According to the Wall Street Journal, YouTube is currently in discussions with a bunch of motion picture companies to make movies available on YouTube en masse. In addition to the free with advertising model, WSJ says that YouTube may offer movie rentals a la Apple’s iTunes store for a price around $4. This would be an expansion into some pretty unexplored waters for YouTube as currently, Youtube is only supported by the advertising revenue generated from page views.
This could make YouTube a big pile of cash. As we already know, YouTube is among the most trafficked sites in the world, so now all the evil geniuses at Google need to do is figure out how to monetize that audience. And any way YouTube might show movies would do just that. In the free + advertising model, YouTube enjoys extra cash by keeping a viewer on the same page while showing him ads periodically (Hulu model, *cough*). That leads to profits. In the pay $4 for your movie model, viewers throw some cash YouTube’s way… which means YouTube makes money. These deals with movie studios could be what Eric Schmidt meant when he said YouTube was on the path to profitability.
No doubt Google will not rest just by getting a few movies to play on YouTube. I suspect that these talks are the first of many that Google execs will have with content providers to try and get YouTube to have Hulu-style content. If YouTube were able to get content enough to really compete with Hulu, it’d blow Hulu out of the water. Even now, Hulu gets barely a tenth of the traffic of YouTube, and that’s doing an estimate in Hulu’s favor. And going back to movie rentals, so long as bandwidth isn’t an issue, user will more than likely go with YouTube over iTunes. After all, why waste rental time downloading the movie file?
