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Fox-y iTunes in the works? - December 3, 2007

Pali Research's well-informed media analyst Rich Greenfield is reporting in a blog post this morning [reg. req.] that Fox is in negotiations with Apple to offer its movies via iTunes beginning early next year.

According to Greenfield, Apple has apparently agreed to a modest increase in the wholesale price it pays the studios from roughly $14 per new release to somewhere around $15. That's still less than brick-and-mortar retailers pay for a DVD, but Greenfield speculates that Fox might be willing to offer them the Apple price if they agree to a no-returns deal.

Greenfield also notes that Fox has recently begun experimenting with including a digital copy of a movie on the DVD for transferring to a PC or portable device for a premium price. Since the device most consumers are likely to want to transfer their movies to is an iPod, Fox has to reach some sort of accommodation with Apple anyway, which could form the foundation for a broader deal.

Greenfield shrewdly notes that if Fox does reach a deal with Apple, the usual race to be third will be one. "While we suspect FOX will be the first studio other than Disney to fully embrace iTunes, we believe others will quickly follow suit," he writes.

In Hollywood, you never want to be the first to do anything, or the last. Third is a nice comfortable spot: Not really behind the curve but nobody has to stick their neck out.

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