When Apple CEO Steve Jobs broke with tradition by demonstrating an upcoming product several months before its release, the move may have been "a warning shot across Hollywood's bow," wrote Fortune magazine's Peter Lewis. He explained: "Apple was demonstrating that it does movie downloads better than anyone else at this point, and that it will only get better. The message: Apple intends to dominate movie downloads just as it now dominates music and TV shows."

Unlike its ability to stand firm against record companies' push for flexible iTunes pricing, however, Apple had to compromise when it came to movies, according to Mr. Lewis. He said that the company was looking for a US$9.99 price across the board, but the studios wanted to charge more "because they think digital movie downloads should be priced higher than physical DVDs, even though there are no physical production, distribution or inventory costs," wrote Mr. Lewis. "They should cost more, the reasoning goes, because of the added convenience to consumers."

The studios still dislike the pricing structure Apple put in place, the senior editor explained, but he expects Mr. Jobs to "hold firm on pricing," especially in light of Disney's recent revelation that it sold $1 million worth of movies in their first week of availability.

He concluded: "The studios can see the allure of iTunes today compared to disasters like Amazon.com's Unbox or MovieLink, and extrapolate that iTunes will become even more popular when Apple releases new video iPods and the iTV set-top box. So, Apple is saying, resistance is futile. Assimilation is inevitable."