Move over Netflix, YouTube may Stream Rental Movies

Move over Netflix (NASDAQ:NFLX), Google Inc's (NASDAQ:GOOG) YouTube is in talks with studios, including Lions Gate (LGF), Sony (SNE) and Warner Bros. (TWX), to stream newer movies for rental.

Via the WSJ.com -- Google Inc.'s YouTube is in discussions with major movie studios about allowing users to stream movies on a rental basis, according to people familiar with the company's plans, marking one of the video giant's first moves towards charging for content instead of making it available for free with advertising.

While some studios already make full-length movies available on YouTube, they tend to be older, lesser-known titles. Now 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.

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."

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 would be available in way that they have been previously—free, with advertising.

Negotiations are continuing and there are no guarantees a deal will be struck. Many details remain in flux, including whether users will also 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 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.

YouTube generally gives studios about 70% of revenue for ad-supported content they already offer on the site, people familiar with the matter say. They would likely get a similar percentage for new movies. But they would also likely be guaranteed a minimum fee of just under $3 per title viewed. That ensures the studio the dollar amount, even if YouTube decides to run a special where they charge consumers less.

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

Both YouTube and the movie studios are being forced to become more flexible in their business models. YouTube, which isn't yet profitable, is looking for new ways to draw premium content and ad campaigns from big brands.

Studios, on the other hand, are also eager to bolster any area that might help compensate for declining DVD sales. Adams Media Research says studio revenue from DVD sales should fall by about $850 million this year to $12.9 billion.

If the YouTube deals come to fruition, the site would join Apple, Amazon.com Inc. and Netflix Inc. in offering services that allow users to stream or download newer movies online.  Sony's Crackle and Hulu LLC allow users to watch full-length movies for free, but don't generally include new releases.

SOURCE: http://online.wsj.com/article/SB125192241524880801.html