The rumors from last week about Apple being "on the edge" of launching a cloud movie service, which would enable iTunes users to stream movies from Apple's servers and then re-download them to other devices, are at best premature.
Apple has yet to sign cloud agreements for feature films with at least four of the top six film studios, according to multiple film industry sources who spoke to CNET. Apple has indeed pursued such agreements, which CNET reported in May, but Apple's negotiations could drag on for months before the company acquires cloud rights from all six film studios, the sources said. A launch is not imminent, the sources said.
Cloud computing is the term used to describe when a person performs computing chores on some third party's servers instead of their own PC. The cloud supposedly represents the next generation of media management and many consumers as well as studio executives are eagerly waiting to see what Apple can do with its cloud. Apple has announced that a cloud service is coming for music and last week rolled out an offering that enables iTunes users to re-download TV shows.
But a cloud service for films is going to be a tougher nut to crack for Apple. Here's why:
Apple still trying to land films, TV shows for iCloud
HBO likely to clear way for cloud video, UltraViolet
Is UltraViolet on track with effort to seed cloud?
One reason is the HBO window. During specific periods of time--often referred to in the film industry as windows--HBO owns the exclusive electronic distribution rights of films from three of the six top films studios: 20th Century Fox, Universal, and Warner Bros. Any retailer that wishes to sell physical DVDs from these studios during HBO's window is totally unrestricted. But online retailers are legallyprevented from delivering movie downloads from the three HBO-restricted studios during HBO's window and they also can't stream titles from those studios. This means that right now iTunes can't stream a movie to a customer during the HBO window that the customer may have purchased outside of the window.
Not only are these agreements one reason for the hold up to the roll out of Apple's cloud-movie service, but they are also a roadblock for UltraViolet, a cloud platform backed by all of the large studios with the exception of Disney.
In addition, while Apple has discussed different video-on-demand deals with the studios, there's no truth to another rumor that floated around last week about agreements Apple had in place to create a subscription film service to rival Netflix, according to industry insiders.
The main takeaway from all this is that one of the most powerful people in cloud video now is Jeff Bewkes, CEO of Time Warner, the media conglomerate and parent company of HBO, Warner Bros. Studios and CNN.
HBO is not blocking the streaming delivery of films with the intent to prevent customers from acquiring legally purchased moves, according to multiple industry insiders. HBO is trying to cover its backside. The company entered into electronic-distribution agreements with Fox, Universal, and Warner long before cloud-video services came along. The contracts are tricky and complex, and HBO doesn't want to give up certain rights without making sure it won't put the company at a disadvantage later on.
The sources say that one scenario HBO wants to avoid is allowing services to stream movies purchased on a pay-per-view basis during the HBO window and then deciding later to switch and sell films on a subscription basis. A rival could conceivably use a relaxed HBO window to offer older titles from NBC, Fox and Warner for less money than what HBO charges and compete with HBO.
These are just some of HBO's concerns, but regardless, the word going around is that Time Warner and Bewkes are committed to cloud distribution and to getting a deal done. They are close to a final agreement with at least one of the studios that would allow it to sell streaming rights during the HBO window. (Grain of salt time: I was told last spring that a deal would get done by mid summer.)
So, for Apple and the company's quest to acquire cloud-streaming rights, the chances look good, but it's going to take some time. As for the studios not covered by an exclusive HBO distribution agreement, it's unclear where they stand but sources said that Apple doesn't have agreements in place with all of these studios either. Apple CEO Steve Jobs is the largest individual Disney shareholder so that would appear to be a slam dunk. Sony Pictures is a big booster of cloud distribution and and of UltraViolet, so that studio seems a likely Apple partner.
As for Paramount, the studio's parent company, Viacom, seems more bullish on digital distribution than ever. With Google, Hulu, Amazon, Apple and Netflix competing in the streaming-video business, they are helping to bid up content prices. Viacom CEO Philippe Dauman remarked on that last week following the company's earnings report and added that traditional movie distributors, such as cable and satellite operators, are also looking to acquire Web rights.
So maybe the message from Hollywood is that regardless of who's distributing video over the Web, if you want content you had better be prepared to pay because if you don't someone else will.