In Europe, Apple Faces Hurdles to iTunes Movie Rentals

LONDON — After introducing an online film rental business for American consumers last week, the chief executive of Apple, Steven P. Jobs, said he expected that the service would be expanded into international markets later this year.

But trying to establish a European version of the iTunes movie rental service, which allows users to stream films or television shows to their computers or televisions, will not be easy.

Apple will have to confront legal and regulatory hurdles, copyright challenges, scheduling conflicts and technological issues, reminders that the European media landscape remains a patchwork of individual countries, rather than the single market that the European Commission envisions.

“The biggest challenge that we have is just the structure of the market,” said Kevin Obi, senior vice president for digital assets at NBC Universal in London, which has licensed shows to several online video-on-demand services.

Because of the difficulty of setting up cross-border services, many participants in the nascent market for digital film rentals or downloads in Europe operate in only one or a handful of countries.

They include MK2, a French movie theater owner; Lovefilm, a DVD rental company in Britain that expanded into digital downloads; and Glowria, a similar business in France.

Last month, Microsoft expanded a service that allows users to download movies over its Xbox 360 video game console, opening up in Britain, France, Germany and Ireland, about a year after starting it in the United States.

The European Commission, the executive arm of the European Union, warned this month that there were significant barriers to developing digital media distribution in its 27 member countries. And Viviane Reding, the commissioner who oversees media, said that by midyear she would propose ways to make it easier to sell content online, including efforts to streamline digital commerce across borders.

“Europe’s content sector is suffering under its regulatory fragmentation, under its lack of clear, consumer-friendly rules for accessing copyright-protected online content, and serious disagreements between stakeholders about fundamental issues” like copying of digital works, Ms. Reding said in a statement.

One problem she cited was the need for content distributors to secure individual licenses to films and other copyrighted material in every country in which they planned to do business. The commission said it would examine ways to encourage rights holders, including movie studios, to issue “multiterritory” licenses.

While pan-European approaches might seem desirable in Brussels, that is not always the case in national capitals, particularly in smaller countries fearful about the decline of their own cultural industries.

European regulators, media companies, telecommunications providers and “collecting societies,” which gather royalties for copyright holders, battled for years over how to license digital music for pan-European use. Some artists and politicians have objected to efforts by the European Commission two years ago to ease music licensing by requiring collecting societies, which used to have national monopolies, to compete with each other across boundaries.

Another difficulty for European digital distributors is the system of “windows,” or staggered schedules, that governs the release of films in different formats, from the cinema to DVDs to pay TV to video on demand and, finally, television.

The release windows can vary widely from country to country. In Britain, many Hollywood films are released at the same time as in the United States, or not long afterward. In other European countries, there may be a lag of several months.

Some movie studios — like Warner Brothers, in a deal with the Belgian cable company Belgacom — have experimented with simultaneous release of films on DVD and video on demand; elsewhere, including France, there is a significant gap between the DVD and video-on-demand release.

Apple declined to discuss the timetable for its planned movie rental service in Europe.

But the company may already be more familiar than many other companies with the intricacies of European content licensing, having recently settled an investigation by the European Commission into the pricing policies on its iTunes music store. Apple recently agreed to lower its prices on the British iTunes to the levels in the euro zone but blamed record companies for the discrepancy.

Despite the challenges that Apple and others will face, the European Commission predicts that revenue from digital sales of “creative content,” including films, music and video games, will rise to 8.3 billion euros in 2010 from 1.8 billion euros in 2005, or to about .2 billion from .6 billion, across the European Union.

Some of the biggest beneficiaries may be local experts who can help the likes of Apple negotiate the legal and regulatory minefields.

Nick Thomas, European media industry analyst at JupiterResearch in London, said, “If you’re an intellectual property lawyer, there’s probably a lot of money to be made over the next few years.”