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YouTube joins rental legions

Posted Sep 03 2009, 05:47 AM by Douglas McIntyre
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(©LWA/Getty Images) Google’s (GOOG) YouTube may finally come up with a way to raise revenue. It streamed nine billion videos last month, but, by some estimates loses $300 million a year.

The quality of the video on YouTube is usually so low that advertisers don’t want to put their high-quality TV messages on the service. That leaves YouTube with limited options to make money.

Bing: The best movies of all time

The video-sharing service is in the final stage of a process to set up a movie rental business with most of the largest studios, including Lions Gate and MGM. Many other companies in the industry will probably join if the program works well. YouTube would offer films for streaming at a price of $3.99. Its audience is large enough that the program could actually work.

But, YouTube may be late enough to the online rental business that it will lose some of the advantage of its size. Firms with millions of customers and major brands, including Apple (AAPL), Amazon (AMZN), and Netflix (NFLX), are already in the digital VOD business. Most cable companies have similar systems that work on their customers’ TVs. Time Warner Cable (TWC), Comcast (CMCSA), and Cablevision (CVC) report substantial film rental sales.

Google has a fine idea, but the market may already be taken.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Comments

 

The video quality on Youtube is fine - you can get HD vids.

$4 to stream a vid seems excessive.

t4bb (Posted 09.03.09 9:15 AM) Report Abuse

Take a good look at Sonic Solutions. This is the company that will drive this business concept.

Russ (Posted 09.03.09 10:21 AM) Report Abuse

the price is to high, I can run to the local redbox get any new release I want, and it's only a dollar....who comes up with their pricing guidelines, take a lesson from walmart you want mass audience, you have to sell cheap...not at video store prices, where most movie renters would rather watch the movie on their tv instead of their pc? "PRICE IT RIGHT" or expect to fail.

Rich (Posted 09.03.09 10:37 AM) Report Abuse

Why would I pay $4 for a streaming video (which will probably be supplemented w/ ads) when I can go to Hastings or RedBox and get a movie for $1 and have better quality, ad-free?

erin (Posted 09.03.09 10:38 AM) Report Abuse

Not for $3.99... maybe $1.99, or even $0.99, but only if they have a competitive selection, and they can guarantee smooth transfer speeds. frequently during the day, videos on youtube will hang due to sever overloads.

Google is better off looking at other products in other markets. There are already too many players in VOD.

Pete (Posted 09.03.09 10:45 AM) Report Abuse

Most new flat panel LCD/LED/Plasma televisions being sold will have internet connectivity built in by the end of this year and they will also have YouTube application as well as Netflix built in. Think about the cost of a round trip to the closest Redbox outlet coupled with some possible additional late fees and the fact that there are millions of people who do not have access to a corner movie outlet. This will be how the majority of the masses get their entertainment going forward.

Russ (Posted 09.03.09 11:08 AM) Report Abuse

Does it matter if Google is the last in line? It's Google we are talking about here.  They have very DEEP pockets and can make almost anything happen.  I would not count these guys out.

Chris (Posted 09.11.09 7:24 PM) Report Abuse

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