By Maggie Shiels
Technology reporter, BBC News, Silicon Valley
Google paid $1.65bn for YouTube in 2006
Video-sharing site YouTube is taking its first steps into the online movie rental business.
The fledgling service will go live on 22 January. Initially only five films will be available to rent.
The movies will come from the 2009 and 2010 Sundance Film Festival and will only be available in the US.
The move for the Google owned company represents a major development for the site which has been looking for ways to boost its bottom line.
"This is a huge move for YouTube in the sense of them trying to monetise the site," Mike McGuire, principal analyst at Gartner Research told BBC News.
"This certainly opens the door for them with bigger movie studios."
Content providers will be able to set their own prices, with YouTube taking a cut of the revenue. All but one of the Sundance films is being offered for $3.99 (£2.50) each for users to watch over a 48-hour viewing period.
The site which is best known for its user-generated content, including dogs on skateboards and performing cats, said 20 hours of video is uploaded every minute.
Last August, Comscore reported that over 10 billion videos were streamed on YouTube.
Industry insiders say this first step into online rental is a curtain-raiser for more ambitious pay-per-view plans.
It is expected that in the near future the site will expand its rental catalogue with television shows and feature films from major studios.
Persuading studios to part with movies like Harry Potter will be key
"Content is king in this kind of business and Sundance is a good first step," said Mr McGuire.
"Negotiating with the major studios over distribution rights however is not for the faint hearted. Google has to perfect its delivery model and its billing system."
YouTube already offers full-length films from Metro-Goldwyn-Mayer's archives. It is expected similar deals like this will emerge in the coming weeks and months and extend to newer movies.
In its blog, YouTube hinted at that possibility.
"In the coming weeks we'll also invite a small group of partners across other industries, in addition to independent film, to participate in this new option."
Some industry watchers say YouTube has had a tough time in the past persuading the studios to part with their crown jewels such as newly released movies and Hollywood blockbusters.
"YouTube has had little luck over the last several years wooing major studios and networks to stream premium content on the site, which would make it easier to draw advertising," said Ben Fritz of the Los Angeles Times.
"Most studios have instead opted to put their content on Hulu, a joint venture of NBC Universal, News Corp and Walt Disney that has had more success luring marketers."
Analysts point out that the pay-per-view movie offering will put YouTube in direct competition with other services including Apple's iTunes store, Amazon.com and Microsoft's XBox Live.
The first five films for rent are "The Cove," "Bass Ackwards," "One Too Many Mornings," "Homewrecker" and "Children of Invention."
The Sundance film festival runs until 31 January.