Earlier this week I had the chance to speak with Jason Holloway, CEO of online video start-up Dovetail.tv. The company’s sweet spot is the "middle" of the tail — between mass-market broadcast content (head) and the YouTubes (long tail) of the world. This basically comprises independently produced but professionally shot and edited content, including short films and documentaries. The thought is that the distribution infrastructure in place for such content only allows room for the small percentage of films that get recognition at film festivals. This, however, leaves lots of content — 10,000 films submitted to film festivals every month, according to Holloway — that mostly end up sitting on a shelf.

Enter Dovetail.tv's own online film festival launched yesterday to bring together this very segment of films whose previous limited physical distribution options rendered them underappreciated and under-delivered. The company has tried to gain traction with contributors by building a model that shares revenue with them. And traction among users has thus far been achieved with zero cost to view films. In the future it plans to integrate an advertising model.

"You really have to start with an advertising model because you can't get users to pay to experiment," said Holloway. "If you want to encourage people to check out new content and new artists, they'll give you some time in the form of watching an ad but they won't write a check. There is too much of a barrier. Once we get enough content and have enough of a portfolio, then we can move toward more of a subscription model."

This seems to be the right strategy to gain users, although there is still a great deal of experimentation with subscription-based and ad-supported models in the online video space in order to discern user preferences. Its strategy to share revenue with content producers is also interesting and should encourage contribution among the types of producers it is looking for. This is compared with the YouTubes of the world that don’t reward contributors in any way (for admittedly less professional content, of course).

One aggregation challenge Dovetail might initially face is satisfying independent film producers who don’t wish their art to be viewed on what they might perceive as an inferior medium (streaming video). Dovetail, however, currently offers DVD-quality video, and Holloway looks forward to the day when the company will utilize higher bandwidth and high-definition online video distribution. There will also be general adoption of IPTV and online video (explored in our IPTV White Paper) that will cause average consumers to increasingly network their home entertainment devices in order to watch Internet-delivered video on their high-definition television monitors. These factors will bode well for Dovetail’s model.

Dovetail has also set up its network with a peer-to-peer architecture that significantly cuts down on IT costs, and it has integrated some interesting social networking components that should help it gain traction among users. To learn more, check out the site for yourself, and see the company’s write-up yesterday in Red Herring.