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Apple losing money in new movie deal

By Greg Sandoval , CNET News.com on May 5, 2008 

 

Summary

Films that Apple will offer the same day the DVDs come out will be sold for at least 50 cents less than what Apple paid.

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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 would not 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 US$14.99, while most catalog titles are US$9.99.

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

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

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