The great reinvention of YouTube continues at Google (NASDAQ:GOOG), with a new focus: video on demand. A report earlier this week at The Wrap said YouTube would begin offering Hollywood blockbusters for rental and purchase through a new video-on-demand service. The initial lineup of partners includes Time Warner’s (NYSE:TWX) Warner Brothers, Comcast’s (NASDAQ:CMCSA) Univeral Pictures, and Sony (NYSE:SNE). Studios like Lionsgate (NYSE:LGF), which already provide a large number of archival movies for free streaming on YouTube, will begin offering new films as well.
This new initiative would be the first time Google and YouTube would go toe to toe with Apple’s (NASDAQ:AAPL) iTunes, Amazon’s (NASDAQ:AMZN) digital movie store, and the many other digital video storefronts that rent downloadable and streaming movies in the same window as DVD releases.
This won’t be a game-changer for YouTube. Offering rentals is simply what YouTube needs to do to stay relevant in the video market. Even Facebook offers rentals following a recent partnership with Warner Brothers.
That doesn’t mean Google can’t make money off of these rentals, but it will need to leverage the best of YouTube to distinguish its service from the many competitors out there. Here are three ways Google can evolve its video-on-demand YouTube service into a profitable venture:
It can’t be emphasized enough how important it will be to offer a subscription-based option for renting movies through YouTube. Google’s audience is already aware that YouTube exists and that it can be used to watch full-length movies. But that audience won’t come to YouTube for individual movie rentals — why go to YouTube when they already have their Time Warner cable box at home and an iPhone in their hand? The key is to offer a premium subscription that would give users unlimited access to a number of newly released films for a monthly fee. Make it higher-priced than Netflix’s (NASDAQ:NFLX) famous streaming subscription plan and only offer access to certain movies for one month after they’ve been released. The high price will appeal to studios while the premium content appeals to audiences.
There is nothing quite so horrifically incendiary as a YouTube video’s comments section, but the popularity and ubiquity of user feedback on the service is easily one of its greatest resources. By making user commentary and feedback an active (albeit risky) feature of its video-on-demand service, Google has the chance to leverage its community to grow business in ways that iTunes and Amazon can’t match. For example, let audiences watch a stream of user comments while watching a rented movie. An old trick that worked well for building YouTube’s amateur video content could effectively distinguish its for-pay Hollywood content.
Make rentals available across platforms
It’s essential that each video-on-demand rental be made available on all devices that can access YouTube for the rental’s duration. Somebody who pays to rent The Hangover 2 through a web browser will need to be able to pick up their Android phone or iPad and immediately continue watching the film. This sort of cross-device continuity has been extremely helpful for Netflix. Google can beat Netflix at its own game, however, by letting users simultaneously view a rental on multiple devices.