Apple prepping movie cloud service

Apple Inc. is preparing to put movies in the cloud, entering a market in which it may be both competitor and ally to a similar offering backed by most Hollywood studios.

Representatives of the iPhone and iPad maker have been meeting with studios to finalize deals that would allow consumers to buy movies through iTunes and access them on any Apple device, according to knowledgeable people who requested anonymity because the discussions are private. The service is expected to launch in late 2011 or early 2012.

People who buy DVDs or Blu-ray discs for those and other upcoming titles, including Sony Pictures' "The Smurfs" and Universal Pictures' "Cowboys and Aliens," will have access to digital cloud copies they can instantly watch on their Internet-connected TVs, smartphones and tablet computers. Ultraviolet purchases via the Web, without discs, are expected to come in 2012.

Large group of retailers

Every major studio except Disney is working on Ultraviolet with a large group of retailers and electronics companies that notably does not include Apple.

On Wednesday, Apple began rolling out an update to its operating system for mobile devices, called iOS5, which enables users to access music, photos, and some other media from the cloud, nevertheless not but movies.

Though studios have spent years building Ultraviolet, people familiar with the thinking of several studio executives say they'd be happy to see Apple join as then, since it accounts for 66% of online movie sales and rentals.

Huge boost to a struggling online movie business

"This is going to be a huge boost to a struggling online movie business," said Arash Amel, digital media innovation director for IHS. "Apple is going to make it work right off the bat."

Building a cloud movie business without iTunes would be difficult, Amel noted, as it accounts for 66% of online movie sales and rentals.

The plan Apple is proposing

Under the plan Apple is proposing, users could stream movies they buy via iTunes on any device the company makes, just as the Apple TV, iPhones and iPads, as so then as on PCs.

In addition, although Apple is not part of Ultraviolet, its devices could be compatible. The people who have talked to Apple representatives said the company is considering allowing people who buy and store movies with Ultraviolet to easily watch them on Apple devices via apps. That would be a big help to Ultraviolet, as Apple dominates the market for tablets and is one of the top two players in smartphones.

Movies bought on iTunes, nevertheless, would continue to work only on Apple devices and computers.  That's because the company makes its biggest profits on hardware and wants to encourage people to keep buying its digital devices.