Shares of Blockbuster Inc. plunged nearly 17 percent on Tuesday after a new threat emerged to the world’s largest chain of movie-rental stores: Apple Inc. announced it now offers movie downloads via iTunes.
ITunes customers can now download older movies and those just released to DVD, in regular or high-definition format, to watch on their TVs, iPods, iPhones or computers.
A spokeswoman for Blockbuster said the Dallas-based company welcomed Apple CEO Steve Jobs’ announcement, made at the Macworld Conference and Expo in San Francisco Tuesday.
She said the new service would speed consumer use of movie downloads. Blockbuster bought the Movielink download service last year to add digital service to its store and by-mail offerings.
But investors saw things differently. Blockbuster shares fell 54 cents, or 16.7 percent, to close at $2.69 Tuesday. The damage wasn’t as bad at mail-delivery movie rental pioneer Netflix Inc., where shares fell 72 cents, or 3.2 percent, to $22.05 on Tuesday.
Apple shares also slipped, losing $9.74, or 5.5 percent, to close at $169.04, as investors seemed underwhelmed by the trendsetting company’s latest product, a slim MacBook Air notebook, also unveiled Tuesday. In after-hours trading Tuesday, Apple’s shares fell another 3.6 percent, to $163.01.
The six major Hollywood studios are supporting Apple’s new movie-download service, which began Tuesday in the United States and will be rolled out internationally later this year.
Apple’s service appeared competitively priced – $3.99 for new DVD releases and $2.99 for older movies, plus $1 for either one for high-definition. Users can keep the movie for 30 days but have 24 hours to finish watching it once they start.
Apple said it would offer than 1,000 movies for rent online by the end of February.
Blockbuster said it now offers about 4,000 movies for sale or video-on-demand rental through Movielink, which gets titles from all the major studios and about 35 independent distributors.
Netflix has a streaming service that includes more than 6,000 movies and television shows. Both also have larger libraries of movies for online ordering and mail delivery.
“We view Apple’s announcement as a great way to create consumer awareness, and we believe we are positioned to capitalize on that increased awareness,” said Blockbuster spokeswoman Karen Raskopf.
Netflix, based in Los Gatos, Calif., anticipated Apple’s announcement – which had been rumored for several weeks – by giving most subscribers unlimited access to streaming movies on its “Watch Instantly” feature.
Many of its 7 million customers had been limited to 17 hours of streaming per month.
Steve Swasey, a Netflix spokesman, said the subscription approach offered good value compared to the portability of Apple’s offering of downloads to a device like an iPod or iPhone.
“Apple and Netflix are taking two different approaches … to getting people watching movies on the Internet,” he said. “But it’s still a DVD world, and it will be for a long time.”