WalMart may have floundered as far as video downloads are concerned, but Netflix is certainly picking up the slack. Earlier this month, Peter Martin posted about Netflix's plan for a box for your television that would stream movies from the Internet to your HDTV. Now the company is adding a fully on-line option to the mix -- one that I imagine will be strengthened by this whole TV box plan. Reuters reports that Netflix Inc. will offer their subscribers unlimited access to movies and television on the Internet.

The company currently offers a limited number of online hours for their subscribers, but for those who already have unlimited rental plans, they will soon be able to watch flicks online to their heart's content -- approximately 6,000 films and shows so far. Right now, this will only be tasty to those with fast connections and decent enough monitors to watch them, but assuming this box idea goes through, Netflix could very well be the frontrunner of the Internet film push. I would hope, however, that the future boxes would have some sort of temporary recorder in them so that there's an option to capture the whole movie before it starts playing. If, for some reason, the film was to stall, or the connection was too slow for an immediate HD film, that would make for one heck of a crappy and annoying movie experience.

But even without the box, and on your smaller monitors, it'd be a great way to fill in the less-pressing holes in your viewing history. Personally, I'd hit every movie I've been mildly interested in seeing, but completely uninterested in paying to see.

Come Tuesday, if Santa pulls through, I'll have my first real iPod (I don't count that Shuffle marked with my old employer's logo, which I got for free). It isn't that I couldn't afford one before; it's more that I'm finally caving in. But at least I'm caving in at a good time. There's talk that iTunes movie rentals could finally be arriving in early 2008, and if they are somehow allowed to be transferred to iPods, then I'll be a very happy subway rider. Sure, we've been hearing about the possibility of iTunes rentals all year, and back in September, Engadget even pointed out an error made by Apple that was evidence that it was coming soon. Three months later, Video Business is passing along the rumor that Apple may announce the service at MacWorld next month. Apparently the developments have been slow going because Apple has been trying to get more of Hollywood's studios on board (currently iTunes only offers movies for purchase from Disney, MGM, Lionsgate and Paramount). We can expect to hear about new additional distribution partners at MacWorld, too.

According to Video Business, the iTunes rentals are likely to only be watched on a PC or via Apple TV, for which Apple is to introduce a software update that will allow rentals to be downloaded directly to the machine (making it like a DVR, sort of). However, considering the new iPod Touch (this is the one that made me cave in) features the iTunes store and can directly download movies from the web via Wi-Fi, I don't see why it wouldn't be able to play movie rentals, as well. If Apple does it right, this could be the new Netflix -- of course, iTunes would have to have some kind of monthly plan, which I doubt they'd do, at least not at first. Last summer it was reported the prices for rentals would be $2.99 each. That's still a whole lot better than the $14.99 for new release purchases. Santa, if you read Cinematical, please don't fail me. And if you happen to know Steve Jobs, tell him not to fail me either.

New technology can be tricky because it has the ability to complicate legislative and contractual matters. The internet has shown this to be true in a number of ways over the past decade, from censorship issues to copyright concerns. Now with the growing industry of movie downloads and other forms of distribution on the web, some old deals are being interpreted in new ways. Starz Entertainment, which has been paying for exclusive rights to Disney films since 1993, is now suing the studio because of one such interpretation. The 14-year-old contract was renewed as early as 2005 and primarily relates to cable television rights, but Starz is claiming its deal extends to internet distribution too. Since Disney is selling titles via services like iTunes and Walmart.com, it is violating this agreement.

But you are probably wondering how television licensing and web licensing can be viewed as similar, especially in a deal made long before downloads and streaming video existed. Obviously Starz is just angry that its own download service, Vongo, isn't as lucrative as iTunes, right? Well, the company has already been through a similar battle with Disney, having sued the studio a few years ago over MovieBeam, a video-on-demand service that Disney itself set up. Starz won that lawsuit despite the fact that the service wasn't through any cable provider (MovieBeam was forced to split from Disney a year ago, though it has just been purchased by Movie Gallery) -- although it is more similar to cable than internet because it was for play on your television. Starz is now concerned particularly with Disney's deal with iTunes because of the new Apple box, which allows iTunes downloads also to be played on a TV set.

Of course, DVDs and other home videos are also playable through the television, so there needs to be a distinction made somewhere. I have a feeling that the courts will make a new distinction regarding internet product and this time around Starz will not be the victor.

I wasn't even aware that the rights to Terminator 2: Judgment Day were owned by Lionsgate Films, but as of today the film is available on iTunes. Yes, that is right, Lionsgate titles are now offered through Apple's download store, almost six months after the studio had originally thought they would be. Back in September, Lionsgate CEO Jon Feltheimer announced to investors the deal to release movies through iTunes -- one of the first leaks that iTunes would definitely sell movies, in fact. But then a few weeks later Apple's movie store opened with no Lionsgate titles included, and no word on when they would be available.

