By Jonathan Strickland | Fri Jan 22, 2010 10:20 AM ET

I’ve been saying for the last few years that the Internet will become a major, if not dominant, delivery method for entertainment. I think my prediction has been pretty accurate so far. You can find televisions or set-top boxes that stream Internet content directly to the TV screen. Sites like Hulu give people the opportunity to view television programs and movies through the Internet. And now YouTube is stepping up to become another major provider of paid content online.

When I think of YouTube, the first thing that comes to mind is user-generated video (often involving cats, men getting kicked in the crotch, or cats kicking men in the crotch). But YouTube has been expanding its role to provide more professional content. Want to watch a music video? There’s a good chance you’ll find a sanctioned video on YouTube, complete with accompanying advertisement. While companies once spent countless hours scouring YouTube for videos that infringed upon copyright, now they’re looking at YouTube as a potential marketing machine.

The newest development is a rental program. YouTube announced that it has entered into a partnership with the Sundance Film Festival. Five films from the 2009 and 2010 festivals will be available to view on YouTube for the low, low price of $3.99 for a 48-hour rental. The promotion starts today (January 22) and lasts until January 31.

The rental program is good news for independent film makers. While the cost of creating a film has decreased dramatically over the years, it’s still a challenge to get a finished film into theaters and in front of an audience. Some movies never venture beyond festival screenings. YouTube’s agreement with the Sundance Film Festival will give filmmakers a chance they wouldn’t otherwise have. Of course, that’s assuming people will be willing to pay for an online streaming experience and watch an independent film in the first place.

From the perspective of Google (YouTube’s parent company), partnerships like this one are vital. Google has lost money running YouTube ever since acquiring the video sharing site. Ad revenue hasn’t brought in enough money to make the site profitable. Rental agreements like the one with Sundance could create a new avenue for generating money.

I think it’s a smart move. There are plenty of other services that will stream content to your television. Netflix is becoming pervasive — you can access it on devices like a TiVo or Roku box or through video game consoles like the Xbox 360 and PlayStation 3 (Nintendo Wii is soon to follow suit). But Netflix’s streaming video library is a fraction of the size of its DVD library due to licensing issues. And Google’s approach may allow people to view movies and other content that hasn’t otherwise moved into the home theater space. In other words, Google won’t be competing directly with Netflix because the content will be different.

I think the biggest barrier to seeing widespread adoption of the Internet as a delivery mechanism for entertainment isn’t technological. Broadband issues and hardware aside, the biggest challenge is creating an infrastructure that is profitable. Right now, Internet content simply isn’t in the same league as traditional media. It’s not even close. But as consumers demand more access to entertainment through the Internet, I think the dollars will follow. Maybe Google will be leading the way.


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