Apple (AAPL) May Join Studios for VOD, Phone Companies Cower

Apple (AAPL) is getting close to a deal that would allow consumers to rent films from major studios through a video on demand service. Unlike Apple’s current iPod video service, the content would not be for sales. It would be downloaded to a computer and then could be moved to a device like an iPhone. But, the feature-length video would be protected by digital rights management software, unlike most music downloads, and the rental would be for a fixed time, perhaps 30 days.

While the new arrangement could make things a little uncomfortable for new technologies like the Amazon (AMZN) Unbox and even cable VOD providers like Comcast (CMCSA), the real losers are likely to be Verizon (VZ) and AT&T (T). An FT report on the service said the price would be a low as $2.99 per film and quoted a studio executive as saying the service would “compete against cable companies and anyone else offering VOD into the home”.

Cable can probably weather some VOD competition. It already has the poll position on top of the TV. Its digital TV products are available in tens of millions of homes. The number of consumers buying bundled television, broadband, and VoIP packages is rising rapidly. Cable can offer VOD with internet connectivity and phone service. VOD becomes part of a larger service.

One of the last visitors to the consumer living room is the phone company. Verizon and AT&T are spending huge sums, $23 billion in the case of VZ, to put down fiber-to-the home so that the firms can offer services like live television and VOD. The last thing they need is one more strong competitor to vie for that business.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.