However, consumer interest in paying to watch the limited selection of movies on YouTube thus far has been very low, according to a person with knowledge of the situation. And one analyst said the greatest hurdle in creating a viable rival to Apple's iTunes or Amazon's Instant Video service is persuading YouTube's 143 million monthly users to think of the site as a place to watch something other than short, quirky videos.
"The biggest challenge they face is a brand perception challenge," said Paul Verna, a senior analyst with EMarketer. "They are so synonymous with user-generated content. ... How do you turn a ship that is so big and has so much momentum in one direction?"
YouTube's expanded on-demand service would make the movies available to stream online for a limited rental period. Consumers won't be able to purchase films and download them on a permanent basis under the current plans. The site has also allocated $100 million to underwrite the cost of original programming, which would be organized into television-like channels, according to people briefed on the matter who asked not to be identified because talks are continuing.
Google's dominant online video service has been in talks with Hollywood executives for more than a year. Studio executives hope YouTube's vast online audience can be enticed to rent newly released films - especially since YouTube's video can be watched on countless portable devices. The studios are eager to bolster digital revenue to help offset declines in DVD sales and perhaps one day to use YouTube as a platform to sell digital versions of movies.
(Ben Fritz of the Los Angeles Times contributed to this report.)
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