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Monday, November 6, 2006 - Page updated at 06:24 PM

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Microsoft to offer movie rentals via Xbox

Seattle Times technology reporter

Microsoft is the latest company to jump into the business of downloadable movies and television shows, but it's using a device no one else has: the Xbox 360 video-game machine.

The company has announced that it plans to offer movie rentals and full purchases of television shows, joining Apple Computer, Amazon.com and other rivals in vying for the "what do you want to watch tonight" entertainment dollar.

Other companies mostly download videos to the personal computer, and have struggled to find ways to easily move that content to the television screen. Although there are cables for sale that connect a PC to a television, buying and using one can present a barrier for consumers.

Microsoft is avoiding that problem by going straight to the Xbox 360 with its content. Console owners with a broadband Internet connection can download the videos directly to the 20-gigabyte hard drive on the Xbox 360, which is already connected to a television in most homes.

The service also stands out because it offers videos in standard-definition and high-definition formats. Although prices haven't been announced, Microsoft said high-definition videos will cost more and take longer to download, perhaps even overnight.

Users will pay for the videos with the points system Microsoft already uses to sell video-game features and other content to Xbox 360 owners. You can buy a block of points online with your credit card or through the pre-paid cards sold in stores. The service is set to begin Nov. 22, the one-year anniversary of the Xbox 360.

The Xbox service doesn't have the vast library of television content that Apple sells on its iTunes Music Store, nor does Microsoft have the kind of partnerships that Apple has with the ABC and NBC television networks. But that will change, Microsoft executives said.

By year's end, the service is set to have at least 1,000 hours of television programs and movies from partners including the CBS and MTV networks, Turner Broadcasting System, Paramount Pictures and Warner Bros. Home Entertainment.

Although Microsoft will sell television shows such as episodes from the "CSI" series, it will only rent movies. That's a key differentiator from Apple, which only sells videos to keep permanently.

The terms of use for movie rentals are more rigorous than those offered by competitors. Once a user downloads a movie, for example, it must be watched in the next two weeks before becoming unplayable. Movielink, a competing service, gives you 30 days to watch a movie rental.

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And once you begin playing a movie on either service, you only have 24 hours to watch it. To extend that time, you'll need to pay more.

Hollywood has demanded those terms mainly in hopes of combating piracy and other illegal use of its movies. Microsoft and analysts say the industry could relax the regulations if it finds online movie services secure enough.

Richard Doherty, an industry pundit with the Seaford, N.Y., firm Envisioneering, called Microsoft's service a win-win for the company and for program providers. Many Xbox 360s are in homes that have broadband connections but not the set-top boxes used to access on-demand video from cable companies.

The audience of Xbox 360 owners – often teens and young adults – are a highly desirable demographic for movie studios and television networks, Doherty said.

"It's the right folks and the right eyeballs," he said.

But the 20-gigabyte hard drive Microsoft sells with the Xbox 360 is not big enough to hold the kind of content available on the service. That hard drive could store only about 12 to 15 hours of high-definition video, he said.

Doherty predicted that Microsoft will soon announce larger hard drives for the console, perhaps as early as the Consumer Electronics Show in Las Vegas in January.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2006 The Seattle Times Company

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