Google has admitted to a mistake in deciding how to compensate users of its soon to be defunct paid video download service.

The company now plans to offer cash refunds for all purchases and extend support for the videos into 2008.

"When your friends and well-intentioned acquaintances tell you that you've made a mistake, it's good to listen," Google video product manager Bindu Reddy wrote on the official company blog.

The company announced last week that it would be shutting down the service in favour of its ad-supported Google Video and YouTube offerings.

Google's original policy called for a full refund for all users who purchased videos before 18 July. Videos purchased prior to that date would be refunded as credit for Google Checkout, the search firm's payment service.

The company claimed that this was because addresses and credit cards used before that time may no longer be valid.

After an outcry from angry users, however, the company decided to amend the policy, awarding full cash refunds for all purchased videos. Users will be allowed to keep any Google Checkout credits already awarded.

"We should have anticipated that some users would see a Checkout credit as nothing more than an extra step of a different (and annoyingly self-serving) kind," said Reddy.

Google also backtracked on its plans to remove playability on the videos once the service closes. All purchased videos will now be playable on the user's system for the first six months after the service shuts down.