Furthering Apple's expansion into consumer electronics and entertainment, Steve Jobs announced at Macworld Expo a significant change to the iTunes Store business model - movie rentals. Interestingly, Jobs introduced the movie rentals by talking first about the iTunes Store successes - 4 billion songs and 125 million TV shows sold - before admitting that the company wasn't happy about selling only 7 million movies so far. By adding the movie rental business to the iTunes Store, Apple was able to sign up all the major movie studios along with a number of smaller ones, a feat that had previously eluded the company.

By the end of February 2008, Apple plans to have 1,000 movies available for rental in the United States (with an international release of the program slated for later this year), and new releases will appear in the iTunes Store for rental 30 days after the DVD availability. The movies will be available in DVD quality (at roughly 640 x 480 resolution, depending on the movie's aspect ratio). Older movies cost $2.99; new releases are $3.99. Once you've rented a movie, you have 30 days to watch it, and you must finish watching within 24 hours after you start. (This is comparable to the viewing restrictions on movies rented via Amazon Unbox, which only supports TiVo DVRs and Windows computers.) You can still purchase some movies, but many are available only for rent.

Movies can, of course, be watched on Macs and PCs in iTunes, on the current generation of iPods, and on the iPhone. But as Jobs noted, most people watch movies on large screen TVs, and in another burst of humility, he admitted that the Apple TV has been disappointing, associating it with failed efforts from numerous other companies. That served as the springboard for the next announcement, of a significant software update to the Apple TV that enables users to rent movies directly from the iTunes Store without the need for any computer. The Apple TV update, which will be a free software update available for all owners two weeks following the announcement, features a redesigned user interface that also provides access to audio and video podcasts, can display photos from Flickr and .Mac, plays videos from YouTube, and lets users purchase music and TV shows from the iTunes Store for direct playback and syncing to computers.

The revised Apple TV is also capable of renting high-definition movies, with Dolby 5.1 surround sound, from the iTunes Store for $1 more than the DVD-quality versions; older movies cost $3.99 and new releases cost $4.99. Other devices, even Macs running monitors capable of viewing high-def content, are excluded from HD rentals.

Jobs also announced that the price for the 40 GB Apple TV, previously $299, would drop to $229; the 160 GB model dropped from $399 to $329. It would have been more interesting had Apple seriously slashed the price, say to $99, in an attempt to drive a vast number of purchases and associated movie rentals.