4 Reasons Why Pay-Per-View YouTube is a Hard Sell

Earlier this year Google started offering online rentals of Sundance Film Festival movies. It bombed. According to the New York Times, Google made a paltry $10,709.16 from its $3.99 rental service over the course of 10 days, and the videos only garnered a combined 2,684 views. Perhaps the content was too niche for a broad audience, but those are still some mortifying numbers.

Worse yet, Google plans on raising prices to $5 per film, according to The Financial Times. If $3.99 didn't work, why does Google think $5 would? Granted, premium content will receive more views, but Google has a spotty track record in the rental biz, and raising prices doesn't seem like the best solution.

YouTube Videos Streaming Only, No Download Option

The movie rental industry is still popular. Redbox is a great example: as a company, it is seen as "destroying" Hollywood with its $1-per-night DVD pricing model. But when it comes to online content, many people want to own what they buy -- which is why Apple had to ditch DRM on iTunes. Google doesn't seem to grasp the concept of video ownership. According to The FT, these YouTube videos will be streaming-only with no option to download. This also forces YouTube renters to have an Internet connection at all times, eliminating portability.

On the plus side, downloading YouTube videos has never been a problem before, so even if Google encrypts its films, I imagine clever hackers will find a way around it.

Competition Heats Up, Lower Prices Likely

Artwork: Chip Taylor
Speaking of Redbox, reports have suggested that the company is considering jumping into the all-you-can-watch streaming market. Redbox's prices are already very low, so it's likely that it'll continue to offer very cheap videos.

There's also Amazon Video on Demand (with Disc+ on Demand), iTunes sales and rentals (including low-priced TV shows coming soon), Hulu Plus, and Netflix's streaming service, which is still as little as $9 per month, plus physical discs. Also, Netflix may soon offer a streaming-only subscription, which would drive its prices even lower.

The winner of the online video battle will be determined by who can offer the most content for the lowest price. Don't forget all the free video sites on the Internet, and the underground download market.

Cable TV Won't Die

In response to the plethora of online alternatives, cable giants will likely -- finally -- try an a-la-carte subscription model, thus giving consumers the choice of what channels they want on a varied pricing structure. For instance, if a customer only wants a small handful of premium channels -- and not 200+ channels to surf -- they'll be allowed to select what they want and pay accordingly.

Cable TV subscribers will also resist paying twice for the same content. If a subscriber buys Showtime to watch show Weeds, they won't want to pay Hulu Plus' price for the same access. Similarly, if a subscriber has HBO -- and access to HBO's own streaming site, as well as on-demand movies -- there's a good chance they'll stay away from purchasing anything from YouTube.

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