YouTube to Challenge In Online Film Rentals

By JESSICA E. VASCELLARO

Google Inc."s YouTube said it will begin testing a new online video service on Friday, entering the rental turf of other technology giants such as Apple Inc., Amazon.com Inc. and Netflix Inc.

YouTube will begin testing the service with five movies from the Sundance Film Festival, the company said Wednesday in a blog post. It plans to later expand its rental selection to a range of health, education and fitness categories, a company spokesman said.

The disclosure marks one of YouTube"s first major pushes into delivering paid video rather than supplying videos that can be viewed for free in exchange for watching ads. YouTube is hoping that the new payment option—which allows a content supplier to set the price per rental—will draw more professional content, including offerings from major film and TV studios, to its site.

A marquee on Main Street in Park City, Utah, announces the Sundance festival.

YouTube"s selection of hit shows and movies has long lagged behind rivals including Apple and Amazon because the advertising revenue that the company generates from ads alongside those videos wasn"t sufficient for its suppliers. And even with this new paid option, YouTube faces challenges in persuading major studios to supply content, media executives said.

Negotiations to attract major movie and television studios to the rental program are ongoing, said people familiar with the matter. Google has talked to Lions Gate Entertainment Corp., Sony Corp., Metro-Goldwyn-Mayer Inc. and Time Warner Inc."s Warner Bros. about the offering in the past, according to people familiar with the talks.

Media companies could be enticed by the more flexible business model YouTube is offering. Unlike Apple"s iTunes Store, which has set tiers of pricing for rentals of movies, Google is allowing partners to set the price that it will charge consumers and how long they want the rental to last.

Consumers must pay through Google"s payment service, Google Checkout. Google and the content supplier will split the revenue, with the partner getting the majority, a YouTube spokesman said.

The first five films, which will cost $3.99 to rent from Friday through Jan. 31, will include "The Cove," a documentary about the dolphin fishing industry, and "Homewrecker," a comedy about a locksmith.

Write to Jessica E. Vascellaro at jessica.vascellaro@wsj.com

http://online.wsj.com/article/SB10001424052748704320104575015512198189490.html?mod=WSJ_hpp_sections_tech