• Cnet News.com, Wednesday, November 12, 2008 11:16 AM

Are YouTube and Hulu destined to become movie destinations? It's an avenue the companies are certainly exploring, but the real question, Cnet's Greg Sandoval says, is how to exploit it.

For one thing, there are concerns about ad-supported business models, and whether studios can match or exceed the kind of returns they've seen from pay-TV, DVD sales, and digital services like iTunes. Among the challenges: consumers balking at the idea of watching two-hour long films on their PC, or clicking away if asked to sit through the same number of commercials that are shown on traditional TV. Also, in the case of Hulu, the joint venture from Fox and NBC, revenue has to be split with distributors like Yahoo and AOL.

Researcher Tom Adams, who owns and operates an entertainment industry research and consulting firm, simply doesn't think it's worth it for Hollywood studios to throw their weight behind sites like YouTube and Hulu. "The issue comes down to ad-supported versus the paid model," Adams said. "For ad supported, the question is how many ads can you run and how much money can you generate per viewing? That has to be compared with the money made from rental or movie purchases." He points out that studios aren't making the same content available for ad-supported services as on rental and sales sites like iTunes. He argues that these services, while still only in their beginning stages, will always be less important to the studios than sales.

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