Apple looking to take on Amazon Unbox

There are a few reports out there today that Apple is looking to add rental options to their iTunes video download service. Today, iTunes is purchase-only for video, but other services, such as Amazon Unbox, offer rental options. Apple has taken a lot of flak in the press and blogs for not offering rentals, especially since Apple TV was released.

Now reports are circulating that Apple is in advanced discussions with several studios about launching a rental service later this year. Titles would reportedly rent for $2.99 (comparable to other services, which tend to range from $.99 to $3.99 depending on the title) and they would have similar restrictions to every other rental service – a 30-day timeout to begin watching and a limited viewing period once playback is begun.

Apple faces an uphill battle in the video market. They currently have a limited selection of titles, mainly TV shows and movies from Disney (Apple CEO Steve Jobs is on Disney’s board). They have older titles from MGM and Lions Gate, but so far have been unsuccessful in landing deals with other studios. Apple’s main advantage, of course, comes from the iPod’s domination of the portable device market. A lot of their video downloads are destined for viewing on a video iPod.

On the other hand, Amazon Unbox has content from all of the major studios, including recent releases. Unbox offers a much wider selection of TV and film titles, as well as offering both purchase and rental options. Unbox had been restricted to Windows PCs and Windows-based mobile deices, until their deal with TiVo. It is considered likely that Amazon will continue to expand the service’s reach, likely to include the Mac.

Both companies have a gateway into the living room and the TV – Apple has Apple TV and Amazon Unbox has their TiVo partnership. This currently works in Amazon’s favor, as the installed base of Series2 and Series3 TiVos is larger than Apple TV at this time. Also, iTunes video purchases must be downloaded to a PC or Mac, then transferred to the Apple TV box – while Unbox downloads can go directly to a TiVo. Presumably, at some point Apple will offer downloads directly from the Apple TV unit.

There is another player in this market that is often overlooked – Microsoft. They offer video downloads directly to the Xbox 360, including HD content – which neither Apple nor Amazon offers at this time. And the installed base of 360s is impressive. MS is definitely not a company to take lightly. Sony is also likely to launch a similar services on the PlayStation 3, with the added advantage of owning several film and TV studios.

Anyone else looking to get into the market, such a Vudu, faces the challenge of getting a box into the user’s living room. The Achilles’ heel for most of the download services to date has been the requirement to view the content on a PC or Mac, and the lack of an easy way to view the content on a TV. Microsoft and Sony have their gaming consoles as Trojan Horses to leverage for their services, TiVo is an established STB vendor in the DVR space which helps get their boxes into homes, and Apple has a devoted following and a dominant market-share via iTunes to help drive adoption of the Apple TV.

That’s a big collection of advantages to overcome for other players. Akimbo has already thrown in the towel, looking to become a service on MS devices. Moviebeam is basically dead. MovieLink is making movies in the right direction by partnering with AT&T to provide content on the AT&T Homezone STB.