One of the major factors holding back the downloadable movie market has been price. With a minimum $9.99 price, often higher, for most films, it's at best competitive with and often pricier than DVDs. Doesn't make much sense given that digital downloads are much cheaper to distribute and the rights are more restrictive.
The reason, of course, is that studios don't want to upset their existing, slowly dying but still multi-billion dollar DVD business. Pricing downloads lower than DVDs would piss off major retailers like Wal-Mart and Best Buy. So most movies on iTunes and other digital stores cost the same as DVDs and the market remains tiny.
The New York Times and Washington Post, both of which trumpeted a partnership with Amazon for its new big screen Kindle DX today, are following the same strategy, according to the press release:
So yeah, it's an innovative new business model! But only in locations where it doesn't threaten the slowly decaying old business model.