Google Eyeing Pay-Per-View Movies on YouTube?

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Google (GOOG) is going Hollywood -- and it's using Tinsel Town's traditional nemesis, YouTube, as a way in.

Google is in talks with the major movie studios about a new pay-per-view video offering based on YouTube, according to a new report in the Financial Times. The article quotes "one executive with knowledge of the plans" as saying:

"Google and YouTube are a global phenomenon with a hell of a lot of eyeballs -- more than any cable or satellite service. They've talked about how many people they could steer to's a huge number."

Even as Hollywood titan Viacom (VIA), which owns Paramount Pictures and Comedy Central, appeals Google's $1 billion YouTube legal victory, top Tinsel Town executives are getting cozy with the search juggernaut, the article suggests. Google has insisted that YouTube, the free video site it purchased for $1.65 billion in 2006, would be profitable eventually. YouTube has been testing streaming video rentals -- not downloads -- since the beginning of the year, the paper reports, citing a potential price of $5 per movie rental.

YouTube and Studios: It's Complicated

Using YouTube as a platform to launch a pay-per-view streaming movie service is mildly ironic given that many in Hollywood -- led by Viacom -- insist to this day that YouTube only gained its amazing growth on the backs of their copyrighted content, like The Daily Show and The Colbert Report. But Viacom's lawsuit targets YouTube circa 2006 -- and alleges no grievance toward present-day YouTube.

"Maybe the parties could have accelerated the timing of new streaming options if they had poured their litigation dollars into innovating rather than their lawyers' pockets," says Eric Goldman, director of the High Tech Law Institute at Santa Clara University School of Law.

Goldman notes that Google has spent a whopping $100 million and counting on its legal defense of YouTube.

Meanwhile, Hollywood can't just ignore YouTube's potential -- it dominates online video, and despite talk of a $2 billion public offering of Hulu, Fox and NBC's ad-supported video service, YouTube is still the Internet video kingpin.

Google-Apple Battle Brewing

It's no secret that Google is ramping up its Google TV campign, with a vision of essentially merging the divide between desktop computer and television by delivering broadband content viewable on the big flat-screen TVs that get cheaper by the month. Netflix (NFLX) and Apple (AAPL) already stream vast movie catalogues to users -- now Google wants to play.

In fact, on Sept. 1, Apple is preparing to roll out an updated version of its Apple TV product, which has languished despite much initial fanfare.

Apple's iPhone already goes head to head with mobile phones that use Android, Google's mobile operating system, which is spreading like wildfire. Now, Google and Apple are competing on multiple fronts, including streaming music and movies to your living room -- and that's good for consumers.

Google Searching for Hollywood

With everyone from telecom and cable giants like Verizon (VZ) and Comcast (CMCSA) to Google and Apple focused on high-speed broadband content delivery to the home, Google's move to get friendly with the major movie studios makes sense. Google certainly has the wherewithal and influence to make a play for consumers' living rooms.

"There's a big opportunity here for Google to embed its technology into televisions," Kurt Scherf, a principal analyst at research firm Parks Associates, told me in May when Google TV was announced. "Google has the scale and the ability to target users and serve up ads that other players lack."

And the search giant does have entertainment ties: Google board member Ann Mather, who joined in 2005, is a Hollywood veteran who held senior positions at Paramount, Disney (DIS) and Pixar, and was instrumental in Disney's purchase of the digital animation juggernaut.
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