And here it is. Apple is said to be aggressively pitching the idea to movie studios of using iTunes for digital movie rentals. Not to toot my own horn (okay maybe a little), but this is exactly what I said they needed to do months ago – not only to spur the iTunes Movie Store growth, but the Apple TV as well.

With iTunes movie rentals the Apple TV goes from somewhat expensive eye candy to very useful home media device in 60 seconds flat. As I’ve said in the past, I thought one of the largest mistakes Apple has made in recent memory is the assumption that people would want to own all their digital movies just like they own their digital music. Whereas there never has really been a big music rental industry, the movie rental business has been huge. To go back to the same example I often use: Do I want to buy a movie like Employee of the Month? No. Will I rent it? Yeah, sure why not.

Word is that Apple wants to keep the price of these rentals to $2.99 for 30 days. This seems like a very attractive price but this worries me a little. It would seem to me for this price they are probably only looking at standard-definition rentals at this point. In my opinion Apple desperately needs to make HD content available on the iTunes store – especially for the Apple TV – soon. If they could add a dollar or so and get an HD rental option alongside a standard-def option (similar to what Microsoft does), that would be great. If somehow they are able to get HD rentals for $2.99 that would be beyond awesome. They’d turn a luke-warm device (the Apple TV) into the next big thing overnight.

Word is that these talks between Apple and the studios are still very much ongoing and the launch of such a service shouldn’t be expected until the Fall at the earliest. It’s interesting though that this info has been confirmed the day before Steve Jobs’ big keynote at the WWDC tomorrow AM. Will there be some kind of “coming soon” announcement? Apple seems to be into those now despite Steve Jobs giving the ‘we normally don’t do this but we’re so excited about this new product that we just had to talk about it’ – preface.

iTunes movie rentals are coming to a computer and Apple TV near you; smart move Apple, smart move, but make sure you bring Hi-Def along for this ride as well.

More on this: WSJ | Ars Technica | The Apple Blog | Mashable | louisgray.com

[UPDATE 5/11]: Om Malik’s piece on the situation does a good job laying out the larger picture as well, expanding on the Apple TV as the new DVD player idea.

FT.com has another story that delves deeper into the VOD platform and the potential for on-demand rentals the day of their DVD release, and how this could mean big trouble for services like Blockbuster and also Netflix (assuming their own VOD platforms don’t take off).