Movie Studios Discuss Ways to Rent Films Over YouTube

Go Google .. rule the world. I just hope Google does not sell out the independent film makers. There is a big enough playing field for everyone .. I should hope!

Jean-Luc Martin


The Wall Street Journal
By SARAH MCBRIDE, JESSICA E. VASCELLARO and SAM SCHECHNER

Google Inc.'s YouTube is in discussions with major movie studios about streaming movies on a rental basis, a test of whether the online video giant can persuade its millions of users to pay for premium content.

For Hollywood, the move could represent a bold attempt to offset its dwindling DVD sales with online revenue.

YouTube is talking to Lions Gate Entertainment Corp., Sony Corp., Metro-Goldwyn-Mayer Inc. and Time Warner Inc.'s Warner Bros. about charging for new titles on the existing YouTube site. In some cases, these titles might be available on the site on the same day that they come out on DVD.

Some studios already make full-length movies available on YouTube free, though they tend to be older, lesser-known films. It is unclear to what extent older movies or television shows will be a part of the new agreements.

While details vary from studio to studio, generally speaking the agreements would allow consumers to stream movies on a rental basis for a fee. However, in some cases, the movies could be available in way that they have been previously -- free, with advertising.

Negotiations are continuing and there are no guarantees the deals will be struck. Many details remain in flux, including whether users will eventually be able to download movies. People familiar with the matter say that new movie rentals are likely to be around $3.99, the price Apple Inc.'s iTunes Store charges for new movie rentals. The companies hope to keep pricing on par with what consumers pay for video-on-demand for new titles, these people say.

In a statement, a YouTube spokesman said the company is always working to expand on "its great relationships with movie studios and on the selection and types of videos we offer our community."

The talks are a sign of how YouTube is emerging as a competitor to a broad spectrum of entertainment outlets, including Blockbuster Inc. and Netflix Inc. as well as iTunes and Amazon.com Inc. The Hulu LLC joint venture and Sony's Crackle allow users to watch full-length movies free, but don't generally include new releases. Hulu is a joint venture of General Electric Co.'s NBC Universal, News Corp. and Walt Disney Co.

YouTube began as a place for scrappy, home-grown videos, but it has become increasingly aggressive in striking deals to host television shows, movies and other professional content as a way to draw in advertisers and viewers. But movie studios and TV networks won't give up their most popular content for a share of advertising, which they complain isn't sufficient. The negotiations with the studios are part of an effort to open up new revenue streams by charging users themselves.

Hollywood has also been eager to distribute more of its films online -- as long as it can collect a reasonable fee. Though many studios now sell and rent movies online through services such as iTunes and Amazon.com, that has yet to produce meaningful revenue. By cutting a deal with YouTube, which had nearly 428 million global visitors in June, according to comScore, it can potentially reach a much wider audience.

Studios have been pursuing these kinds of deals with renewed urgency, as revenue from DVD sales has eroded more quickly than they had anticipated. Adams Media Research says studio revenue from DVD sales should fall by about $850 million this year to $12.9 billion.

However, YouTube users aren't accustomed to opening their wallets to watch videos. And the full-length movies that already exist on the service -- ranging from classics such as the 1940 "His Girl Friday" to more recent movies like the 1999 horror flick "House on Haunted Hill" -- have drawn a modest number of views compared to content like comedy clips and music videos. Many consumers balk at watching full-length films on a computer screen.

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.

Under current plans, 10,000 Google employees will test the service for a period of three months, people familiar with the matter said. The trial was supposed to start at the beginning of September, but was pushed back as studio negotiations dragged on.