I have a feeling that Lionsgate was finally clear to deal with Apple once Wal-Mart announced its own movie download service. Now iTunes has about 400 movies, which is still a lot less than Wal-Mart's 1,000. Some of the additions today include Total Recall, The Blair Witch Project, Dirty Dancing and Monster's Ball (which I bet is great for watching on public transportation). Hopefully, we'll hear from other studios soon. Next, likely, will be an announcement from 20th Century Fox since it was once thought it would be the first non-Disney studio to sign on.

It took long enough, but Wal-Mart now has its own movie download service online. The retail company has been whining about this alternative to DVD consumption for over a year, and it may even have halted the progress of iTunes and other services. But there was no way that it couldn't follow the format into the future; in November it officially entered the download game with a single title, Superman Returns.

Of course -- as if we didn't see this coming -- Wal-Mart is offering some movies and TV shows at a cheaper rate than the competition. It also has titles from all of the major studios, though it is missing most of the major television networks. So far it only has 3,000 titles, with newer movies sold for a higher price than older movies, just as other services do. The site launched today is also only in a Beta stage, so it could have some glitches (it won't work at all in Firefox) -- though hopefully none as bad as the recommendations scandal.

Wal-Mart could be hurting itself a bit by giving in and selling movie downloads, as this will only contribute to the problem of decreased DVD sales, which the company depends on so dearly. But the decision to finally launch a download service may be in relation to news that Hollywood is permitting download-to-burn technology, which will likely be used in download kiosks that will be located in Wal-Mart stores. With these kiosks, Wal-Mart could still attract customers the same way it currently does with low-price DVDs. Still, Wal-Mart isn't yet allowing its downloads to be burned to a disc. It hopes to allow this later in the year -- probably after it figures out a definite kiosk game plan.

We may have the first important movie tech story of 2007: The major studios have approved new security technology for downloaded movies that are burned to DVD. Sonic Solutions Inc. has introduced their Qflix system, which adds a digital lock to the DVDs. This copy-protection lock isn't much different from the locks used on store-bought DVDs, though because it is for burned discs, it will require customers to buy a new kind of blank DVD and a new kind of DVD burner.

This could be a very big step in the movie download business, because one of the downsides so far has been that few movie sites have been given permission to offer a download-to-burn option. CinemaNow introduced such an option last summer, but it got a bad reputation. Another concern for downloaders is with the restriction of multiple burnings, but the movie download sites will likely allow for two burns, which seems in my opinion to be plenty for non-pirates.

In addition to benefiting the personal computer movie downloaders, Qflix is going to aid the in-store download kiosks that were being discussed last year. These kiosks will offer an extensive list of titles to be downloaded and burned at places like Walmart and Target.

Significant issues still exist for movie downloads, such as reasonable cost and picture quality, and until these issues are dealt with or bettered, downloaded movies are still not that appealing for mass consumption. But at least the studios are headed in the right direction.

In totally unrelated news, Blockbuster Video has shut all its stores in Peru.

More on movie downloading:

Film Clips: Direct-to-Download: The New Wave of Film Distrib?

Cinematical Seven: The Most Important Things to Happen in Film in 2006

Two of the most important stories in movie news this year have been the push for movie downloads and the related focus on portable viewing. Apple came in a bit late with its attention to both trends, but it quickly became the major front runner of interest with its iTunes movie store and its promotion of iPods that play movies. But there are many download services out there and many other portable devices, much of which can play downloaded films.

Sony's PSP is primarily a video game player, but it can also be used as a video player. It used to have its own hard-copy video format, the UMD, but due to poor sales Sony appeared to have killed them in favor of simple MemoryStick movies (UMDs are still made and are supposedly popular in Japan, at a new discounted price). As an alternative, there have been ways to convert DVDs to PSP-capable files and also ways to download movies for viewing on the device, but nothing officially promoted by Sony. Until now. The Hollywood Reporter is reporting that third-party sites are in negotiations to offer downloads for the PSP -- though Sony hasn't yet issued any statements confirming this -- and another site is in the works for direct-to-PSP downloading.

According to the numbers provided by THR, sales of PSPs have been on a downward slope since their debut in early 2005, so making movies more available to the device may be Sony's hope for boosting public demand. Living in a metropolis, I see a good amount of PSPs on the subway, but I see more iPods, and I rarely see anyone watching videos on either machine.

Is portable movie watching something that you are interested in?

