The Financial Times reports that Apple and News Corp.'s 20th Century Fox film studio have signed a deal for digital movie rentals. Consumers will be able to rent the latest Fox DVD releases from iTunes for a limited time. The deal, which will likely be announced at Macworld in January, would likely be matched with an upgrade for the woebegotten Apple TV which has been de facto dead on arrival since it was released. It is suspected that Disney, which has extremely close ties with Apple — Steve Jobs is its largest shareholder after Mickey bought his Pixar animation studio — will be on board at launch as well.

One analyst said "Fox and potentially other studios are coming around to the idea that there is nobody out there to challenge iTunes." The rumor mill pegged Sony, Paramount and Warner Bros. as having talks with Apple about movie rentals, but this is the first concrete evidence of a deal. With Apple getting into millions of homes as a result of increased Mac sales and millions of video-savvy iPods and iPhones sold this holiday, the service could get off the ground much faster than competing services from Amazon or Netflix, which have foundered. We mentioned the possibility of Apple setting up a movie rental service back in November.

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