Why Apple should launch iTunes movie rentals now

Ever since Apple enabled users to download movies on iTunes, the world waited with bated breath to see if the company would launch a movie rental service. Unfortunately, those people are still waiting.

But with a renewed sense of importance toward getting movies through iTunes into your hands, Apple may finally pull the trigger and create a full-fledged movie rental business.

Even better, Piper Jaffray analyst Gene Munster believes that launch could happen at Macworld. As Munster points out, his team expects Apple to announce new partnerships with at least one more movie studio, and this may be followed by the immediate availability of a movie rental service.

If that's not enough to whet the appetite of Apple fanatics all over the world, Munster also believes the Apple TV will play a key role in the launch.

"If Apple begins renting movie downloads on iTunes, we expect a related software update to the Apple TV enabling movie rentals direct to the Apple TV. In fact, the Apple TV software currently includes 'iTunes Store settings' in its settings menu, but the option is essentially inactive," he wrote. "We expect this setting to be activated soon; users will likely be able to log into their iTunes accounts directly from the Apple TV and browse movie rentals, then download them directly to their Apple TV."

Of course, the story doesn't end there. Simply put, should Apple even consider movie rentals, and if so, what good will it be for the company? Suffice it to say, if Apple decides to give movie rentals the green light, it'll be one of the company's most intelligent moves in years.

As Gene Munster explained in his message to clients, "We have been expecting iTunes movie rentals for nearly one year, but due to pricing disagreements and DRM-related issues, the studios and Apple have not yet come to an agreement."

And therein lies the rub.

Once again, we're at the mercy of a group of movie studios who have no idea what we want or how to bring it to us. Why should we not be given the service we want because some idiot at MGM is deathly afraid of his precious B-movies getting pirated? Got news for you, friend: it's already happening, and adding more DRM won't work.

To make matters worse, these movie studio losers are so incredibly worried about pricing, they've lost sight of what we really want: better movies at a better price. Is that too much to ask?

But I digress. Unlike the movie studios, Apple has been able to bring something to the table that most other companies have failed to do--products and services that most people actually want. And when it comes to movie rentals, don't expect anything different.

But why should Apple get in on this business, you ask? It's simple, really: to address a growing demand of people looking for such a service and to revive the Apple TV.

The People demand movie rentals!

With Blockbuster tanking into obscurity and places like Netflix trying to allow you to download movies instead of waiting for them in your mailbox, now seems like the perfect opportunity for Apple to get in on the rental game.

Quite honestly, if Apple ever decided to offer a service similar to Netflix's core business model, I'd scoff and tell you why it would be an awful idea. But unlike Blockbuster's brick-and-mortar tack or Netflix's mailbox strategy, Apple would be getting in on something that has been relatively untapped.

Let me ask you this: would you rather wait two days for a movie you want to see now or wait about an hour for that same movie to download onto your system? Chances are, you'll take the latter.

Of course, iTunes movie rentals won't work in the slightest unless Apple can find a way to distribute the videos to the right devices. After all, would you really want to sit in front of your computer screen for two to three hours just to watch a movie? Sure, some would, but if Apple is trying to tap into a larger market, computer viewing simply won't work.

To make matters worse, Apple needs to be aware that pricing is an extremely important element in all of this. Why would I rent the movie for $8 if I can buy it for $10? Generally speaking, movie rentals really shouldn't go above $5, but a sweet spot of about $3 to $4 should be its goal.

Revive the Apple TV

There's no debating the fact that the Apple TV has performed much worse than some expected. As Forrester Research told us last week, the Apple TV has sold just 400,000 units--a full 600,000 units shy of the company's estimate for the year.

And while Steve Jobs called the device a "hobby," and most are speculating that it's an 18-month trial product to see if there's any interest from consumers, iTunes movie rentals could have a profound impact on Apple TV sales, if integrated with the device properly.

Of course, integrating movie rentals with the Apple TV will be a vexing issue for Apple. With only 400,000 units in the wild, Apple obviously can't justify allowing users to watch only movie rentals on its multimedia device, right? Think again.

Why wouldn't Apple's movie rental strategy mirror how it handles iTunes and the iPod? Think of it this way: you could still download movies from the iTunes Store and watch them on your computer, but if you want to view those movies on any other screen, you'll need to have an Apple TV handy.

Even better, as Munster points out, why not install an add-on to the current Apple TV software that would enable users to download rentals right from the device?

Believe it or not, iTunes movie rentals may be the only strategy that could save the Apple TV from its coup de grace. Sure, it may not increase sales overnight, but over time, Apple may be able to realize the kind of sales on that device that it has been able to enjoy on others over the past few years.

Don't let the company kid you: iTunes movie rentals are coming, and Apple should bring them as soon as possible.