iPhone to Stream YouTube Clips

Apple ( AAPL) said Wednesday that it created an application to let iPhone users wirelessly download and play video clips from YouTube.

The move bolsters the iPhone's appeal as a portable entertainment and Internet device and tightens the bond between Apple and YouTube's parent company, Google ( GOOG).

Apple will be the first company to use YouTube's mobile video format that's suited to a cell phone's smaller screen. YouTube's mobile format also prevents videos from sapping a cell phone's battery life.

In late May, Apple announced that its television set-top box would be able to download and play YouTube videos over wireless home networks.

Most YouTube videos are homemade, but some companies, including CBS ( CBS), have experimented with airing clips of copyrighted broadcast on the site.

Giving Apple products access to YouTube increases the video material available to iPhone and Apple TV users who can also pay to download copyrighted videos and movies from Apple's iTunes service.

The company is looking for ways to increase the value of the iPhone -- due out June 29 -- for which it is charging a premium price of $499 for the base model and $599 for additional memory.

Apple designed a touchpad keyboard rather than actual keys to maximize the size of iPhone's screen so that users could easily watch videos and surf Internet sites.

The device also lets users log onto the Internet either through a cellular network or over a Wi-Fi network such as those available at coffee shops, airports and other public sites.

For its part, Google stands to benefit by gaining more outlets on which to run the advertisements it gets paid for running alongside of YouTube videos.

Time Warner ( TWX) cable news channel CNN, for example, is working with YouTube to create videos of people posing questions to presidential candidates.

The videos run alongside advertisements for reporter Anderson Cooper's coverage of the presidential debates.

Shares of Apple were off 93 cents to $122.82; Google rose $1.41 to $515.72 midday.

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