To Succeed In Pay Per View, YouTube's Movie Store Needs a Makeover

The Financial Times threw more fuel on the web TV fire this morning, reporting that Google (GOOG) will introduce a pay per view YouTube channel with major Hollywood films before the end of the year. But the search giant will have to make some major upgrades to the site if YouTube hopes to compete with Apple (APPL) and Netflix (NFLX).

The detail that jumps out from the FT's reporting on Google's potential PPV deal is that YouTube will be able to offer premium films for streaming without having to wait a significant period of time after the titles are released on DVD and On Demand. This contrasts with the delayed release on streaming sites like Netflix, which has been building up its catalog with offerings from major studios, but won't be able to offer these films till a month or more after their mainstream release.

Another interesting nugget from this story is this quote from an unnamed executive with inside knowledge of the talks between Google and the film studios.

"Google and YouTube are a global phenomenon with a hell of a lot of eyeballs -â€" more than any cable or satellite service," said one executive with knowledge of the plans. "They've talked about how many people they could steer to this . . . it's a huge number."
Obviously if Google began to do major business in films, it would raise important questions about whether their search algorithm steered users to YouTube instead a competitor like Amazon (AMZN).

When it comes to professional content, the site is emerging as a legitimate platform. YouTube just won its court case with Viacom (VIA) over copyright infringement. And the success of Vimeo, a partnership with several major record labels, has shown that YouTube could generate revenue through advertising and attract an unparalleled volume of viewers. Videos from pop stars are now far more popular than user generated clips.

But so far YouTube hasn't had much success outside the ad supported model. "With respect to how it'll get monetized, our first priority is on the advertising side. We do expect over time to see micropayments and other forms of subscription models coming as well," said Google CEO Eric Schmidt. "We are making very good progress now with small, medium, and even large-scale studios."

In order to succeed, YouTube is going to have to do some serious rebranding. Apple has a major advantage in selling and streaming films to the more than 100 million credit cards users who have already registered and purchased from the site. YouTube, on the other hand is famous for low quality, amateur videos, all of which are free. The site has been offering streams of full length films for a while now, but these YouTube films are a motley mix of softcore porn and old Jackie Chan flicks.

Back in April YouTube debuted a rental service, which boasts some higher quality films. But there is little to differentiate this YouTube "Store" from the site's free offerings. It's the same exact same layout and films from the two sections are cross listed. That means a Jackie Chan movie which costs nothing sits right next to an equally obscure Chan film that runs $1.99 a rental.

If YouTube hopes to start charging as much as $5 for rentals of premium films, as the FT report suggested, it's going to need a separate, more upscale section with a recommendation system to rival Netflix and Apple. YouTube is clearly building out its store step by step, but right now it comes of as an amateurish competitor in an increasingly crowded field.

Image from Flickr user Mike Hammerton
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