Daily Debrief: The epic fight for online movies continues

>> Welcome to the Daily Debrief. I'm CNET's Kara Tsuboi here with CNET News Senior Writer Greg Sandoval to talk about feature length films and other types of video online; such as Google, You Tube, such as Hulu, such as iTunes of course, and there's been a lot of controversy recently Greg it seems with major studios committing to putting their films on these various websites. What's the problem? Why won't they do it? >> Greg: Well it turns out that you have to stick a lot of ads into these feature length films to make the kind of money that's profitable for the studios. But then you have the potential problem with alienating your users. >> Kara: See we don't want to see a bunch of ads. >> Greg: Exactly and they're not used to it. So, but then how do you give people this option of watching movies online? So this is the tightrope they have to walk right now. >> Kara: It seems like one of the options they have found is to go through Apple's iTunes. >> Greg: And the studios would love to find a competitor to iTunes. They don't want a controlling video like they do in music but nobody's come around, and it looks like Hulu is having this problem. According to the source I've talked to they're trying to stick ads into the feature length film but not alienate the audience, so there's plenty of money sitting there, there's plenty of advertisers who want to be a part of Hulu. But that can't sell anymore because they can't put it into the video and risk putting off their audience. >> Kara: That's right more studios seems to sign on to Hulu first and that's for a couple of reasons I understand. Why don't you explain what makes Hulu so attractive? >> Greg: They like Hulu because they know Hulu. It's NBC Universal and Newscorp and they know what they're getting. The video quality is excellent. >> Kara: There you go. >> Greg: That's what people want. You want to watch a full length film on your laptop or your computer, you want to be able to see the images, they want them to be sparkling as best quality as you can get. >> Kara: Right as if it's your TV at home. >> Greg: Exactly. >> Kara: Yeah. Okay so why hasn't You Tube been as popular as Hulu as a place for these movies? >> Greg: Well they haven't been able to get...You Tube had an attitude towards Hollywood. It's well-defined, I didn't write it, this is how it was. They didn't care. The users were posting unauthorized clips on You Tube and You Tube was shrugging its shoulder and saying, "Hey look we're not responsible for what they're doing. We'll take it down when you ask us but we're gonna let it go up and that created a lot of bad feelings. >> Kara: Yeah you can kind of see why can't you? >> Greg: Exactly. As far as I was concerned, You Tube was a rogue. I guess that's what Viacom's CEO said. He called them a rogue company. >> Kara: So who's approaching who? Is Google now or You Tube--is You Tube now going after these studios saying, "Come back, come back, we want you. >> Greg: Absolutely, they're wooing them and they are successfully wooing them. >> Kara: Successful in what ways? >> Greg: They're telling them hey look we're not gonna drive a hard bargaining war with our asking for the revenue splits. Right now my sources are saying they're offering 70% to the studios, keeping 30%. They're saying we're gonna take down unauthorized clips, we have the systems to do that now, we're gonna get you a better video player and they're talking about really presenting this and supporting this as a vehicle so. >> Kara: A couple of studios have already signed on, at least for small clips. >> Greg: Short films--that's right Lions Gate and obviously the most recent one MGM. >> Kara: Okay but possibly more to come. Who knows? >> Greg: Yes. >> Kara: Okay well there you go. I mean that sort of sets up a competitor to Hulu which is their competitor of iTunes so there could be more options on the market then. >> Greg: Yes. Definitely they're coming. >> Kara: They're coming. The story is just beginning to unfold it sounds like. >> Greg: It is. It's exciting. >> Kara: Thank you so much. Senior Writer Greg Sandoval, I'm Kara Tsuboi. We'll see you on the next Daily DeBrief.