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YouTube's quest for professionally created content is about to get interesting. The Wall Street Journal reports that the video giant is in talks with movie studios to stream movies to its users for a fee.
That will bring a shift from its free video supported by advertising model, but could go a long way toward helping the site turn a profit for Google — and possibly change the game for online film viewing.
YouTube currently has rights to stream older films from Sony’s Pictures, MGM and Lionsgate, but according to The Wall Street Journal:
"YouTube is talking to Lions Gate Entertainment Corp., Sony Corp. and Warner Bros. about integrating newer titles into the existing YouTube site, most of which it would carry a rental charge. In some cases, these titles might be available on the site on the same day that they come out on DVD. It is unclear to what extent older movies or television shows will be part of the new agreements."
The Journal reports that YouTube is planning to charge $3.99 per film, the same rate that Apple charges for its movies. YouTube currently has a revenue sharing agreement that gives 70% of ad dollars to studios for ad-supported content, and that agreement is likely to extend to film content.
This could be very bad news for Netflix. Writes The Journal:
"The agreements would allow consumers to stream movies on a rental basis for a fee. However, in some cases, the movies would be available in way that they have been previously—free, with advertising."
Over the last year, YouTube has been unveiling a steady stream of new revenue sources hoping to recoup the $1.65 billion investment that Google made in the company back in 2006.
This new agreement could go a long way toward making that happen. YouTube has the infrastructure to create high quality viewing experiences for film online. And what's more — they have the viewership to experiment with price points. That could spell trouble for the competition.
But as more and more contenders join the space, the online film viewing audience is still up in the air. Aside from Netflix, Amazon and Apple have online film operations. Meanwhile, movie studios are launching a Hulu-esque site called Epix to stream movies online this fall.
There are no guarantees that the deal with go through, but it will be interesting to see if YouTube gains any traction with a paid service. As part of the world's largest search engine, they have access to more eyeballs than even Apple and could take a bite out of the market by pricing their content just a little lower than other pay per view sites.
But YouTube has been playing it safe with its streaming agreements, looking to get a mass quantity of video content rather than go after exclusive contracts or high revenue streams.
Meanwhile, the audience for online film viewing remains untested. To this date, 99% of all video viewing in the home still happens in front of a television set. But film distribution companies want to be established as viewers move online.
Regardless of what they charge, simply offering new release films could do a lot to cement YouTube's role as the place to go for online video.