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Businessweek reports that Apple and the Hollywood studios are inching closer to a deal to supply movies to the iTS. Reportedly, the major studios are reaching a compromise with Cupertino, although the ink may not be dry in time for Jobs to make an announcement at MWSF.

Apple is said to have agreed to pay a sum closer to the $17 mark that Hollywood typically receives for a hard-copy DVD movie, whereas $14 was previously Jobs' upper limit.

The other major development is release timing: studios were previously reluctant to allow new releases to go straight to iTS, preferring to sell DVDs for a month or so before allowing online movie rental sites access.

Rentals will play a major part in the new strategy, with movies reportedly costing $3.99 for a 24-hour rental. Apple is hoping this will not only drive iPod sales, but Apple TV as well.

Analysis: A $3.99 video download or a trip to the store? And what's a new-release movie download worth to you? $15?