Apple movie cloud service launches, but without two major studios

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Apple Inc. is putting movies in the cloud, providing a boost to Hollywood film studios’ small but growing digital business.

Movies purchased through Apple’s iTunes Store from five studios -- Paramount Pictures, Sony Pictures, Walt Disney Studios, Warner Bros. and Lionsgate -- will be accessible via the technology giant’s iCloud service from any of its devices, including the Apple TV, iPad and iPhone.

Apple announced its plans, which have been in the works since last year, at a Tuesday news conference, where the company also unveiled new versions of the iPad and Apple TV, an Internet-connected device that displays the movies and TV shows from iTunes and other services on televisions.

20th Century Fox and Universal Pictures are not part of the iCloud movies launch. That’s because of restrictions in their distribution deals with pay cable channel HBO, said people close to the situation not authorized to speak publicly because of the privacy of negotiations. But both studios are negotiating with HBO and expect to add their films to iCloud soon, those sources added.

In addition to new purchases, the iCloud service will store any movies that users have already bought from iTunes. Previously, Apple customers had to store movies they bought on the hard drive of their computer or other device.

The news is significant for Hollywood because Apple accounts for approximately 75% of all movies bought online, according to one person involved in the digital distribution business but not authorized to share the data. However, the percentage of iTunes movie transactions that are purchased has fallen in the last year, that person said, from nearly 50% to about 33% -- the rest being movie rentals.

Studios are eager to reverse that trend because movie purchases, which typically cost between $15 and $20, are significantly more profitable than rentals for $4 to $5.

Another potential boost to digital movie sales comes from the new version of Apple TV. While the previous Apple TV only allowed movie rentals because it did not have a large hard drive for storage, consumers will be able to buy films on the new version that are stored in the cloud.

Movies in iCloud will likely prove a formidable competitor to UltraViolet, the digital movie technology backed by every Hollywood studio, save Disney, and most major electronics manufacturers, except Apple. Backers have been aggressively trying to grow UltraViolet since it launched last October and expect a big boost next week when Wal-Mart will announce it is supporting the technology in stores and online.

However, the studios apparently concluded that their top priority was growing the digital movie business with Apple on board, rather than only supporting UltraViolet.

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-- Ben Fritz