YouTube May Take On Blockbuster, Netflix

NEW YORK (TheStreet) -- YouTube is moving into Netflix and Blockbuster's terrain, as it explores streaming movie rental options.

The online video site, which is owned by Google(GOOG Quote), is reportedly in talks with Lions Gate Entertainment(LGF Quote), Sony Pictures, a unit of Sony Corp.(SNE Quote) and Time Warner's(TWX Quote) Warner Bros., to stream movies.

The news sent shares of Netflix(NFLX Quote) and Blockbuster (BBI Quote) tumbling in afternoon trading.

If such a deal goes through, it poses a threat to Netflix and Blockbuster's rental businesses. Blockbuster's in-store rentals, especially for new movies, are typically higher than $3.99, while Netflix charges users $8.99 a month to rent.

While YouTube's entrance into movie rentals most likely poses a bigger threat to Netflix, which is growing its streaming movies base, Blockbuster has been struggling to hold on to its market share in the face of newer technology like Coinstar's(CSTR Quote) Redbox rental kiosks.

Netflix fell 4% to $40 in afternoon trading and Blockbuster sank 6% to $1.13.