MGM to show movies on YouTube!

Metro-Goldwyn Mayer Studios, better known as MGM, will be the first major movie studio to post full-length feature films on YouTube, the company announced Sunday.

CNET News reported on Thursday that YouTube was preparing to launch a feature-film service after spending months smoothing over fractured relationships in Hollywood.

MGM will likely not be the last studio to post full-length feature films on YouTube, according to an industry source. Last summer, Lionsgate announced a partnership with YouTube, but that deal calls for the studio to offer only short clips from films and TV shows. MGM will also post TV shows on YouTube, according to multiple reports published on Sunday.

For Google, YouTube’s parent company, the deal is a turning point in its relationship with Hollywood. There was lots of distrust and bitter feelings in entertainment circles after the way Google dealt with copyright infringement on its site. But that was when Google was in the driver’s seat. Back then, thousands of YouTube’s users would post clips from TV shows and films on the site and YouTube executives told the studios they were powerless to prevent it–all the while YouTube amassed an enormous following.

The law, according to YouTube, didn’t hold them responsible for crimes committed by their users. Hollywood was further frustrated when Google required copyright owners to send written requests when they wanted a clip removed from the site.

The studios have Hulu to thank for forcing Google to soften its approach. Hulu, the video portal formed by NBC Universal and News Corp., has become the top outlet for watching full-length films and TV shows on the Web. The site is generating as many ad dollars in only its first year in business as the three-year-old YouTube, according to reports.

If Google wanted to duplicate Hulu’s success, it needed to make nice with film studios. So it did. YouTube has developed systems that help keep pirated clips off the site and is developing video players that present clearer images than the site’s standard player. When it comes to financial terms, Google has proven much more flexible than in the past, according to three studio sources.

The typical splits right now call for the studios to pocket 70 percent of the profits and Google gets the rest, say the sources. What MGM and Google negotiated hasn’t been disclosed.

The only obstacles to Google and YouTube getting more studios to post full-length movies is Google’s insistence on a particular ad format, say the sources. They declined to say which ad unit Google prefers. The other hurdle is that some studios are skeptical that users will accept all the ads that need to accompany a feature film in order to make it profitable.