YouTube has launched a Canadian online movie rental initiative one day before Blockbuster Canada announced the closure of its remaining 253 stores.

The rental service rolled out quietly on Wednesday, August 31, allowing Canadians access to Google Inc. video portal where they can rent an assortment of feature films and a selection of key Canadian content.

Prices vary.  New releases cost $4.99 with older releases going for $3.99.  There are even some titles available for free.  Yes, for free.  We can’t confirm if those titles are ones that you would want to watch, or some of the titles that you would see in the large WalMart discount bins.

Rental periods will range from 24-48 hours, with more recent releases being available for the lesser of the time.  The best part is that your time begins from the time of first-play as opposed to when it was downloaded.

Currently, YouTube has 1,000+ titles available, with some titles released in Canada that are not available on YouTube’s US rental service.  The company has also indicated that there will be additional features available similar to what you would see on DVDs.  This includes behind-the-scene features, cast and crew interviews, deleted scenes and gag reels.

“Over time, we’ll also be adding additional videos and features to YouTube Movie Extras so that you can get even more into movies on YouTube,” they noted in their press announcement.

The move to offer full-length films on top of the site’s user generated content is just the latest strategy in a series of moves to compete with other rival video streaming services such as Netflix and Hulu.  It is also widely speculated that Google will make a run at Hulu, which is currently courting purchase offers, a move which would give YouTube access to a library of first-run US network television content.

Market research firm ComScore Inc. released a report in late April that indicated Canadians spend more time watching online video content than any other country, making this move a likely cash-cow for YouTube.  It was also an indicator that the area of DVD rentals in this country was nearing an end, a fact that was further supported yesterday, September 1st, with Blockbuster Canada’s announcement of the imminent closure of its stores.  The receiver handling Blockbuster’s bankruptcy cited the fact that a buyer could not be found as reason for the closings.  Sadly, it will mean the loss of 2,300+ jobs.

You can check out the YouTube Canadian rentals store here.