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YouTube Dips Its Toe Into Paid Movie Rental

Thursday, 21 Jan 2010 | 9:56 AM ET

YouTube is departing from its ad-supported model and dipping its toe into a whole new world -- paid rental of streaming movies.

The Google unit announced on Wednesday night, the eve of the Sundance Film Festival, that it's offering five films from this year and last year's festival for rent online. The films will be available online, at prices set by the filmmakers (YouTube Starting this Friday, through the following Sunday January 31,

The test is small, and with just a handful of niche art house films, but the idea that YouTube would offer unique content with a pay model is huge. It's a step towards competition with Apple's iTunes as well as Netflix and even Hulu.

YouTube will allow content creators to decide how much to charge for films and how long the rental product is available to the consumers — 24 hours or 7 days. This lends itself well to independent films that are often owned by an individual who can make that distribution decision, also giving a new distribution mechanism for films that often never reach the mainstream. Most importantly, it sets the stage for media giants to sell rentals through YouTube and get paid. It's a major acknowledgment that different types of content require different revenue models.

YouTube emphasizes that this is "a really early beta" test of the platform — they're starting out small to work out the kinks of the functionality. Down the line they aim to add caption functionality, the highest quality high-definition, and the ability to syndicate across other websites.

YouTube is starting with Sundance because of its history at the festival — the company has had a presence there for years, with a 'YouTube screening room' etc. Why not start with the filmmakers who are desperate for distribution. Once they make it work with the folks who are hungry for this online option, then they can move on to the companies that are more resistant to working with YouTube.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.