Will Apple's rental service succeed?

Steve Jobs' keynote at this year's MacWorld included the announcement of four new products: the new MacBook Air, Time Capsule, an update to the iPhone and iPod Touch, and a revised Apple TV with movie rentals through both the Apple TV and the iTunes store. It's clear that Jobs is excited about the new offering and the studios are also quite pleased with the terms of the new service, but what about John and Jane Consumer?

At the new iTunes rental store, visitors can check out movies from all of the major Hollywood studios. For new releases, users are charged $3.99 and catalog rentals are $2.99. HD rentals were also introduced this week at $4.99, but are only available through Apple TV. Once downloaded the movies will remain accessible for 30 days, but will only stay active for a 24 hour period after pressing play.

In 1987, the Dead Kennedy's released an album titled "Give Me Convenience, or Give Me Death," and for those who live by that credo, the new iTunes service delivers hands down. The Netflix streaming service is a sweeter set-up in many ways, but it only runs on Windows and installing a second operating system on your Mac is probably not an ideal solution.

The terms and pricing of Apple's rental service leave much to be desired. At my local supermarket there is a DVD Play kiosk offering $1.49 rentals with a $.99 fee for each additional day. Blockbuster has abandoned late fees, and Netflix provides a rotating supply of DVD rentals at prices starting at just $8.99 that also includes unlimited PC viewing.

Compared to these other offerings, Apple falls flat. The fact that HD content isn't available for most users is yet another strike against them; it's unclear why Apple excluded the iTunes store from renting HD content, but some have speculated it is to prevent piracy.

Apple offers a service that is more expensive than DVD Play, is subject to the strict time restrictions that Blockbuster ditched months ago, and is far less flexible than Netflix. On one message board, someone suggested that Apple's rental terms are a throwback to the 1980's and I have to agree. In fact, as I read all the details about the program I was reminded of renting videos at the local Videozone when I was a kid: new releases were $3.99 and older videos were $2.99; it's almost as if the deal had been struck in a business environment from another decade.

It's no secret that those at the top of many corporate food chains are a bit out of touch with every day life, and studio executives are a perfect example of this phenomenon. Just as George H. W. Bush demonstrated his aristocratic naivete by expressing surprise after first seeing a check-out scanner on the 1992 campaign trail, it's quite likely that many of Hollywood's top guns haven't rented a video since, well, Top Gun.

Despite being inferior to some video rental alternatives, the Apple initiative may still be successful. The seamless integration the company offers is certainly appealing, and the new service is clearly the easiest way to watch movies on both the iPod and iPhone. In comparison to pay-per-view the pricing is competitive, and I don't see cable and satellite companies dropping pay-per-view anytime soon. So perhaps the new iTunes movie rental store will turn out to be successful after all.

While I don't like the terms of the service, and while I wish that Apple had held a stronger line in negotiating a deal that was more flexible for the consumer, I will probably find myself renting the occasional movie from the iTunes store regadless. I highly doubt that Apple has another iPod on their hands, but with enough users taking advantage of the rental feature every once in a while, the new service may prove to be economically sustainable.