iTunes Store Dominates Music, and Movies May Be Next

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On Thursday, Apple passed yet another significant milestone at its iTunes Store. The company announced that music fans have purchased and downloaded more than five billion songs. Movies could be the next digital medium to realize those numbers.

The iTunes Store is the largest music retailer in the U.S., according to the NPD Group. And iTunes customers are now renting and purchasing more than 50,000 movies every day, according to Apple.

Analysts said Apple's decision to give consumers the ability to turn previously purchased tracks into complete albums at a reduced price, and seamless integration with iPod and iPhone, has helped its cause.

"This is just further evidence, if any is needed, that the recorded music business is headed toward Internet distribution," said Phil Leigh, a senior analyst at Inside Digital Media. "Apple is already selling more music than Wal-Mart."

Are Movies Next?

In addition to its more than eight million songs, the iTunes Store peddles more than 20,000 TV episodes and more than 2,000 films, including more than 350 in high definition.

iTunes features movies from all the major movie studios, including 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount, Universal Studios Home Entertainment, Sony Pictures Entertainment, Metro-Goldwyn-Mayer, Lionsgate and New Line Cinema.

Apple is working to make it easy for consumers to access digital movies with initiatives like iTunes Movie Rentals, integrated podcasting support, and iMix playlist sharing.

Users can rent movies and watch them on their Macs or PCs, all current generation iPods and iPhones, and on a widescreen TV with Apple TV. iTunes Store customers can also purchase new movie releases from major film studios and premier independent studios on the same day as their DVD release.

"As far as movies are concerned, it's as certain as fleas on a yard dog that movies are going to the Internet," Leigh said. One of the most in-demand gadgets now is the Netflix by Roku digital streaming movie box, he continued, which is a testimony to the growing adoption of digital movies.

Obstacles to Digital Movie Adoption

Still, analysts said there are obstacles standing between consumers and mainstream digital movie adoption. Perhaps the most significant obstacle at this stage is how the digital model threatens the conventional television business.

"Traditional television broadcasters are beginning to make some tentative moves to try to throttle Internet bandwidth, or at least meter it and charge you for usage," Leigh said. "The reason they give is that the heavy users need to be charged more than the light users. But I think that's a red herring."

The real reason, Leigh said, is that TV broadcasters can see the handwriting on the wall: Video distribution over the Internet is the wave of the future and it's going to bypass conventional cable TV. Leigh expects consumers to vigorously object to metered usage, which could leave the door open for telephone companies to compete in this arena more effectively.

"There are powerful companies in place that don't want to see video on the Internet," Leigh said. "They are not going to be able to stop the trend, though it's almost certain they will try."

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