Friday, January 22, 2010

YouTube Takes a Small Step Into the Film Rental Market

YouTube made its long-awaited entry on Wednesday into the business of online movie rentals. But do not expect to be able to stream to your PC the latest Hollywood blockbuster or even a flick from a studio’s dusty catalog of classics. YouTube, which is owned by Google, is introducing its rental service with just five movies, all from independent filmmakers.

By comparison, Netflix gives its customers the choice of thousands of films, and most cable operators offer their customers large catalogs of on-demand films. More movies will come to the YouTube service later, but the company did not say when or what films it may offer.

Still, YouTube’s decision to dip its toes in online rentals represents a significant, if expected, shift for the online video site. YouTube has thrived by offering an eclectic collection of free video clips and earns most of its revenue from advertising. YouTube already offers some older, full-length movies on its site free.
Last summer, YouTube held discussions with major studios, including Lionsgate Entertainment, Sony and Warner Brothers, in an attempt to obtain newer offerings for a planned rental service. In the fall, YouTube conducted a test of the rental service with some content from studios, but the test was available only to Google employees, according to two people with knowledge of the test who spoke on condition of anonymity because they were not authorized to discuss the matter publicly.

YouTube declined to confirm the talks with studios or the test.
A studio executive, who also could not speak publicly, said that Hollywood was always concerned about cannibalizing existing distribution deals. But the executive said that his company would be willing to make some movies available for rental on YouTube on terms similar to those available to services like Apple’s iTunes, Netflix or cable operators.

Some analysts have questioned whether Hollywood movies would appeal to most of the audience at YouTube, which is better known for its broad selection of short clips.
YouTube is unveiling the rental service in conjunction with the start of the Sundance Film Festival. All five films offered for rent on YouTube are part of the festival this year or were shown at the event last year.

“YouTube had a very close relationship with the independent film community since we launched,” said Sara Pollack, entertainment market manager for YouTube. Ms. Pollack said that the number of people watching videos online has grown quickly and that YouTube wanted “to offer a way for filmmakers to connect with these audiences.”
Ms. Pollack said that only a tiny fraction of the films submitted at Sundance were able to find some form of commercial distribution, and that YouTube would provide a new outlet for independent filmmakers.



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