Could YouTube become hub for feature films and TV shows?

For a long time, I've said that YouTube could become the Web's supreme ruler of short-form and long-form video should it ever offer feature films and TV shows.

The Web's top video-sharing site now appears to be preparing to make such a move. YouTube has begun experimenting with delivering longer videos than the typical 10-minute clips allowed on the site, Fortune magazine reported Wednesday. On YouTube now are several full-length documentaries and TV shows. (See one of those videos, Howard Buttelman, Daredevil Stuntman, embedded below.)

The question is whether Google is making the move too late.

Long-form content would mark the latest attempt to help Google cash in on YouTube's massive audience. Two years after acquiring YouTube for $1.65 billion, Google still hasn't figured out a way to profit from the site, CEO Eric Schmidt has said several times recently.

Google hasn't yet responded to my inquiries on the Fortune report.

While Schmidt has declined to detail why the company is struggling to squeeze profits from YouTube, some of the site's shortcomings as a money maker are obvious.

YouTube has become a massive video-hosting service, where people post clips of baby's first steps, a sleeping puppy, or the family picnic. Most don't attract mass audiences. Nevertheless, Google still has to pay the bandwidth costs.

Each minute, more than 10 hours of video are posted to YouTube, which "is now the majority of outbound bandwidth" for Google, Schmidt said last week in an interview with The New Yorker. "We had to retool the network."

Bandwidth costs are likely less of a worry than the advertising issues. If YouTube hasn't become a cash cow after three years as the Web's top supplier of short-form, homemade clips, perhaps its time to conclude advertisers just don't like user-generated content--or at least they don't like it enough.

Greg Sterling, an advertising and marketing analyst, said studies have shown that ad agencies remain wary of putting their brands next to user-generated content. "They don't like not knowing what they're getting," he said.

But Sterling doesn't see how offering long-form content can help YouTube. In addition dealing with advertisers who are squeamish about user-generated content, YouTube must also figure out how to advertise to an audience--regardless of the length of the video--that resents advertising on the Web.

Google has yet to discover an vehicle that can get ads in front of viewers well enough to please advertisers but not alienate viewers.

The Hulu factor, and Mark Cuban weighs in
Another challenge is that YouTube's move toward long-form video comes after many of the big content suppliers have already found other Web outlets for their material. For instance, Disney last week began showing full-length movies online, beginning with Finding Nemo.

The best example of these attempts maybe Hulu, the video portal created by NBC Universal and News Corp. The site offers popular TV shows from both founding companies as well as shows owned by other media firms, including Viacom. Critics have praised the site for delivering high-quality video and for enabling users to embed Hulu videos on other sites.

Hulu has other advantages, such as owning the rights to show all the video it offers, Mark Cuban wrote on his blog Tuesday. Cuban, owner of the National Basketball Association's Dallas Mavericks and the cable channel HDNet, is one of YouTube's biggest critics.

He wrote that Hulu is crushing YouTube in revenue per video and revenue per user primarily because "Hulu has the right to sell advertising in and around every single video on its site," Cuban wrote. "It can package and sell any way that might make its customers happy."

YouTube doesn't have the same luxury because it can advertise only "on the small percentage of videos on its site that it has a licensing deal with" Cuban wrote.

In an e-mail on Wednesday, Cuban was also skeptical that providing long-form content could help YouTube.

"By the letter of the law, YouTube is a hosting service," Cuban said in an e-mail. "They aren't allowed to know what the content of the user uploaded videos they host are. It could be a hard core porn or the daredevil stunt-man movie that is 95-minutes long. Hulu knows exactly what they stream...I think long or short form, Hulu is a better platform to make money from."

On YouTube is copyright content that the company can't sell ads against or else risk losing its protection from lawsuits under the Digital Millennium Copyright Act, which protects hosting sites and ISPs from being held responsible for illegal acts committed by users.

That brings us to whether YouTube can acquire the rights from networks and studios that have long accused the company of failing to protect copyright.

This is where I think there will be little problem for YouTube. While it has been criticized for dragging its feet on providing filters that protect against piracy, it can provide content creators an audience of 71 million unique users worldwide every month.

If YouTube can deliver movies and TV shows in high quality, entertainment industry executives are going to want to be in front of YouTube's audience.