Apple is in advanced talks with film studios to launch an online film rental service, according to the Financial Times.

The company has been engaged in secretive talks with Hollywood studios to launch such a service, putting the comany firmly into the video on demand market while posing a challenge to satellite and cable TV operators, the report explains.

Apple has achieved some success selling films from some studios through iTunes, but many studios have baulked at selling their films through the service, for fear such sales would impact more lucrative DVD sales.

Rental is another matter. Studios seem keen to exploit Apple's massive user base of Mac, Apple TV and 15 million video iPod owners. They see Apple's users as digitally-savvy users who would be happy to use the service - meaning more profit for the studios.

“Video-on-demand gives the Apple TV box a lot more utility,” one senior Hollywood studio executive told the Financial Times. “Right now it’s just a way to move stuff from iTunes to your TV but it will end up becoming a way to directly order a movie to your TV.”

The report claims films would cost $2.99 each and users would be able to hire them for 30-days. Copying and illegal sharing of the films would be prevented, but users would be able to move the films to an iPod or iPhone, the report states.