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Report: YouTube VOD to Include Major Studio Releases

30 Aug, 2010 By: Erik Gruenwedel

Social video behemoth YouTube reportedly plans to begin offering transactional video-on-demand (VOD) of new major studio movie releases at the same time as DVD/Blu-ray Disc by the end of the year.

London-based Financial Times reported that Google-owned YouTube, which has been in talks with major studios to acquire content for its nascent VOD rental service, upped the negotiations in recent weeks after scuttlebutt suggested Apple Inc. plans to unveil updated movie rental options to AppleTV in the near future.

Major new releases would be offered from $4.99, according to FT.com. YouTube dominates online video views, representing more than 97% market share for predominantly free user-generated and promotional streamed content. A Google spokesperson was not immediately available for comment.

YouTube in January launched its transactional streaming service with five independent films screening that month at the Sundance Film Festival priced from $1.99 per title for a 48-hour window. With reportedly little more than 10,000 VOD transactions, YouTube’s foray into a market already flooded by Netflix, iTunes, Blockbuster On Demand and Amazon VOD was mocked by some analysts.

Undeterred, YouTube quietly added content to the service in April, including higher-priced releases from Lionsgate, Image Entertainment, Sony-owned Crackle.com, Bollywood and Screen Media, among others.

At the time, Ralph Schackart, media analyst with William Blair & Co. in Chicago, said YouTube’s movie toward mainstream movie streams could be the catalyst needed to jumpstart the VOD business.

“Even converting a tiny percentage of [YouTube’s massive user base] to paid rental content would materially accelerate the adoption rate of digital content transition,” Schackart wrote in a note. “Longer term, this may be an interesting revenue opportunity for YouTube if the studios allow it to scale titles.”

Eric Wold, analyst with Merriman Curhan Ford in New York, said the latest report underscores studio desires to ramp up transactional VOD efforts, which have included aggressive co-marketing efforts with cable operators.

“Given that studios want the streaming offerings to reach as many consumers as possible (depending on which services they prefer to use), we believe this move could help to significantly accelerate the segment’s growth over the next few years,” Wold wrote in a note. “But given that studios are still the ones setting prices, we do not expect the additional competition to lead to lower prices for digital rentals."

Indeed, digital distribution of movies and TV programming continues to gradually increase as content owners seek alternatives to softening package media sales. Digital, which includes transactional VOD and electronic sellthrough, represented more than 20% of studio revenue in the first half of this year, according to DEG: The Digital Entertainment Group.

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