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Amazon eyeing digital entertainment

NEW MARKETS The leading site for selling goods online is branching out into selling downloadable movies and TV shows, putting it up against firms like Apple


Amazon.com Inc, the leading purveyor of goods online, has started selling digital products, offering movies and television programs that can be downloaded and watched on a computer or portable video player.

The move, which was expected, is the first major effort by Amazon, the Internet's largest retailer, to sell downloadable entertainment. Amazon has at times moved toward offering music downloads but never introduced a music service. It does, however, offer some free promotional music files.

Amazon's new video service will compete with the iTunes Music Store of Apple Computer Inc and a growing array of other video retailers including Google Inc, AOL, Movielink and CinemaNow.

Apple has been selling television programs and music videos and is expected to announce next week that it will also sell movies.

Amazon's service, which is called AmazonUnbox, will sell most movies for US$7.99 to US$14.99 and most television programs for US$1.99 (the same price as Apple). Users can also rent movies for a 24-hour period for US$3.99.

Amazon will sell current and back titles of all major movie studios except Disney and has programs from several dozen television networks as well. Indeed, Amazon is the first video service to license the original Star Trek series.

For many new movies, Amazon's US$14.99 maximum price is lower than other download services, like Movielink, which sells most new releases for US$19.99. The studios have largely set the wholesale price of downloads above US$14.99 hoping to keep the retail price at US$20 or above. They do not want to alienate Wal-Mart Stores Inc, by far the largest movie distributor, which uses discount DVDs to attract shoppers. Amazon is pricing some current movies higher than its US$14.99 cap. For example, Silent Hill from Sony Corp is US$16.87 and Rumor Has It from Warner Brothers is US$19.62.

Bill Carr, Amazon's vice president for digital media, declined to discuss the company's pricing strategy or arrangements with studios.

The chief executive of Cinema-Now, Curt Marvis, said the high price of movies was one reason movie download services had not been popular.

"We have learned that online customers expect prices to be low. Period," he said. "It doesn't matter if they are buying a car or a diamond earring or a movie."

Another problem, Marvis added, is that it is difficult to watch downloaded movies on home televisions. Most downloads, so far, are meant to be played back on a personal computer. While some computers can be wired to television sets, few are.

CinemaNow has started selling some older movies in a form that allows them to be burned to DVDs on computers and then played through regular DVD players. Marvis said for those titles, five times as many people burn DVDs as watch movies on their computers.

Carr declined to say why Amazon was not allowing users to create DVDs.

Amazon says its movie service improves on others because the video quality is higher. That quality comes at a price: longer download times.

For example, Inside Man, which is 129 minutes long, is downloaded as a 2.2-gigabyte file on Amazon instead of a 1.5-gigabyte file on Movielink. Amazon says the typical movie will take two to seven hours to download, depending on the connection speed of the user.

"We know our customers well and the one thing they tell us is they want high quality," Carr said.

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