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Friday, September 8, 2006 - Page updated at 12:00 AM

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Amazon's downloadable movie launch beats rival Apple

Seattle Times retail reporter

The worst-kept secret in Hollywood is out.

Online retail juggernaut Amazon.com on Thursday unveiled a service aimed at conditioning the masses to purchase and download movies online — pre-empting a competitor, but with little fanfare.

Amazon Unbox, announced via news release shortly after the markets closed, features software that allows consumers to purchase, download and play television shows, movies and other videos on computers and portable devices.

Apple Computer — which has dominated downloadable music and video sales — is widely expected to unveil a rival service Tuesday, in tandem with an updated iPod music and video player that features a wider viewing screen.

In a surprise, Amazon's service doesn't allow customers to burn videos onto DVDs — one of the viewing restrictions that hinders movie-download services such as Movielink.com and CinemaNow.

The major Hollywood film studios have faced increasing pressure to sell movies online, as box-office receipts steadily decline and peer-to-peer networks offer illegal movie downloads free.

Technology analysts had speculated that Hollywood would loosen licensing restrictions on Amazon — giving customers the ability to unshackle content from desktop computers — because of the Seattle company's brand power and ability to reach a mass consumer market.

"[Hollywood] owns the tickets to the movies and you're only allowed to use whatever [rights] they open to you," Rob Enderle, principal analyst with the Enderle Group, said of the studios' restrictions. "That's been a painful aspect of every one of the download services. There's nothing Amazon can do about that."

The movie-download business is a natural fit for Amazon, which still draws a third of its business from media sales. The company also operates the Internet's top-ranked movie site, IMDb.com, which attracted 18.7 million unique visitors in July, according to comScore Networks.

Amazon said Thursday it would charge $1.99 per TV show, and $7.99 to $14.99 for most movies. Movie rentals will run $3.99.

Won't work with iPod

While Amazon's service carries thousands of TV shows and movies from more than 30 studios and networks here and abroad, it has many of the same prohibitive features that impede other movie-download services.

With a typical DSL/cable home Internet connection, it takes 55 minutes to download a hourlong TV episode and one hour and 50 minutes to download a two-hour movie, although Amazon has a feature that allows customers to watch a video during the process.

The Amazon Unbox video player works solely on Microsoft's latest operating system, Windows XP — not on Macs or older versions of Windows. The system is not compatible with the iPod, the center of a technological ecosystem that Apple strictly controls.

Without a burn-to-DVD feature, videos can be viewed on televisions only by plugging a computer to the TV with an S-video cable — unless a computer carries Windows XP Media Center, which is designed for a television-viewing experience.

For rentals, customers must watch the video within 30 days of purchase and within 24 hours after hitting the play button.

Amazon customer Mike Perry said the rental service is inconvenient for those who start watching a rental film at 7 p.m., get interrupted and have to finish watching by 7 the next evening. "Why not a more reasonable 72-hour period?" he asked. "That's not a lot to ask."

Roy Price, Amazon's digital-video product manager, said Amazon's service carries new features that rival other services, such as DVD-picture quality on both computers and portable devices, and a feature that allows remote downloads of a video to another computer.

Amazon Unbox also includes a personal library to store and access videos online. "It's a great combination," Price said.

Amazon faces a fierce rival in Apple. The Cupertino, Calif., computer maker entered the video-downloads business last October when it added music videos and episodes from five television shows, including ABC's "Lost" and "Desperate Housewives," to its store.

One million videos

Customers purchased and downloaded more than 1 million videos within the first two weeks of the service, and more than 35 million videos to date.

While Apple doesn't break out video iPod sales , its iconic music and video players have become ubiquitous in the marketplace.

Consumers have purchased more than 58 million players since the iPod debuted in May 2003.

Apple has not confirmed its entry into the downloadable-movie market, but an invitation sent to the media for a Tuesday event hinted at an entertainment announcement. The invitation shows spotlights shining on the Apple logo with the simple words, "It's Showtime."

In a blog posting, Jupiter analyst Michael Gartenberg said that it's hard to see Amazon's new service as a real threat to Apple — at least until it links itself to a compelling portable device for watching videos.

"We've said it before and we'll say it again. The iTunes music store succeeded because of the iPod, not the other way around," he said.

Amazon's shares fell $1.07 Thursday to close at $29.73, gaining 17 cents in after-hours trading.

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

Copyright © 2006 The Seattle Times Company

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