YouTube goes to the movies
Google's video site hopes to sell more ads in a deal with MGM to show full-length films.
NEW YORK (Fortune) -- For months, YouTube has been making a pitch to Hollywood studios: Give us your films, and we'll make you money.
The studios balked. Sure, they reasoned, YouTube had a massive audience of 74 million monthly users. But the Google- (GOOG, Fortune 500)owned site only wanted to give them a share of its ad revenues. It wasn't offering them any money upfront.
Now Hollywood is warming up to the Internet's top video site. On Monday, YouTube will announce an ad-revenue sharing deal with MGM - home of James Bond, the Pink Panther and Rocky - that will let the site show full-length movies for the first time from a major Hollywood studio.
Jordan Hoffner, YouTube's head of content partnerships, called the agreement a "watershed moment' for the company: "We are really happy about MGM. They have an incredible library."
It's easy to understand why YouTube is excited. Founders Chad Hurley and Steve Chen want the site to be more than just a destination for clips of skateboarding dogs, experiments involving Mentos and Diet Coke and the occasional Simpson episode that needs to be taken down immediately because of copyright infringement.
After all, there are only so many ads YouTube can put into a short clip like "Tiger vs. Bear." A feature-length film like "Rocky IV" has room from many more marketing messages.
The site is already showing full-length independent movies like "Harold Buttelman, Daredevil Stuntman." Now YouTube can boast that it has the kind of big budget movies that people can watch on Hulu.com., News Corp (NWS, Fortune 500).'s partnership with NBC Universal. (GE, Fortune 500)
There's only one catch. MGM - owned by an investor group led by Providence Equity Partners, Sony and Comcast (CMST) - will only be posting only a few of its 4,000 movies on YouTube at first.
"I don't think you are going to be seeing a James Bond movie on YouTube," said Jim Packer, MGM's co-president of worldwide television. "That's a very special franchise for us. We are very cautions about where we put those movies."
He said MGM would offer lesser-known movies that aren't as easy to sell to television networks and on DVD. Its initially plan is to share films it also shows on Impact, its video-on-demand cable partnership with Comcast devoted to action movies.
The first MGM movie to go up on YouTube will be a Lone Wolf McQuade, a Chuck Norris vehicle, "Bulletproof Monk," starring Chow Yun-Fat.
Packer said MGM is also thinking about creating a special YouTube site for women to show films like "Fame" and television shows from its vault such as "Cagney & Lacey."
The YouTube deal would enable MGM to both make money on such less-sought-after content and also promote its DVD and theatrical releases, according to Packer.
"YouTube has a lot of traffic," he said. "It's no different from being in Wal-Mart. You want to be in a store that has a lot of traffic."
Hoffner says YouTube expects to reach similar agreements soon with other movie studios. He points out that the site already has content-sharing partnerships with television networks like CBS (CBS, Fortune 500), BBC Worldwide, Fox, Showtime and HBO.