Apple, Fox planning movie rental service?

Apple is reportedly planning to get into the movie rental business and license its digital rights management technology, and it could announce a deal within the next few weeks.

Both the Financial Times and The Wall Street Journal are reporting that Twentieth Century Fox Film has signed a deal with Apple to let iTunes users download new movies and keep them for an unspecified (but likely short) period of time.

Both reports say Apple CEO Steve Jobs will make this news part of his Macworld keynote on January 14.

The reports also says that as part of the deal, Fox is also going to use Apple's FairPlay digital rights management technology on its DVD releases, which would allow DVD buyers to rip their movies onto their computers using iTunes and also move those store-bought movies to iPods and iPhones.

Rumors of Apple getting into the movie rental business have been swirling all year, as it has become clear that the per-song pricing strategy that worked so well for Apple in the music business has not worked as well in video.

The movie studios want the same thing the record labels want--variable pricing, and more control over it--and people want the option of either buying or renting. There are plenty of films people would pay US$4 or so to rent, but not US$15 or US$20 to buy.

Part of the problem, of course, is that only Walt Disney, which counts Jobs as a member of its board of directors, sells its first-run movies on iTunes. Adding Fox's movies would provide a significant boost to iTunes, not to mention a lineup of iPods that has been almost completely redesigned around making it easier to watch video.

This move would also have interesting implications for Apple TV. A rental service from a new movie studio would give Apple TV owners another easy-to-access source of entertainment to watch on their big-screen televisions. Right now, they are restricted to buying movies and TV shows on iTunes, or watching skateboarding bulldogs on YouTube.

But it might not just be movie studios that feel the implications of this deal, should it come to pass.

In February, Jobs wrote an open letter on DRM and music that contained this sentence: "Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies."

Apple's concern was that if FairPlay were licensed to outsiders, the encryption technology could quickly become public, and the company would be unable to keep up with those bent on cracking the code and ensuring unlimited usage rights for their songs.

However, if the reports are right, Apple has come to grips with the idea of licensing FairPlay in spite of those concerns. So is FairPlay now up for grabs? Licensing FairPlay to companies like Microsoft or SanDisk would allow the Zune or Sansa to play songs and videos purchased from the iTunes Store; right now, you can play iTunes Store purchases only on iPods.

In any event, it sounds like Macworld will once again involve more than just Macs. Apple's stock is at an all-time high, and it went up further yesterday on reports of the movie rental deal.

This article was originally a blog post on CNET News.com.