The Apple (NASDAQ: AAPL) model for bringing video to the iPod has been to offer downloads that can be purchased to be stored and watched later. Disney (NYSE: DIS) went along with the model, but Steve Jobs is on that board of directors. Other major studios have stayed away from the model.
The Mac and iPod company has had a change of heart, perhaps because its other plan was not working. According to media reports, Apple will offer feature content on a VOD model where the movies are offered with digital rights management software and can only be played for 30 days. The price per rental is pegged at $2.99.
The new service is a bit of a step back for Apple. Content will be downloaded onto a computer and can be played on one other device, presumably an iPhone or iPod. But, the company's vision that a huge library of films and TV content would be available for purchase rather than rental has been abandoned for now in favor of a systems that studios find more palatable.
Whether Apple can use this foot in the door to get studios to allow for permanent downloads is anyone's guess.
Douglas A. McIntyre is a partner at 24/7 Wall St.