Apple Moves into Online Movie Rentals

SAN FRANCISCO — Now that it has conquered the online music business, Apple Inc. wants to do the same with online movie rentals.

Apple announced Tuesday it will begin renting downloadable movies on its iTunes store for $2.99-$3.99. High-definition versions cost $3.99-$4.99. Users will have 24 hours to finish watching movies once they start.

Apple also introduced what CEO Steve Jobs said was the world's thinnest computer — a notebook PC that's only three-quarters of an inch at its thickest point and skinny enough to fit inside a manila interoffice envelope.

In what could be a harbinger of the beginning of the end of CD and DVD drives in computers, the new three-pound MacBook Air doesn't have an optical drive. Just as CDs and DVDs replaced floppy discs and tapes, Apple and Jobs say wireless innovations are beginning to make optical drives obsolete. Eliminating a drive also cuts down on space and weight.

"We don't think most users will need an optical drive because MacBook Air is made to be a wireless machine," he said. Just in case, though, users can buy an external optical drive from Apple for $99.

The new computer isn't cheap. It will start at $1,799 when it begins shipping in two weeks.

Apple, of course, isn't the first computer maker with an ultra-portable. Sony currently is a leader in the business, and Chinese PC maker Lenovo earlier this month unveiled its own ultra-portable as part of its entry into the U.S. consumer business. Dell rolled out a thin and light notebook of its own last year, as did other PC makers.

But some industry analysts are already predicting that MacBook Air's distinctive design and features will make it a hit with consumers and some business people — despite its hefty price tag.

"It's going to be the technology object of desire for 2008," said Michael Gartenberg of technology consulting firm Jupiter Research.

Apple isn't the first company to get into the online movie rental business. Amazon.com is among others also rolling out similar services. Just Monday, movies-by-mail pioneer Netflix said it was removing limits to how many movies and TV shows its customers can view over the Internet using its Watch Instantly service.

But Apple's service is unique in that users will be able to transfer movies from computers to their iPods. And if they buy one of the company's AppleTV set-top box devices, they can transfer them to their big screen TV, too.

To help support its new movie business, Apple also just overhauled its AppleTV device, Jobs said. The latest version of Apple TV will go for $239, Jobs announced Tuesday, and will let users connect their TVs directly to the Internet — with or without a home computer.

Even more important, Apple's online movie rental has the backing of every major Hollywood studio. Jobs' history as a founder of Pixar Studios — and now as the biggest shareholder of Pixar owner Walt Disney Co. — undoubtedly helped in negotiating with the studios.

"When Steve came to us with this idea, it was a no-brainer," said Jim Gianopulos, CEO of 20th Century Fox. "I think this will be a transformative version of the rental model."

Apple already sells movies, TV shows — and music, of course — on iTunes. The company has sold 7 million movies and 125 million TV shows on iTunes, Jobs said.

But, he acknowledged, movie sales haven't met Apple's expectations.

"We think there's a better way to deliver movie content," he said. "Most of us watch movies once, maybe a few times. Renting is a great way to do it."

Likewise, the first version of AppleTV didn't work as well as Apple wanted it to, Jobs said.

"We've all tried to get video over the Internet and onto the widescreen TV, and you know what, we all missed."

But the new AppleTV device, he said, "is very strong."

At the opening of the MacWorld Conference & Expo here, Jobs also announced software upgrades to his company's iPhone and iTouch devices that include new mapping and messaging capabilities.

He also unveiled a new computer back-up system, called "Time Capsule," that helps Mac users instantly save and store their files.

A 500 gigabyte version of Time Capsule will sell for $299 and a 1 terabyte version will sell for $499 when they hit the market in February.