Another Brick in the Pay Wall

Score another one for paid content. Just after The New York Times confirmed what we’d all suspected (is “feared” too strong a word?) — that it’s going to charge for online access again — YouTube became the second media giant in a week to announce a shift from free access to paid content. The user-generated video specialist is launching an experimental digital movie-rental service, and its first venture into transactionable content. But will it work?

The dynamics are different. In the case of the Times, customers will have little choice but to pay whatever the Gray Lady decides to charge (it hasn’t said yet and the service won’t launch for another year). On the other hand, YouTube will continue to serve up as many pet-trick videos as its armies of users will upload, so it’s not changing its core business model (such as it is).

But in dipping its toes into the movie-rental stream, the Google-owned site is putting Netflix, Blockbuster, Amazon and others on notice that it plans to go head-to-head with them.

For now, YouTube’s foray into film rentals is limited. It’s offering a handful of titles featured in the 2009 and 2010 Sundance Film Festivals for rent under terms dictated by the content owners. It just so happens that all the content owners are using the same price point: $3.99. The content owners can also specify the conditions of the rental transaction — things like how long the customer gets to keep the movie before it self-destructs.

For the record, the titles are “The Cove,” “One Too Many Mornings,” “Bass Ackwards,” and “Children of Invention.” This isn’t the kind of offering that’s going to make a dent in Netflix’s 17,000-title “Watch Instantly” library or its 100,000-strong DVD catalogue. But we all know that Google isn’t stopping there. For months, YouTube has been rumored to be negotiating with major Hollywood studios, so it’s only a matter of time before this pebble morphs into an avalanche.

What are YouTube’s chances of success in the movie rental business? As tough as it will be to compete with hardened veterans like Netflix, YouTube’s biggest obstacle may be itself. In the five years since it launched, the site has etched itself into the public consciousness as synonymous with short, user-generated clips. People use the phrase “YouTube video” to describe any clip that fits those loose parameters. That includes a lot of things, but not feature films or even television shows. We never think of curling up on the couch with a good YouTube video, but we look forward to those Netflix movies, whether they come in a red envelope or through our broadband pipe.

Then there’s the matter of rental fees. Not to keep harping on the Netflix model, but it’s awfully handy to know that your streaming activity is covered under the monthly fee you were already paying anyway. A similar thing can be said for iTunes or Amazon. Once you make the mental leap and surrender your credit card info, you can download songs, TV shows, movies and mobile apps without feeling like you’re opening your wallet. Yes, I realize we’re dealing with psychological differences here (you’re still spending money in all cases), but these things matter at a time when people feel financially pinched because of the recession, not to mention bombarded with millions of new ways to spend a few dollars each month.

In order to make this work, YouTube will have to change the mindset of its hundreds of millions of viewers. A tall order.

If it fails, we’ll shake our heads and lament the fact that YouTube became the victim of its own success. On the other hand, if it pulls this off, we’ll hail its achievement as a case study in brand reinvention.

Personally, I’m rooting for the latter scenario, challenging as it might be to pull off. What do you think?