Amazon.com on Thursday unveiled a widely anticipated Internet service offering movies and TV shows that can be downloaded to personal computers, moving it into a nascent and higher margin business.

The service, called Amazon Unbox, will offer thousands of titles from six Hollywood studios, including 20th Century Fox and Warner Bros., and TV networks such as CBS and Fox and cable channels Comedy Central and E! Entertainment, Amazon said.

Shares in the online retailer, which closed at $29.73 on Nasdaq, rose 23 cents in extended trade, up nearly 1 percent.

Speculation about an Amazon download service had been rife for months, with Wall Street pleased by the prospect due to the higher profit margins in digital downloads.

Seattle based Amazon, the No. 2 e commerce site behind eBay Inc., has seen slowing sales and has fewer new product categories into which it can expand.

Directionally it's the right kind of thing for them to be doing, said Global Crown Capital analyst Martin Pyykkonen. From a margin standpoint this is a much better business than anything they've done before.

Amazon's digital download service launch comes ahead of an expected announcement by Apple Computer Inc. on Tuesday that it would sell feature length films on its iTunes service, which already sells TV shows from major networks.

Sources had previously told Reuters Amazon was talking with four major music labels for a digital music service to rival Apple's.

Pyykkonen questioned how long it would take for Amazon's movie service to boost margins. Broader questions also remain, he said, including whether its service will cannibalize Amazon DVD sales, or whether it will hurt rival retailers more.

Blockbuster Inc. or Wal Mart Stores Inc. should feel the pinch more from the move over time, he said.

Whether it's more immediate, Pyykkonen added is something that's harder to answer.

Asked whether the service would cut into sales of DVDs, which generally sell individually for between $7.99 and $19.99 on Amazon, Amazon's Vice President of Digital Media Bill Carr said that consumers would welcome having a choice.

This makes us the destination for film and TV lovers online, Carr said. No one else offers this.

Amazon, which owns movie Web site IMDB.com and also allows its customers to view and download books, said its service offered DVD quality picture. Content will download within five minutes using a typical cable broadband connection, Carr said.

Amazon, which will also offer films from independent studios Lions Gate Entertainment Corp. and Fox Searchlight, said customers will be able to buy downloads on one computer but download them to another. Consumers can watch movies and TV on up to two personal computers at one time, but the service does not allow copying of content onto a CD.

Movies will be priced between $7.99 and $14.99, with television shows at $1.99 per episode. Movies will also be rented for $3.99, the company said.

Amazon said TV content will be available to consumers as soon as the day after an episode airs, with movies to become available the same time they are released on DVD.

Downloadable films have been available through privately owned Movielink and CinemaNow, which until April offered digital movie downloads for a rental period that would eventually expire. Last spring, both companies said they would offer a download to own service for popular titles.

Warner Bros. is part of Time Warner Inc. and Fox is owned by News Corp. Inc.

(Additional reporting by Bob Tourtellotte)

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