YouTube to offer video rentals

Five full-length independent movies drawn from the Sundance Film Festival will be available to rent for a limited time beginning Friday, marking the Google-owned site's first effort to glean revenues that aren't derived from advertising.

YouTube's modest foray into the movie rental business couldn't find a more fitting launchpad than the wintry Sundance Film Festival: What might seem the size of a snowball today could turn into an avalanche. Or it just might melt away.

It didn't exactly send shock waves through the film world when YouTube announced Wednesday that it will stream five indie titles to users for a day or two at $3.99 a pop. Google execs will be at Sundance to sign up more filmmakers for the service.

Sure, it was the first entertainment product to come with a price tag on a Web site where everything is free, but fare such as " The Cove," the 2009 Sundance winner for best doc, isn't going to move the masses.

But despite the inauspicious start and the numerous obstacles that stand in YouTube's way, underestimation could be a mistake. Even a baby step is a big deal when you have a footprint the size of YouTube, which generates 1 billion page views every day.

To some degree, this Sundance experiment is a bit of a letdown given the way YouTube had been dropping hints that paid product was on the way. David Eun, Google's vp content partnerships, was telegraphing such a move as recently as last month.

Last year, the whispers of YouTube rentals spurred Think¬Equity analyst William Morrison to gush, "If Google is able to offer access to newer movie titles to its roughly 400 million users globally, we believe that it could become a billion-dollar business for the company within a few years."

Other estimations of the potential for online movie rentals are more sobering.

A Digitalsmiths survey in September found that 43% of online video viewers polled were either unlikely or unwilling to stream a rented movie for $2-$3. Piper Jaffray found that only 1% of total movie rental revenue in 2009 came from the Internet, compared with 54% in retail and 13% for VOD.

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