UPDATE 2-Apple talks with media giants to rent shows-sources

Wed Aug 25, 2010 2:14am BST

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* Apple in talks with News Corp, CBS, Disney - sources

* Stream TV shows for 99 cents - sources

* Some media companies have concerns - source (Adds analyst's comments, more details from sources)

By Sue Zeidler

LOS ANGELES, Aug 24 (Reuters) - Apple Inc (AAPL.O) is in talks with News Corp (NWSA.O), Walt Disney (DIS.N) and other media conglomerates to rent TV shows to viewers for 99 cents through iTunes, three sources with knowledge of the matter said.

The industry sources, who spoke on the condition of anonymity because negotiations were private, said the discussions were aimed at allowing viewers to rent network programming off Apple's iTunes store for 48 hours.

One of the three entertainment industry sources said that several media companies, including NBC and CBS, were not enamored with the plan because they believed it would undercut revenue they already earn through iTunes.

But some analysts say if the deal goes through, revenue raked in off iTunes is likely to dwarf the income networks earn through free, ad-supported content online from sites such as Hulu.

Representatives from Apple, Disney, News Corp, CBS(CBS.N) and General Electric Co's (GE.N) NBC declined to comment. Disney owns ABC and News Corp runs the Fox network.

Consumers currently can buy -- for repeated viewing -- whole episodes of popular TV shows like ABC's "Lost" and NBC's "Friday Night Lights" for about $1.99 an episode.

"Right now, we're against it. We don't think it's a good business model. Why cut your price?" the source said.

Apple is also set to unveil a new version of its iPod Touch with a higher resolution screen, according to Bloomberg, which broke the news of Apple's network negotiations.

Fox and Disney's ABC already provide episodes to video web site Hulu, a joint venture with NBC -- which has offered streamed programs for free until recently, when it started charging customers for some content.

And all of the media companies also have existing content deals with cable and satellite companies.

"In a sense, this rental model undercuts purchase, but it's the way the world is going," said Tom Adams, president of Screen Digest Inc.

"All the free streaming options that have proliferated on the Internet have already brought to a halt the fast growth of the TV show sales business," he said referring to the electronic sales of episodes on iTunes.

He also noted that free, ad-supported streaming services were providing pennies per episode viewing to networks, while Apple's plan could conceivably yield more if Apple offered to take the industry-standard 30-percent cut on any content rented.

Apple in 2007 debuted Apple TV, which plays computer-based video on television sets. Its popularity has paled in comparison with devices like the iPhone and iPad.

(Additional reporting by Jennifer Saba in New York; Editing by Edwin Chan, Bernard Orr)

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