Sony in Talks with YouTube

According to a news article on CNN YouTube is in negotiations with Sony Pictures to acquire licensing rights to full-length content. Last week Disney agreed to licence short-form content to YouTube. To compete in the burgeoning online video market YouTube must obtain more long-form drama.

Sony Pictures' Web video property, called Crackle, could result in a boost to YouTube's ambitions to become a player in Hollywood.

Sony acquired Crackle in 2006, a year before Google bought YouTube. It's a multi-platform next-generation video entertainment network that distributes digital content including original short form series and full-length traditional programming from Sony Pictures' library of television series and feature films.

YouTube and Google can't be too choosy. The truth is that two years ago they miscalculated how much they needed Hollywood. YouTube frustrated some studio and TV executives by saying "we're not responsible for the actions of our users."

Since then, YouTube managers have changed their attitude and have focused on making the site more appealing to big entertainment companies, such as offering better-quality streams, and filtering for pirated content. Still, what was true two years ago is true now: none of the big entertainment companies is going to allow Google to build YouTube's business on their content without getting something in return.

There's also the question of what the studios intend to do with the traditional distribution model. Hollywood has long had agreements in place to release films through a complex assortment of channels, including theatrical release, DVD sales, and cable, premium, and broadcast outlets. For example, film-industry sources say the money Hollywood earns from the Web is a trickle compared with the ocean of cash it receives each year from cable providers.

Nonetheless, more and more people are canceling their cable subscriptions and turning to the Web for entertainment. Even execs from the cable companies have acknowledged this. Last week, after Disney announced the agreement with YouTube, I asked Jordan Hoffner, YouTube's chief of content partnerships, whether YouTube, Hulu, and the other Web video services can convince Hollywood to wean itself off these other distribution channels.

"I think that what we're doing is we're dealing with a fragmented world," Hoffner said. "You can't just say you're going to count out any distribution channel and focus on one because audiences are moving to other places. We're one of the places they're moving to."