The key issue is pricing. Apple wanted all movies to sell for $9.99, just as it pressed for all music singles to be sold for 99 cents. The studios would not stand for that, though, because they sell DVDs for a lot more than that... So Jobs compromised just a bit...The cost of downloaded movies, while not exactly zero, is pretty damn close. In any case, it's orders of magnitude lower than DVDs, which themselves have production costs lower than VHS. (The "cost" for the bandwidth and server space for a DVD-quality movie is, for the movie label, on the order of pennies, not dollars.)
The studios still hate that, because they think digital movie downloads should be priced higher than physical DVDs, even though there are no physical production, distribution or inventory costs. They should cost more, the reasoning goes, because of the added convenience to consumers.
Despite this - and despite the fact that the labels stand to capture more profits, per-film-sold, through downloads - they still want to rob you blind. Nice. Just to be clear, a new release DVD usually runs about $25, and the film studios want to charge you more than that - so you could be paying more than triple what Jobs is suggesting for a movie, when the product costs are less than 5% of the physical variety. These people have no shame.
This is the fundamental problem with copyright today - in place after place, it isn't serving it's explicit purpose. The whole point of intellectual property is to encourage invention and innovation, and here we've got a classic example of copyright-holders doing their level best to hurt a business innovation by pricing it out of the market. If movie execs were capable of anything resembling collective action, we'd actually be in trouble. As it is, we'll just be paying too much for movies.
Anyway, once Jobs gets this going - and I have no doubt he will, despite movie label's truculence - it will be just another blow against the movie theater industry. Good riddance.