Wal-mart has officially entered the movie download game. Until now, the retail company had been sitting on the sidelines -- not without its influence, of course -- but apparently it isn't happy simply controlling the download industry, specifically iTunes' share, by way of bullying tactics. Starting today, customers can purchase a download of Superman Returns for as little as $1.97. There's a catch, however: to get the download, you have to first purchase the DVD of the same film. The DVD comes with a sticker, which features on it a code that you enter onto a special website. You then have the option of paying $1.97 for a copy for your iPod, Microsoft Zune, or other portable device; $2.97 for a copy for your laptop or desktop computer; or $3.97 for a copy that can be played on any type of player, portable or computer. Although it seems silly to have to buy the movie in order to buy another copy of the movie, at Wal-Mart's online price of $14.87 for the DVD ($5 less than Amazon and $1 less than Best Buy online), the company really knows what it is doing.

But, does this make Wal-Mart right? Whatever your opinions on the company, there is no denying that this idea is better than the plan to block studios from going to iTunes or the suggestion that Wal-Mart should get a percentage of iTunes movie sales. It may be a sneaky move, but it isn't an altogether perfect option for customers wanting movie downloads -- particularly those who want just the download -- and at least it is a competitive rather than bullying move.

Wal-Mart will be offering other DVD/download combos in the following months, and states that the idea is in a testing phase. As far as the company's interest in download-to-burn kiosks goes, I'm guessing that option has been abandoned.

I must have missed the memo about this officially being Whiny Mega-Retailers Month. A little over a week ago, we told you how uber-rich Wal-Mart was bitching about the new iTunes movie store, and how only Disney titles are offered there at the moment, perhaps because Wal-Mart (the big bully on the movie distrib playground, apparently) sent a letter to studios this summer warning -- that's right, warning -- studios that it is not going to just idly stand by and watch studios focus on downloads while DVD sales are heading south. Wal-Mart, as the leading seller of DVDs (which are Hollywood's biggest source of revenue), apparently has the muscle to dictate studios' business to them.

Not to be outdone, Greff Steinhafel, President of Wal-Mart's rival company, Target, has sent his own letter to major studios, whining about how movie download prices are below DVD prices, according to a Wall Street Journal story published yesterday. The letter reportedly said that Target would "reconsider its investment" in the DVD business if pricing isn't made more equitable ("equitable" here presumably meaning "lining our coffers with more cash and increasing the value of my own stock options so I can afford that private school tuition and new yacht").

As our sister site Engadget reported yesterday, Target and Wal-Mart both need to relax a bit on the whole movie download issue. The quality of movie downloads isn't even close to the quality of DVDs and won't be for a long time, and the prices aren't exactly bargain-basement -- it's simply just another channel for customers to choose from. Instead of whining about how movie downloads are going to sound the death-knell of DVD sales, major retailers like Wal-Mart and Target need to focus on finding ways to incent customers to buy DVDs instead (better features, better quality, special offers, exclusive content), while simultaneously finding ways to partner with studios and move into the digital download space themselves.

The market is ultimately going to dictate the future of movie downloads; if customers want it and will pay for it, and the product is good enough to support it, it's going to happen, and either DVDs will compete and hold their own market share, or they'll eventually go the way of the eight-tracks, cassette tapes, and VHS. Threatening the studios that if they don't give in, Target and Wal-Mart are going to take their balls and go home, isn't going to benefit studios or the retailers in the long run. When the game changes, guys, you don't pout and stop playing. You learn the new rules -- or better yet, make your own rules and own the game. Nobody likes a whiner.

The new iTunes movie store has been open a few weeks now, and still no other studios besides Disney are offering titles via the service. Why? Because Wal-Mart rules the world, of course. Over the summer, the retail giant gave a warning to Hollywood that it will not stand by and watch the studios concentrate on movie downloads while DVD sales are decreasing. Because Wal-Mart depends on DVDs to draw in customers and Hollywood has depended on the stores for a major share of their revenue (Wal-Mart is the leading seller of DVDs, which is Hollywood's biggest source of income), the studios would rather not offend the relationship. Sure, studios have partnered with other download services, but it wasn't until Apple decided to get in on the market with iTunes movies, that movie downloading had enough promise to scare the retail businesses.

So, what can Wal-Mart do? Well, first it can put a stronghold on the studios. After Disney's plan to partner with iTunes, Wal-Mart threatened to decrease its order of Disney DVDs, specifically the very popular seller, High School Musical. But that simply ignores the fact that downloads are the future, while also hurting their customers. So, in order to support progress and reap the rewards, it needs to get in on the download market. How? By pressuring Apple into giving the chain some of the profits. Wal-Mart is currently in discussions with Apple to start selling iTunes gift cards or coupons in stores, the proceeds of which will be divided between the companies.

My guess is that this kind of deal will keep iTunes from being able to lower their price on movies, though the Wal-Mart coupons will probably have an advantageous discount potential. So, if you want to let Wal-Mart continue bullying the world, make sure to give your lunch money to them by purchasing iTunes through their stores.