YouTube: Time to Start Cutting Entertainment Deals

(MoneyWatch)  YouTube may be about to enter a key dealmaking phase kicked off by plans to run full-length ad supported movies on its site. However, the big missing element may be a better cut for the entertainment industry.

Let's connect a few dots on YouTube:

• CNET News' Greg Sandoval reports that YouTube will begin offering feature films from at least one of Hollywood's big studios next month. These films would reportedly be ad supported.
• YouTube's video-identification systems are roughly 75 percent accurate, according to NBC Universal. YouTube doesn't reveal the accuracy of its internal video identification system. But that 75 percent accuracy rate means that as much as a quarter of content owners could be requesting takedowns.
• YouTube is getting serious about monetization and Google, the site's parent, wants to find a way to make money from the video sharing site. Piper Jaffray analyst Gene Munster said Thursday that display advertising on YouTube is holding up (from a small base though).

Add it up and all signs point to a friendlier YouTube to the content industry. One key point Tom Steinert-Threlkeld makes in his YouTube special report is the iTunes precedent. Apple cuts content owners in on the revenue share and gives up 70 percent of the revenue. If you're a content owner why would you allow YouTube to cut anything different?

Download: YouTube's video ID system: Is 75 percent accuracy good enough? Video ID system cost benefit and revenue calculators. (15-page special report includes: Executive checklists, YouTube's vendors and analysis.)

As for MySpace's deal with MTV I'd reckon the revenue split is nearly identical to what Apple provides. MySpace won't detail specifics on the deal. My hunch is that YouTube and Google ultimately move into a similar direction. If YouTube emulates iTunes' model a lot of problems?€"which divert valuable resources?€"go away.

• Also see: Google's favorite penny stock: Nexicon

Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
Credit: ZDNet