Google’s predicted deal with Hollywood is both good and bad news.

Google staffers may well have been wondering since 2006 what they would eventually do with YouTube. It’s huge, it’s eclectic and a great way to get famous for five minutes. But when it comes to content, the YouTube user has to kiss a lot of frogs before meeting a prince. Now sources close to things are saying that a deal with Hollywood to screen new features on YouTube is close.

The deal is to be a global one, and will use pay-per-view as the business model. The service is scheduled to be up and running by the end of 2010. Hopes and excitement are high in the world’s movie capital, where the studios are desperate for new revenues to replace DVD sales, which have seen sharp falls recently.

Viewers will stream rather than download the films and pay around £4 for newer titles. The movie YouTube launches would be syncronised with their DVD release.

There are three interesting points to this deal. The first is that it puts Google nose to nose with Apple in the digital film distribution sector. With competition between the two on this and myriad other fronts, you have to ask now who is going to win out: the software/social/info/entertainment appeal of Google, or the hardware/gadget/design/pro/entertainment whiz-kid that Apple has always been. The Slog suspects that the medium term result will be one of complementary domination. By the time the dust has settled on the modernisation of moving-image entertainment, these two groups plus Microsoft and Amazon will control the virtual and hardware world of infotainment and networking. I don’t see this as a welcome prospect.

Switching to purely commercial considerations, while advertising has never played much of a role in the Video/DVD sectors, a streamed product may well be entirely different: it gives the viewer less flexibility – and potentially a lower ability to avoid commercial messages. The ad agency business should be eyeing the opportunity with great interest: after all, the global numbers involved are astronomical.

Finally, the upside; yes, there may well be one. Taught a pain-free lesson by the grisly demise of the music business as we knew it, the studios are wisely opting for streaming. But for home-garage movies, the same opportunities apply to break into a decent-sized audience without a Hollywood deal as those grasped by young music bands ten years ago at the dawn of downloading. This could be an exciting time for indie movie-makers…and as content quality must now become central to what YouTube is about, I’d be surprised if the Googlies don’t have plans to encourage – perhaps even sponsor – this: the company’s strapline is, after all, ‘Broadcast Yourself’.

Following last week’s rare blunder about the US growth rate, I’d like to reassure loyal Sloggers that this story emanates from the same axis which allowed us to scoop the Verizon deal.