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Infinite Loop / The Apple Ecosystem

Why Apple can’t sell movies

Sales of movies at the iTunes Store have been lackluster in 2007, and MGM and …


In the past three months, company has sold some 700,000 more. Though comparisons are difficult because iTunes sales always spike around the holidays, numbers demonstrate that the addition of three new studios this winter has not significantly accelerated business.

Sure, six-figure analysts and anonymous nerds on the Internet will counter that the Apple TV will boast sales significantly for the rest of 2007, but it's debatable how much the Apple TV can do. There are at least five problems the Apple TV alone cannot solve for the iTunes Store.

  1. Studios: Disney was onboard with the iTunes Store last September when the Apple
    TV was previewed, Paramount in January, Lionsgate in February, and now MGM.
    This gradual rollout contrasts sharply with the opening of the iTunes Music
    Store in the US in 2003, when all the big labels came onboard at the same time.
    Even with MGM signing on, Apple still has not reached a deal with Universal
    and Sony, and Sony could be especially troublesome. As a competitor in media
    hardware, Sony has resisted the iTunes Store in the past.
  2. Content: Even when studios license movies, they may withhold titles. MGM is
    selling catalog titles, but not new releases. Even Apple's stalwart ally Disney
    only had about 100 films available at end of 2006. While Apple boasts about
    now having more than 500 movies available, contrast that with NetFlix, which
    has more than 75,000 titles for rental. Sure, that number includes TV shows,
    but movie the library of NetFlix still dwarfs that of the iTunes Store.
  3. Access: At present, there is no option to rent movies on the iTunes Store,
    and, unlike music purchases versus subscription services, renting movies is
    a preferred method of consuming content. Further, purchasing movies through
    the iTunes Store still requires a computer, rather than direct shopping using
    the touted Apple TV.
  4. Price: While a price of $9.99 for older films may be competitive with DVDs,
    charging $12.99 or $14.99 for new releases does not favorably compare with Wal-Mart,
    especially when considering the visual quality and extras of DVDs. Though there
    has been speculation that Wal-Mart and other retailers may have pressured the
    studios on pricing for the iTunes Store, that hardly matters to the average
    consumer looking for a bargain.
  5. Quality: One need only visit an Apple Store and watch the Apple TV demo to
    see how badly content from the iTunes Store looks on an HDTV. What may look
    great on an iPod leaves a lot to be desired on a 32" Sony Bravia.

Looking at the just those issues, it's easy to conclude the iTunes Store is in trouble, which is not the same thing as failing. Even should Apple do nothing to address the issue of the content library, purchasing options, and video quality, the iTunes Store will not fail to sell movies. However, If Apple is relying only on the Apple TV and the iPhone to spur sales of movies at the iTunes Store, then it won't succeed in 2007 either.

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