Google hopes site will get bigger in pay-per-view biz

Hollywood’s homevideo divisions are in the unusual position of growing in popularity as they continue to lose customers with slowing DVD and Blu-ray sales.

Their newest fan is Google, which hopes YouTube can become a bigger player in the pay-per-view biz with a larger slate of studio films.

Since YouTube started rolling out its online rental service with mostly independent pics during the Sundance Film Festival, the site has been negotiating with the majors to boost its offerings.

After testing the waters with its low-budget indies, the company wants to begin renting higher profile studio fare by the end of the year.

That should provide good news for studios dealing with the fact that digital is clearly the way consumers will want to watch movies at home and on the go in the near future. With disc sales eroding and being threatened by rentals as the economy continues to struggle, studios are eager to embrace any new platforms that can put more coin into their coffers after movies have ended their runs at the megaplex.

It doesn’t get much bigger than YouTube, which is clearly a juggernaut for delivering video online.

YouTube regularly dominates the online video segment. In July, more than 143 million people watched at least one video on a Google-owned site, with most of those housed on YouTube, according to comScore. That’s down from 144 million in June. In fact, the web traffic monitor found that more than 40% of videos available on the Internet were viewed on YouTube in the U.S. and that viewers on Google watched more than 1.88 billion videos in July, averaging 282.7 minutes of viewing over the month.

To up its numbers, YouTube is also looking to expand its audience beyond traditional computer users, making sure an app for its site is embedded on the screens of new TV sets and inside web-enabled Blu-ray players, similar to what Netflix has been doing to make its service more ubiquitous.

But studios aren’t just trying to hammer out deals with YouTube. There are also digital video-on-demand services through the cable and satellite companies, cell phone providers, Apple’s iTunes, Amazon, Netflix, Hulu, Microsoft’s Xbox Live, Microsoft’s Xbox 360 and Sony’s PlayStation 3 videogame consoles and Best Buy’s CinemaNow, and in development from Redbox, all looking to increase their own profiles with customers through digital pay-per-views.

All that interest is creating a headache for Hollywood — namely, how much to charge per film.

There wouldn’t be an issue if the studios were all in agreement on when to release certain films to each digital distributor.

But while Warner Bros., Universal and Fox are in one camp — requiring companies like Netflix and Redbox to wait to offer movies until 28 days after they bow on DVD — Paramount, Lionsgate, MGM and Sony, for example, are in another faction, giving greenlights to offer those same films day-and-date with homevideo release. Research conducted by those companies suggest that day-and-date offerings haven’t significantly impacted DVD and Blu-ray sales.

Digital rentals can range from $1 to $10 and some studios are readying to experiment with offering some titles as downloads anywhere between $25 and $50 shortly after their theatrical run. There are signs that a consensus is forming for the price of new releases. For example, current DVD releases like “Date Night” are available as rentals on seven services for $3.99.

YouTube is considering offering movies for about $5 for the highest-quality HD version, according to sources, similar to what Blockbuster currently charges for rentals in its stores.

More obscure indies now rent for $1.99 on the site, although it hasn’t generated significant interest with those titles. There are more high-profile pics, with the standard version of Lionsgate’s “Kick-Ass,” for example, available to rent for $3.99.

Still, should YouTube’s millions of users open their wallets, that could add up to a lucrative new revenue stream.

At the end of the day, studios have the final say on pricing. If they’re not happy with how much a digital rental service is charging, they can simply hold back on offering their films to that company.

The digital audience, however, is just too big to pass up. Altogether, 85% of Internet users in the U.S. watched a video online in July, according to comScore. The downside: they spent on average of only 4.8 minutes watching.

The proposed price is still far less than is generated by a DVD or Blu-ray, which can sell for about $20.

Yet brokering deals with multiple digital companies now could ensure that studios don’t leave any money on the table as the models evolve or give consumers reason to turn to piracy instead.

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