter Research. "There's a limited selection that's fairly hard to download, and they're not particularly supported on a wide number of devices."

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A natural fit

Apple, based in Cupertino, Calif., is a natural fit for the downloadable-movie business. While the company wasn't the first to sell music online, Apple is largely credited with bringing song downloads mainstream — proving that people would pay to buy music online as recording studios started cracking down on illegal free-download sites.

Apple sold more than 1 million songs in the first week when it unveiled its iTunes music store in May 2003, and it dominates the market today.

The computer maker extended its reach into video downloads last October, adding music videos and episodes from five television shows, including ABC's "Lost" and "Desperate Housewives," to its store.

Customers purchased and downloaded more than 1 million videos within the first two weeks of the service, demonstrating a market exists for downloadable videos.

Apple would not confirm its entry into the downloadable-movie market, but an invitation sent to the media for a Tuesday event coyly hinted at an entertainment announcement.

The invitation showed spotlights shining on its iconic Apple logo with the simple words, "It's Showtime."

Holding out hope

Wall Street has held out hope that Amazon would enter the digital-movie business after a blogger in mid-August posted unconfirmed screen shots of Amazon Unbox — software that would allow consumers to purchase, download and play digital movies.

While Amazon declined to comment, the company registered the word "Unbox" with the U.S. Patent and Trademark Office in mid-August.

In its filing, Amazon said Unbox would be used to sell goods and services, namely "downloadable computer software for the delivery and viewing of digital media."

The movie-downloads business is also a natural fit for Amazon, which still draws the lion's share of its business from media sales — books, music, videos and DVDs. Those items accounted for two-thirds of Amazon's $2.1 billion in second-quarter sales.

The company, meanwhile, operates the Internet's top-ranked movie site, IMDb.com.

If anything, Amazon Unbox would put to rest mounting questions about the massive investments it has made in recent years.

The online retailer has spent $1.3 billion on technology and content since the start of 2003, with no big prize to show for it.

Amazon's stock has slid 35.3 percent since the beginning of the year, as its profit margins continue to contract from a combination of heavy investments and a free-shipping promotion to customers.

A far grander vision

Richard Doherty, director of Envisioneering, said Amazon operates one of the most trusted retail stores online. "The studios would like to deal with global reach, and Amazon certainly has the global reach," he said.

Amazon's vision in this arena may be far grander, still.

The company in April introduced a service that allows film studios and TV networks to sell more obscure or niche titles through an on-demand DVD manufacturing service.

The service erases the financial risk associated with manufacturing DVDs and holding inventory of lesser-known works. In the future, the same inventory-free model could be applied to blockbuster movies, as well.

Sinnreich, the Radar Research analyst, said consumers are ready for the switch.

They already use TiVo digital recorders to watch programs when they want. They get video rentals through the mail with Netflix, and they expect entertainment to be flexible and adapt to their schedules.

Soon, getting a movie is not going to be that different than getting picture mail or a text message on your cellphone, he said.

"It's going to be the kind of thing where, 10 years from now, we're going to say, 'How did we live without it?' "

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

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