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Google Pitching YouTube Pay-Per-View. Anyone Buying?

Google (s GOOG) is pitching Hollywood studios a pay-per-view service that would enable them to rent videos on YouTube for $5 a piece, according to a report in the Financial Times. While the service could introduce incremental revenues to both the online video site and the studios, the question remains whether the service will catch on with consumers.

YouTube’s pay-per-view service is not new; the site has had video rentals available on its site since January of this year, when it launched with films featured at the Sundance Film Festival. Up until this point, the service has been largely dominated by independent films and video rentals from niche publishers, such as anime distributors FUNimation Entertainment and the Anime Network or health and fitness video specialists Bay View Fitness and the Fitness Channel.

YouTube even launched a store highlighting some feature content available through its rental service. Now, eight months after the service was launched, the YouTube store features a number of indie titles, as well as some videos from Lionsgate Films (s LGF). While most of the rentals cost $1.99 each, some newer releases — like Lionsgate’s Kick-Ass, for instance — cost $3.99.

With consumers flocking to Netflix’s (s nflx) $9 a month subscription service, as well as a steady decline in DVD sales, studios are looking for new ways to increase sales through VOD and digital sales. Due to the relative profitability of VOD sales — at a price point of $4.99 or more per title — studios have collapsed the VOD window substantially over the past year, making titles available much closer to the same day-and-date that they go on sale on DVD. They’re also being more aggressive with electronic sell-through, making more titles available through digital platforms like Amazon (s AMZN) Video on Demand and Apple’s (s AAPL) iTunes.

Despite the growing number of videos available for rental, however, it’s difficult to determine whether the store has actually caught on with consumers. YouTube’s initial rental numbers for Sundance films were somewhat disappointing, with the program only generating 1,500 views in the first weekend those movies were made available.

Even after adding Oscar-winner Precious: Based on the Novel Push by Sapphire and popular library films like Reservoir Dogs, YouTube failed to generate much interest in its rental program, with the top ten titles in the program generating only 6,200 streams in the first week its rental “store” was opened.

While some incremental revenue is no doubt welcome, early lack of interest in the rental program could spell trouble for expansion of the pay-per-view initiative. Despite YouTube’s massive scale as the #1 online video site  — with more than 40 percent of online video views in the U.S., according to comScore — the site has had a difficult time monetizing all that content. After five years of streaming mostly user-generated content, the site has yet to turn a profit. That could change in 2010, according to some analyst forecasts, with YouTube expected to pull in nearly $1 billion dollars in revenue this year.

Related content on GigaOM Pro: 3 Things Apple iTV Must Do to Succeed (subscription required)

9 Responses to “Google Pitching YouTube Pay-Per-View. Anyone Buying?”

  1. I don’t get it. Why would I pay $5 a movie when I can get unlimited streaming from MUCH bigger libraries for $10 a month from Netflix and Hulu?

    If GooTube was thinking with their head on straight, they’d give the micro transaction power to their partners, and allow people like iJustine, Shane Dawson and The Fine Brothers release the occasional video behind a pay wall for a buck or two, with the site taking a small cut of each transaction.

  2. $5 a flick?! Do the Google people ever leave their compound and interact with the real world anymore?

    RedBox offers videos for $1.

    If Google wants to make a splash and get people to seriously consider them, I’d suggest 50 cents a download … or a dime. That will get people’s attention. Offering anything (not to mention of poorer quality) for a price that is several times more expensive than the industry leaders is beyond stupid. It is retarded.

    Come off the compound, Google. Come see what the real world is doing before you do another bonehead move.

  3. Definitely agree on Brian’s point that viewing experience sits at the forefront of this debate. I’d argue there is a market for pay-to-play streaming simply because users aren’t aware of the alternatives, but paying to stream my movie experience on YouTube versus watching on my HDTV in the living room does not translate to me personally.

  4. Part of the problem, of course, is that they use Google Checkout, which sucks balls and even if it didn’t, do we really need to provide Google with even more of our private information just to watch a movie?

    Another problem is that most people equate streaming with poorer quality, certainly not worth $5 a flick (that’s more than Blockbuster charged and they’re going out of business).

    However, it will be an interesting case study to see if Google can ever convince large numbers of people to pay for videos when for all these years YouTube has been a free service.