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YouTube begins its push into online movie rentals

January 20, 2010 |  4:27 pm

The world's most popular video website is getting into the pay-per-view business.

Google Inc.'s YouTube announced today that it will make a total of five movies from the 2010 and 2009 Sundance film festivals available for online rental. It's the first time that YouTube has given content providers the option to provide video for a fee, rather than streaming it for free with advertising.

The Sundance movies are just a prologue for a much more ambitious pay-per-view venture, said people familiar with YouTube's plans who spoke on condition of anonymity because they weren't authorized to discuss confidential business plans.

Within a few months, the website that has historically relied upon user-generated videos -- think dogs on skateboards -- will start offering television shows and feature films from major studios for rent.

In an e-mail to journalists, a YouTube spokesman alluded to the possibility, stating that "[I]n the coming weeks we'll also invite a small group of partners across other industries, in addition to independent film, to participate in this new option." He declined to comment further.

According to the people close to the situation, YouTube is beyond the invitation stage and is now making deals for specific pay-per-view content from studios.

Content providers will be able to set their own prices and YouTube will take a share of the revenue. All but one of the Sundance films are being offered for $3.99 each to watch during a 48-hour period.

The move to a paid service is a clear sign that Google, which has struggled make a profitable business out of YouTube after buying it in 2006 for $1.65 billion, is looking for a new ways to "monetize" the service. Luring advertisers to YouTube has been difficult, in large part because so much of its content is uploaded by users and varies widely in quality.

In addition, YouTube has had little luck over the last several years wooing major studios and networks to stream premium content on the site, which would make it easier to draw advertising. Most studios have instead opted to put their content on Hulu, a joint venture of NBC Universal, News Corp. and the Walt Disney Co. that has had more success luring marketers.

YouTube's "shows" section, which it launched last year in an attempt to distinguish premium content, still consists primarily of older television shows, Web-only series, and movie trailers.

Offering pay-per-view movies will put YouTube into direct competition with a variety of other online movie services, including Apple's iTunes Store, Amazon.com and Microsoft's Xbox Live. However, YouTube is by far the most popular video destination on the Web. Last August, it streamed more than 10 billion videos, according to Comscore.

In 2006, before buying YouTube, Google launched a paid video option of its own called Google Video Store. It shut down the service in 2007.

Sundance movies that will be offered to rent from this Friday through the next Sunday, Jan. 31, include the "The Cove," a documentary about dolphin killing that was at the festival last year, and 2010 entries "Bass Ackwards," a road movie, and romantic comedy "Homewrecker."

--Ben Fritz

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