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There's an interesting gavotte taking place in the world of digital video. On one side, Apple and the iTunes Store. On another, the studios. On yet another, those invested in physical video media--DVD and HD and the hardware used to play this media. What makes it interesting is the thin line each treads--staying in sync just enough to keep the various bodies moving across the dance floor but with each trying to lead the others.

As you may recall, during last January's Macworld Expo, Steve Jobs announced the introduction of movie rentals at the iTunes Store. During that portion of his keynote, Jobs introduced Jim Gianopulos, co-chairman and CEO of Fox Filmed Entertainment, who, after waxing rhapsodic about iTunes movie rentals, went on to announce that Fox would begin including iPod-compatible digital copies of movies on some of its DVDs and HD discs.

(Just this week, Warner Home Video joined the dance, but with a slight twist. Instead of including a digital copy of the much maligned 10,000 B.C. with the Blu-Ray version of the movie, Warner offers it as a digital download--this offer isn't available with the DVD version of the movie.)

Gianopulos' two messages nicely illustrate the tightrope the studios walk. On the one hand, iTunes rentals are good because it's more money in the bank and these digital rentals, for the time being, aren't eating into disc rentals. So, in this case, the studios and Apple see eye to eye.

On the other hand, the studios need to please distributors and sellers of physical media. If the studios make it too easy to obtain high-quality movies online, where's the incentive for you to drive to Blockbuster (at US$4.50 a gallon) to rent or purchase a movie?

How then, as studio head, do you please both Apple and the physical media folks? You don't. For now it appears that you don't open the vaults to Apple--keep enough new stuff flowing without making everything available--while at the same time enhancing discs so they're more attractive to the portable media crowd (read: iPod owners).

Apple is likely frustrated because it can't offer a broad selection of movies for sale or rent. At the same time distributors see studios working against their interests by offering their content to a competing service like the iTunes Store.

Worse yet, distributors believe that the studios aren't doing enough to promote their interests in areas where they feel they can compete. At the recent Home Media Expo, Baker & Taylor Senior Vice President Frank Wolbert suggested that studios aren't doing a good job promoting titles that have digital copies, a feature that might induce customers to choose physical media over a digital download. Of course this works only for retail sales as you can't provide every rental customer with a digital copy of a movie for free.

Another suggested solution during this same discussion was to try to push customers to Blu-Ray--something that's been difficult in the past because, until recently, consumers were unsure whether to jump to Blu-Ray or the competing HD DVD standard. Now that Blu-Ray has been declared the standard, HD discs should gain far wider adoption, yes?

Not so fast. It's rumored that Toshiba will release a super up-converting DVD player by the end of the year that will make existing DVDs look as good as Blu-Ray. And if so, why would you replace your library of DVDs with expensive Blu-Ray discs? And if, therefore, HD video becomes the norm rather than the exception, how does Apple justify charging $5 for an HD rental? And when studios find that Blu-Ray isn't the Next Big Thing, do they then return to Apple with the idea of expanding their relationship?

As I said, an interesting dance that's likely to turn into a cutthroat game of musical chairs. I'm anxious to see who loses their seat first.