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Apple, Fox Ink Movie Download Deal

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LOS ANGELES Apple and Fox have struck a deal for downloadable movie rentals, according to a report published Thursday in the Financial Times, while giant retailer Wal-Mart has discontinued its movie-download service.

The shake-up in the nascent industry of feature films and TV shows delivered via the Internet comes in the eighth month of a writers' strike in which one of the primary goals of the Writers Guild of America is to negotiate a bigger cut of new-media revenue.

Wal-Mart, the nation's biggest retailer, ditched its download service Dec. 21, according to a message at Walmart.com/videodownloads, less than a year after the service began.

A Wal-Mart rep told Reuters that the decision was made after Hewlett-Packard discontinued the technology that powered the service, and an HP spokesman verified that sales of video downloads had underperformed expectations.

It's the second time Wal-Mart has harnessed the power of the Internet to sell movies, only to later abandon the effort. Two years ago it left the DVD-by-mail service and began directing interested customers to Netflix, the inventor of that business model.

As for the Apple-Fox agreement, which is unrelated to Wal-Mart's decision, consumers will be allowed to rent the newest releases from the News Corp.-owned studio through iTunes. A formal announcement of the service is expected Jan. 14 at the Macworld show in San Francisco. This would mark the first time that Apple has made films available to be rented at its digital store.

Disney makes its newest titles available for purchase on iTunes, but not to rent. Paramount, MGM and Lionsgate make older offerings available for purchase through Apple.

The Fox deal has been long-rumored and it is seen as a sign that Apple is willing to compromise on pricing and other issues to attract more Hollywood studios. A Pali Research analyst said this month that News Corp. was negotiating with Apple, in part, because the company was willing to raise the wholesale price it pays for movies.

The Fox rentals also will be equipped with Apple's FairPlay DRM technology that would allow the content to be copied to computers or iPods. It would be the first time that Apple would allow an outside company to use this technology.

Apple and Fox representatives declined comment.