YouTube Slowly Sundances Into New Rental Territory

The movie industry loves a gala premiere, with red carpets, paparazzi and Klieg lights sweeping a glittering marquee. YouTube’s announcement this week of its new movie rental strategy is about as far away from that scenario as you can get.

Instead of the commercial first-run features that are popular with Netflix members, YouTube said this week that it would make available for streaming rental five movies from this year’s and last year’s Sundance Film Festivals. The US$3.99 rentals would only be available, however, from Friday through Monday, and the titles are more art-house than grindhouse — or multiplex, for that matter.

Yet it appears to be just a dip into the pay-per-streaming market for the world’s biggest video Web site, purchased a little over three years ago by Google in the hopes of adding to that company’s bottom line.

“While YouTube has offered an easy and economical way for filmmakers — as well as content creators of all kinds — to instantaneously connect with fans around the world, many of them have told us that the ad-supported business model doesn’t always meet their distribution and monetization needs,” reads a recent post on the YouTube blog. “These are early days and in the coming weeks we’ll also invite a small group of partners across other industries, in addition to independent film, to participate in this new option.”

YouTube says it will offer those partners — including those making movies in non-commercial spaces such as health and education — “unpredecented control” over their work, including pricing, rental duration, and total access to all rights.

An Early Step

“Additional content from other sources will be available in the weeks ahead,” Google spokesperson Aaron Zamost told the E-Commerce Times. However, the sources who are working with YouTube now may have laid down some unpopular restrictions. Some of the comments on the YouTube blog from those who have tried renting the Lionsgate-produced documentary “The Cove” in countries outside the U.S. say they run into a disclaimer saying “video contains content from Lionsgate who has decided to block it in your country.”

Zamost did not respond by press time to a follow-up request for an explanation about content restrictions.

“It’s a natural evolution for them to follow, but the announcement to me is disappointing,” Inside Digital Media president Philip Leigh told the E-Commerce Times. “It’s disappointing not for what it says but for what it doesn’t say — that they didn’t get more (content partners).”

It’s been less than a year since YouTube announced it would begin offering ad-supported movies and TV shows for view, Leigh said.

However, the offerings were similar to those you might find on a syndicated TV station or retro cable network. “They were not able to expand much beyond that. The fact that they’re looking at seeking content from other sources, aside from the most popular ones you would expect out of Hollywood implied that they’ve been turned down by Hollywood,” he said. “I’m concerned that this is a fairly modest start.”

Attracting a Niche Audience?

YouTube’s opening into movie rentals may be on a small scale, but at least the Sundance festival is an A-list name when it comes to quality independent movies — in past years, many of its films have gone on to box-office success and attention from the Academy Awards.

“I think it may be a smart approach, actually — acknowledgment that in order to make money but to keep the risks relatively low, they’re targeting distinct niches of consumers that may be smaller in number but more willing to pay money,” Parks Associates Digital Media Analyst Kurt Scherf told the E-Commerce Times. “The producers of the independent stuff may be much more anxious to find high-quality distribution partners. So I think that’s first, and then you build out your catalog for the Hollywood blockbuster stuff.”

The admission from Google/YouTube that ad-supported-only content doesn’t appear to be the answer at this time regarding paying for digital media stuck with Scherf. “I think we are seeing this shift in thinking that says, in order to do this, transactional revenues are going to be a critical part of this.”

In terms of control and restrictions set by the media providers, “that’s a slow go for the entire industry, whether you’re YouTube or Netflix. It’s clear Hollywood is keeping the basic rules clear about how it windows content. Until online gets proven that it’s more highly profitable, their cash cow is DVDs,” Scherf said.

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