Consulting group The Diffusion Group (TDG) said Apple iTunes is definitely heading to the living room. The company did extensive research on consumer receptivity to an iTunes-branded service offering movie downloads to the PC and to a TV set top box.

TDG notes that the movie studios have been reluctant to license online downloads not only because of copy protection, but also due to unfavorable economics. The studios earn $10 per DVD and much less for online sales. TDG concludes that Apple is in a unique position with the brand power to make online movies work. Online distribution will take market share from DVD. The studios will have to accept the online channel.

Disclaimer: Author Marc Freedman consults with The Diffusion Group