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YouTube Quietly Expands Movie Rental Service

23 Apr, 2010 By: Erik Gruenwedel

YouTube April 22 expanded its movie streaming service (www.youtube.com/store) from independent films to major studio releases, including Oscar-winner Precious.

Rentals are priced from $1.99 to $3.99 for a 48-hour window.

Google Inc.’s social video site YouTube in January launched the streaming service with five independent films screening that month at the Sundance Film Festival.

With reportedly little more than 10,000 VOD rental transactions, YouTube’s foray into a market already flooded by Netflix, iTunes, Blockbuster On Demand and Amazon VOD was mocked by some analysts.

MotleyFool.com analyst Rick Munarriz said YouTube viewers come to the site in droves to watch free content, not pay-per-view. “It was easy to predict that YouTube’s user base wouldn’t warm up to paying $3.99 to rent … films,” Munarriz said in January.

Undeterred, YouTube spokesperson Chris Dale said the company remains in discussions with small and large studios alike to bring their content onto the YouTube platform. He said that YouTube recognizes that not all content fits the ad-supported model, and promised that additional rental content would appear on the site as more partners joined the program.

A perusal of titles offered indicated that Lionsgate is a major player in YouTube’s streaming service. Other content providers include Image Entertainment, Sony-owned Crackle.com, Bollywood, and Screen Media, among others.

Earlier this year, Lionsgate CEO Jon Feltheimer lauded VOD margins, saying the Santa Monica, Calif.-based mini-major would generate about $17 million per quarter in digital distribution this year. By comparison, Lionsgate generated $78 million in DVD and Blu-ray Disc revenue during the most recent financial period.

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.”

It could also impact the ongoing $1 billion copy infringement litigation between Google/YouTube and Viacom.


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