Posted September 3, 2009 11:41 am by with 4 comments

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As impossible as it sounds, Netflix, the popular rental-by-mail-and-instant-download service, may be facing some stiff competition in the future—from YouTube. The Wall Street Journal reports that major studios are discussing YouTube rentals.

Yep, you read that right: YouTube movie rentals. If this comes true, this will be the biggest test to see if users of the most popular video site in the world will pay for premium content—possibly paving the way for more sites to add that income stream.

YouTube has been making deals with professional content providers for a long time—including Disney, MGM, and Lions Gate in the last year.

The oldest of those deals, the one with Lions Gate, was supposed to feature paid movie downloads (though I can’t say I ever saw that feature—did you?). The deal with MGM was for full-length movies, and the NYT said at the time that MGM’s parent company, Sony, and Time Warner might also consider similar deals in the future.

I guess the future is now: all four of those companies are discussing movie rentals with YouTube now. So far, the tentative deal appears to include streaming a movie from YouTube for a fee. In some cases, they may also be free, supported by advertising (like many of the free full-length movies on YouTube now). “People familiar with the deal” set the price point at $3.99, the same as the iTunes store’s new movie rentals. And yes, these movies will be new, not just the backcatalog that’s collecting dust. They may even be available the same day the DVD comes out.

There are still some kinks to work out in the deal:

You Tube and the studios are still hashing out how to divide revenue from the new arrangement. For deals that involve advertising, YouTube is likely to give partners the majority of the revenue, as it has done with other partners in the past. Some deals may also guarantee the studio a minimum fee per title viewed, in some cases just under $3, according to people familiar with the matter.

YouTube is pressing studios to allow the movies to be streamed on mobile devices, but some of the studios are resisting, even though that is currently allowed under other online rental services such as iTunes.

The deal has apparently been in the works for a while—the original plans were to have some 10,000 Googlers test the product starting at the beginning of this month. (Unsurprisingly, prolonged negotiations have pushed back the start date.)

What do you think? Would you pay for streaming new movie rentals from YouTube? Will enough people pay to justify this as an income stream? Will other sites adopt the model?

  • I have FIOS so I might. It all comes down to cost and quality… the portability factor is pretty intriguing.

  • Great post, thanks for sharing. I just wish that more people would really share. I’ll be back shortly to read and learn more. You Tube has the potential to be huge. When they do hit it, it will be big.

  • When Mega Video started charging, I stopped watching Mega Video. I’ll do the same if Youtube starts charging.

  • I personally think Youtube will be more easy to navigate, especially since Google are now running the show, lets face it they are not short of money.