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Blockbuster won’t be pleased: Google’s video site is hooking up with Hollywood to build a movie rental business.

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The ‘broadcast yourself’ site, which gets eyeballed more than more than 2 billion times per day, is to morph into a serious competitor to iTunes, Amazon and video streaming site Netflix, in the movie rental business, which should be up and running next month, reports suggest.

And this is just its latest attempt to move away from amateur content, which has seen the media giant stream live events like Laneways Festival here in Australia and also shows independent movies, announced at Sundance film festival 2010.

The premium movie-on-demand service, will provide internet streaming of new releases starting at US$2 though prices will differ for each movie.

The film houses which YouTube are said to have signed licensing agreements with include Sony Pictures Entertainment, Warner Bros and Universal.

However, reports suggest further deals have been complicated by existing contracts between other Hollywood studios and streaming services like Netflix.

The Google owned video site has been veering this way for a while, and recently hired former Netflix boss Robert Kyncl as VP of TV and film entertainment as well as other execs from Universal and Paramount, so will be well versed in the workings of the industry.

Earlier this month, Kyncl hinted at such a move, saying “imagine if you had a video store on YouTube, where you could rent or buy the movie without being sent elsewhere.”

However, Aussie YouTube fans needn’t rush to the PC just yet – the service, when first launched, will be confined to the US for now.

Amazon’s new Instant Video service, offers thousands of new movies and 90,000 shows to buy or rent in HDTV as soon as they are released, but for a fee, although is free to its Prime members.

The movies cost $2.99 for a 3-day rental and $11.99 to buy the permanent viewing.

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