Apple losing money in new movie deal

Films that Apple will offer the same day the DVDs come out will be sold for at least 50 cents more than Apple paid. It's not uncommon for retailers to sell new products at a loss.

Apple drew a lot of attention when it announced that it will offer movie downloads the same day they come out on DVD, but the deal won't mean a windfall for Apple--at least initially.

The reason for that is Apple will lose money on every sale, a source said.

Apple announced on Thursday that it had reached an agreement with a group of film studios, including the six largest. Apple said that starting this week, iTunes customers will be able to purchase newly released movies for $14.99, while most catalog titles are $9.99.

The Wall Street Journal reported that Apple is paying the studios nearly $16 for each sale, but a source close to the negotiations told CNET News.com that Apple is paying closer to $15.50 than it is $16.

It's not uncommon for retailers to sell a new product at a loss. The question is whether Apple will eventually boost the prices or if the company can convince the studios to take less.

The only way a dialogue like that would even begin is if Hollywood sees boffo sales out of Apple.

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About the author

Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.

 

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