Apple's iTunes sells movies on DVD release date

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NEW YORK (Reuters) - Apple Inc said on Thursday it would begin selling movie downloads on its iTunes service on the same day as the titles are released in DVD form, under agreements with most of the top Hollywood studios.

Apple shares rose 2 percent on the news, as investors hoped the new movie sales would boost purchases of the company’s portable iPod media player and its Apple TV, as well as fuel growth for iTunes.

"It’s actually a big deal, because when they were able to get parity on the music side, they were able to drive music sales," said analyst Shannon Cross of Cross Research.

ITunes will offer new releases and catalo titles from 20th Century Fox, Walt Disney Studios, Warner Bros., Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studios.

Titles that will be available this week include "Juno," "American Gangster" and "I Am Legend." New titles will sell for $14.99 (7.50 pounds) each and catalo titles for $9.99 each.

Movie sales have been eyed as a new area of growth for Apple, possibly prompting consumers to buy newer models of its iPod digital media player and stoking interest in Apple TV.

Apple’s efforts to gain a foothold in video entertainment also poses a threat to video rental companies like .....continued below

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Earlier this year, Apple launched a service for iPod and iPhone users to rent and download movies to watch on their devices. But it still seeks a bigger audience for Apple TV, first designed to let viewers watch Internet video on a television set.

"The movie studios have been much slower to embrace digital distribution," said Cross. "This is a really good example of how they are moving more quickly toward it and we think Apple is best-positioned (to benefit)."

Studios previously gave DVD releases a head start of as much as 30 to 45 days over other distribution outlets to help preserve a major income source.

Warner Bros is part of Time Warner Inc, 20th Century Fox is owned by News Corp, Paramount is a unit of Viacom Inc. Universal Studios is part of media conglomerate NBC Universal, which is controlled by General Electric Co.

Apple rose $3.60 to $177.55 on the Nasdaq. Netflix shares fell 2.2 percent to $31.27, Blockbuster rose 1 percent to $2.95.

(Reporting by Michele Gershberg, editing by Dave Zimmerman)