Paramount has agreed to sell 100 of its library titles as downloads, although new films will not be included in the deal.
Apple chief executive Steve Jobs claimed in his Macworld keynote address that more than 1.3 million movie downloads have been sold through iTunes since September 2006.
Film studios are unhappy at the $12.99 (£6.70) price tag for new films from iTunes, because studios make smaller profits at that price. They also risk creating a rift with traditional DVD vendors which sell the films at a higher cost.
Paramount head Brad Grey confirmed that it was the company's efforts to treat bricks-and-mortar retailers in an equitable way that had restricted it to selling library films on iTunes.
Paramount has agreed to sell its older movies on iTunes for $9.99 and expects the initial choice of 100 movies to double by the end of the year.
- Disney strikes film download gold with iTunes
- Beatles finally to be on iTunes?
- Jobs announces the mighty iPhone
- Cisco expects deal with Apple on iPhone trademark
- Apple drops 'Computer' and ads TV
EE, O2, Vodafone, Three and Airspan open the bidding
Worried about data privacy? Here are several ways to secure your Facebook account
The ICO is seeking an urgent warrant to investigate a major data breach - everything you need to know as the story continues to unfold