Update: Apple has also signed Disney, but Variety reports that "Sony, Universal and Warner Bros. are unlikely to participate for various competitive reasons."
The Financial Times reports that Apple has signed a deal with Fox to enable movie rentals through iTunes. There have been a number of clues that Apple will rent movies, and I expect we'll see an updated Apple TV and iTunes service on January 15th at Macworld. As part of the deal, Fox will also include a FairPlay DRM version of the movie on Fox DVDs, enabling customers to legally "rip" a movie for playback on Apple computers, iPhones, and iPods.
Is this a Netflix-killer? Doubtful, but I think Apple is uniquely positioned to enable the viewing of rented movies on TVs, phones, computers, and portable media players. However, Apple has a very limited collection of movies, and NBC recently removed content from iTunes because it wasn't profitable. To threaten Netflix, Apple has to expand the number of movies from hundreds to tens of thousands, and fix the Apple TV to improve the resolution.
Netflix is also expected to unveil a strategy for watching downloaded movies on TVs in January, and I expect we'll also hear from Blockbuster, Microsoft, and others, too.
Reuters reports that Netflix and Blockbuster shares are down on the news.
Thanks to Matthew & Timothy for sending this in.