Like iPod, device to operate on closed system

Gadget hounds who manage to get their hands on Apple’s new iPhone will find it easy to load it with video obtained from Apple’s iTunes Store, like Disney’s “Pirates of the Caribbean” movies.

But anyone interested in viewing content from other sources will have to be as inventive — and possibly as indifferent to the law — as Captain Jack himself.

If the phone is a hot seller, that could nudge more media companies to do deals with Steve Jobs’ company — or find a way to circumvent the tight link Apple has forged between its devices and iTunes, its online media marketplace.

Apple’s newest product will play a selection of 10,000 free videos from YouTube, as well as video podcasts offered for free on iTunes from outlets like CNN and HBO, plus movies and TV shows sold on iTunes by suppliers such as Disney, Lionsgate, NBC and ABC.

But like the video iPod before it, the device won’t play content sold by sites including Amazon Unbox, Movielink or CinemaNow, which offer movies in a Windows Media format that Apple doesn’t support. Apple also doesn’t allow content marketplaces other than the iTunes Store to sell content “wrapped” in Apple’s FairPlay digital rights management (DRM) technology. That restrictive policy guarantees Apple a high degree of loyalty among iPod and iPhone users but has recently brought scrutiny from European Union regulators.

“The iPod and the iPhone are closed systems,” said Jim Flynn, chief exec of movie site EZTakes. “Apple has done a beautiful job of locking out competitors.”

That limits the breadth of content iPhone users will be able to purchase.

The independent film marketplace Jaman, for instance, offers 500 titles for rental or purchase, but none will play on the iPhone. “If Apple would license FairPlay to third parties, we’d be first in line,” said chief exec Gaurav Dhillon.

Media companies can easily offer free content for the iPhone; Playboy, for instance, will offer one free TV show for iPhone users but has no plans to charge for content. Austin, Texas, startup ON Networks currently offers 10 shows on iTunes for free download, such as “Golf Tips” and “Cocktails on the Fly.” CEO Kip McClanahan says the company recently remastered its content to look better on the iPhone’s screen, which has a higher resolution than the video iPod and a 16:9 aspect ratio when held horizontally. ON Networks’ business model is to begin selling sponsorships for its shows.

But free content offered on iTunes, or content sold or rented outside of the iTunes universe, can’t be protected by DRM technology if it is intended to play on the iPhone.

That doesn’t bother some small movie sites like Massachusetts-based EZTakes. Flynn says the company will sell content in iPhone-compatible form, without DRM attached to it, by the end of the summer. The site offers indie, foreign and genre fare such as “Super Size Me,” “The Umbrellas of Cherbourg” and “Toxic Avenger,” respectively.

Already, though, software of dubious legality exists that allows consumers to take a DVD and convert it into a digital file that will play on the iPhone. (Such software is illegal to sell but legal for personal use.) While the software must be downloaded and installed (and in some cases purchased for about $30), Flynn says that motivated users will find it easy to transfer a DVD to their iPhone.

“I could train a monkey to do it,” he said.

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