At a panel of the Digital Hollywood conference in San Jose this week, there was agreement among upstart Web production companies that the long tail of user-generated content is of no interest to brand advertisers.

Michael Kernan, CEO of Numedia Studios  says the reason that people only watch two or three minutes of UGC clips is because "they're not very good."

By contrast, "studios know how to tell stories," says Kernan, a former executive with the Big Three talent studio ICM . "That creates an audience, which is valuable to advertisers."

Kernan likened the state of Web video to the early days of television, when shows were merely re-purposed radio programs. Then came "I Love Lucy," which was shot live, became a huge hit with the public and advertisers and spawned a new genre of entertainment.

Peter Hoskins, CEO of ManiaTV, says his production company has abandoned UGC altogether.

"Great characters and great stories will win," says Hoskins.

The new hits on Web TV won't look like television because it has to be scripted and shot in ways to fit onto a smaller screen. 

Meanwhile, while smaller shops like Kernan's and Hoskins' are innovating, the big studios are hedging their bets by producing content for different platforms, including television, DVDs, mobile phones and the Internet, says Sean Atkins, former VP of digital media for HBO.