It's official: Disney offers short-form YouTube channels

Update 4:50 p.m. PDT: To include comment from entertainment industry source on YouTube's DRM issues.

Disney has agreed to post short-form video content on YouTube, a deal that might come as a bit of a disappointment to those who had hoped to watch full-length ESPN sporting events or episodes of ABC's "Gray's Anatomy" on YouTube.

But those people shouldn't lose heart. This could be the start of something bigger.

Disney announced on Monday that it would launch "multiple ad-supported channels featuring short-form content from ESPN and the Disney/ABC Television Group." Under the terms of the deal, Disney can sell its own ads that run with its content if the company chooses. Disney's material will begin showing up at YouTube sometime in April.

PaidContent broke the news. The news blog's Staci Kramer wrote that YouTube and Disney are discussing long-form content but that a deal is not yet done. Hulu, the video portal owned by NBC Universal and News Corp., is trying to secure Disney material.

What's interesting is that it appears YouTube's long-form deal would eliminate Hulu's chances of landing full-length Disney shows, according to PaidContent.

CNET reported late last year that YouTube had shed its image in Hollywood as an enemy to copyright content and was in a position to obtain long-form content. MGM has already begun posting a few feature films on YouTube.

As for the short-form deal with Disney, I'm not sure having ESPN and ABC channels advances the ball much. Many of Disney's competitors already operate YouTube channels. The move appears to be more of a test. YouTube's hopes of becoming more Hulu-esque and becoming a platform for full-length features and TV shows could be threatened if the big film studios and TV networks retreat from the Web. Much has been written lately about whether the major entertainment conglomerates are being pressured by cable companies to cut back the amount of ad-supported content they post online.

The cable companies say this is contributing to the decline of cable subscribers.

Another concern of network and studio suits is whether it's possible to generate a reasonable return from Web ads while managing to avoid overloading viewers with commercials.

Some studios are also concerned about YouTube's ability to protect full-length features from piracy. An entertainment industry source said some studio heads worry that YouTube lacks any copy protections on its video streams. The source said once the DRM issues are solved, YouTube could be "a real competitor for the likes of Hulu."