dovetaillogo.bmpDovetail.tv is offering amateur filmmakers ten cents every time someone downloads their movie, the latest sign of cut-throat competition in the video industry.

This is a great way to market its service, yet Dovetail is going to pay for it somehow. Dovetail’s founders have so far funded the company, but the company is considering looking for venture capital and other options, says chief executive Jason Holloway.

Dovetail.tv’s technology delivers high definition full-length movies to users via a downloaded software. It wants eventually to make money by inserting advertising within the movies. Its move to pay filmmakers comes as Netflix‘s annouces today a new service that lets viewers get movies via the Internet instead of DVD-by-mail. (See Merc story here).

We first wrote about Dovetail.tv here.

Netflix’s move to “stream” video real-time, however, may set it up for patchy transmission quality because many people don’t have adequate broadband. Dovetail.tv, by comparison, offers a “download-and-then-watch” experience, so there is no buffering. However, downloading before watching takes time. So Dovetail.tv is moving toward a Tivo-like service, Holloway said, allowing it to deliver subscribed movie content directly to a user’s computer — with peer to peer technology. So users won’t have to wait to download their movies. joostlogo.bmpHolloway said the patchy quality of the Venice Project (since renamed Joost), at least according to some reviews, is due to its streaming technology.

The last few months have been brutal in this industry. Everyone has wanted in on the video business, from Apple to Cisco. As for the Google and Amazon services, which also charge users to watch movies, it isn’t clear whether users will pay for the downloads, Holloway says. That’s why Dovetail is letting users watch the movies for free, for now. Metacafe and Revver also share revenue with video makers, but those clips are typically short and not the greatest quality. And other services, such as Akimbo, require hardware purchases.