Apple to Lose Money on iTunes Movie Releases

Apple has lowered the prices of its iTunes movie downloads in an attempt to draw more business to its stores and website. The electronics retailer will be selling titles from almost every major film company at a $1 loss. New releases, such as 'Juno' and 'American Gangster', will retail for $14.99 on the website, while older films will sell for $9.99 (Source: efluxmedia.com)

After completing deals with 20th Century Fox, Walt Disney Studios, Warner Bros., Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lions Gate, Image Entertainment and First Look Studios, Apple will release movies online the same day as the DVDs hit stores. This decision will likely improve sales of downloaded movies, since customers won't have to wait the month after the DVD is released to access the online version. (Source: theglobeandmail.com)

Selling movies online is a tricky field for marketers. On the one hand, the strategy assumes that people are willing to buy movies online for the convenience. On the other, the hassle of burning movies onto CDs so that they can be watched on larger screens than iPods and PCs might also deter customers from buying movies online like they buy music.

Apple could make up the difference if downloaders also purchase products such as the iPod digital media player or Apple TV. The company will have to rely on these supplementary devices to close the margin between the wholesale and retail prices of iTunes' movie sales.  (Source: yahoo.com)

Apple's current predicament suggests that the it will have to fight the big movie sellers, such as Best Buy and Wal-Mart, in what looks to be a losing battle.