Last time I wrote about the significance of Apple's new movie rental business and how it will change the industry. Today I am going to look at several aspects of rental pricing, a contentious aspect of iTunes.

Pricing

Of course rental pricing is one of the biggest stumbling blocks of a download service, especially compared to "all-you-can-eat" subscription plans from Netflix and Blockbuster. Why pay $3-$5 per movie when Netflix gives you "unlimited" rentals for $20/month? (It's only unlimited in the sense that the maximum is dictated by how fast you can watch and snail mail return the discs for new ones.)

Recently Netflix even href="http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/ 01/13/financial/f090113S93.DTL" target='_blank'>announced they are expanding their own digital download service. Now subscribers get all the downloads they want for no additional fee!

I have no idea how Netflix can support this. Surely the bandwidth has a cost and the studios would want a fee for each download (Apple supposedly makes very little on downloads), so I can only assume that Netflix is doing this at a loss to promote their download service and keep customers from defecting to iTunes. The interesting twist is that if the movie studios are cooperating with Netflix to offer flat-rate viewing, then that is something Apple could negotiate as well.

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