Google's Box-Office Bomb

Google (NASDAQ:GOOG) won't come out and say it, but its gamble over the weekend to establish a digital video-rental service is a box-office bomb.

It was easy to predict that YouTube's user base wouldn't warm up to paying $3.99 to rent one of five critically acclaimed Sundance-screened films. Folks approach YouTube as an outlet for short -- and free -- clips.

Apple (NASDAQ:AAPL), Blockbuster (NYSE:BBI), and Amazon.com (NASDAQ:AMZN) have all struggled to push digital video rentals, while Netflix (NASDAQ:NFLX) has enjoyed much better luck in that department. And all of these players have systems in place to deliver those films directly into set-top boxes, DVRs, portable media players, or other home-theater gadgetry, a realm into which YouTube is just beginning to venture.

However, even a cynic like me is shocked to see how poorly YouTube's rental debut went over the weekend. It promoted the offerings on its landing page on Friday. I kept tabs on the slow trickling of the view counts during the weekend, and this is where the tally stood as of last night.

Ouch! We're talking about 1,422 total views, or $5,673.78 for all of the rentals at $3.99 apiece. If Google is giving the filmmakers roughly two-thirds of the take -- and I'm going by other digital-media standards, since the site isn't publicly spelling out the royalty payouts -- each of the five productions will walk away with just hundreds of dollars for their role as video-sharing pioneers over the weekend.

Maybe YouTube made the system too cumbersome, requiring film buffs to jump through too many hoops, and ultimately requiring payment through Google Checkout. It could have at least accepted eBay's (NASDAQ:EBAY) PayPal or a major credit card like Visa (NYSE:V), instead of forcing users toward its proprietary transaction platform.

Google also runs the wildly popular AdSense program for third-party website publishers, and YouTube Partners as its revenue-sharing offering for popular video creators. Where were they in all this? At the very least, YouTube could have approached some of the bigger Partners to promote the rentals in exchange for a piece of the action.

Despite generating a fair deal of publicity for the rollout in the financial media, YouTube's effort failed to resonate with the tastemakers on its site.

If anything, YouTube may find itself on damage control duty this morning. YouTube users were able to rate the films, even without purchasing them. There are hundreds of more ratings than views, and many of them are skewing toward lower one-star reviews -- likely as a reaction to YouTube charging for content in the first place. Of the five films, I have only seen The Cove, and it's highly unlikely that its uninspiring average rating of 2 1/2 stars out of 5 stars owes to folks who actually saw the documentary about a mass slaughter of dolphins in Japan.

YouTube shouldn't give up this early, of course. Opening weekend may make or break a Hollywood flick, but an operating model takes longer than that to prove itself. Let's hope that Google comes back with fewer restrictions, a wider selection, and lower introductory price points if it really wants YouTube to eventually excel as a digital ticket-taker.

Will premium rentals on YouTube ever work? Share your thoughts in the comments box below.