Apple Inc. is working out plans to strike deals with Hollywood studios to offer ultra high-definition films on its new Apple TV, but discussions have been hampered by disagreements over pricing, according to reports by Wall Street Journal (WSJ) gleaned by businessamlive.
The tech giant is expected to unveil the new version of its streaming media device at an event Sept. 12, which is being touted as having compatibility with new 4K televisions.
The 4K format offers more than eight million pixels per frame—significantly sharper than traditional high-definition video at the same size. Apple will also reveal updates to its iPhone and Apple Watch, according to people briefed on its plans.
Apple wants to have major Hollywood films available in ultrahigh definition on the new device, expected to go on sale later this year. However, it wants to charge $19.99 for those movies—on par with what it sometimes charges for new HD movies, the people with knowledge of the discussions said. Several Hollywood studios want to charge $5 to $10 more for 4K movies, the people said.
Conflicts over pricing between Apple and media companies are nothing new. The technology company typically argues lower prices will help expand a category and generate more long-term revenue, while studios often worry more about preserving profit margins and higher prices for higher quality formats.
Closing deals with studios before Sept. 12 is important to Apple as it tries to reignite interest in the TV product it first launched in 2007. The company has been losing market share lately to streaming-media players from rivals such as Amazon.com Inc. and Roku Inc., which already offer devices with 4K capability that cost at least 60 percent less than the $149 Apple TV. Its market share fell to 15% in the first quarter this year from 19 percent a year earlier, according to Parks Associates, a market research firm.
The Apple TV accounts for a fraction of the company’s revenue, but research by Kantar Worldpanel has found that owning additional Apple devices strengthens consumer loyalty to the iPhone, which accounts for two-thirds of sales.
“Historically, Apple has looked at the levers they can pull to be competitive, and they’ll have to have richer 4K content to leapfrog other competitors,” said Matt Smith, vice president at Brightcove Inc., which provides online video services.
The availability of Hollywood films in Ultra HD, another term for 4K, also could rejuvenate the iTunes Store. The company’s movie rental-and-sales business has been losing market share to rivals such as Comcast Corp. and Amazon, falling below 35% from about 50% in 2012.
Ultra HD movies have been available online for less than two years, and an executive at one studio said pricing is still in the testing phase. An executive at another studio said $19.99, Apple’s preferred price point, would likely prove more popular with consumers given the vast amount of content available for $12 or less a month from Netflix Inc., which offers a limited number of Ultra HD movies and television shows.
Streaming service Vudu, owned by Wal-Mart Stores Inc., already offers some digital movies in Ultra HD. “Baywatch,” from Viacom Inc.’s Paramount Pictures, and “King Arthur,” from Time Warner Inc.’s Warner Bros., cost $29.99 while Walt Disney Co.’s “Guardians of the Galaxy Vol. 2” is $24.99.
Hollywood’s biggest studios, a group that includes Disney, Paramount, Warner, Comcast Corp.’s Universal Pictures, 21st Century Fox Inc.’s Twentieth Century Fox, Sony Pictures Entertainment and Lions Gate Entertainment Corp. , are eager to establish a new category for digital movie sales, particularly as that business’s growth has been slowing in recent years.
