LOS ANGELES (Reuters) – Shares of movie rental companies Netflix Inc (NFLX.O) and Blockbuster Inc (BBI.N) fell on Thursday, dragged down by news that online video site YouTube is talking with several major movie studios about renting movies, analysts said.

Shares of Netflix fell about 4 percent to $40.10 while shares of Blockbuster declined about 10 percent to $1.08.

A deal between YouTube, owned by Internet search giant Google Inc (GOOG.O), and studios could pose stiff competition to Netflix’s online streaming service and movie rental retailer, Blockbuster.

"The thinking is if you’re going to rent a movie from YouTube, you’re not going to rent from a Blockbuster store or Netflix," said Edward Woo, an analyst at Wedbush Morgan Securities.

Woo said that a deal would likely hurt Netflix more, since the subscription-based company has a much deeper digita

Netflix, Blockbuster shares fall on YouTube deal | Markets | Hot Stocks | Reuters