UPDATE: YouTube contacted us with new information to further clarify this post.

Evidently, YouTube initially had a sponsor lined up for The Screening Room, but at the last minute, that deal fell through. Instead of abandoning the project, YouTube made good with the filmmakers and paid for the initial batch of films.

YouTube will work to have sponsors for The Screening Room, but there may be case-by-case situations where YouTube fronts the money to keep the program going. YouTube is not getting into the acquisitions business.

Original post after the jump.

When YouTube launched its new indie short film destination The Screening Room earlier this week, we had heard rumors that the video sharing site actually paid creators an upfront fee to license films like Love and War and Our Time is Up for the new section.

When asked, YouTube spokesperson Ricardo Reyes told us via email “The economics of our deals are subject to confidentiality provisions, but we are experimenting with a variety of limited promotional sponsorship programs.”

In a follow up phone call, Reyes told me that he “can’t confirm but not denying” that YouTube is paying for content for The Screening Room. Additionally, when referencing his earlier email Reyes said that YouTube itself could be considered a “sponsor.”

For a site that was built on the backs of its community (and, some would allege, other’s copyrighted works), YouTube is sure putting a lot of effort into this program. Not only is it apparently putting up cash for some content, but it’s also experimenting with a higher-quality video player for The Screening Room that’s twice as good as the standard player.

I was skeptical of YouTube even getting into the shorts biz, but I can’t understand why the site wants to get into the content acquisitions business. The beauty of UGC is that other people do the work for you, quality be damned!

Now YouTube will have to actually pay attention to the films. Submissions will have to be cleared of all copyright concerns and they’ll actually have to be, you know, good, before they can get on the site. And with an open call to filmmakers, YouTube is going to have to spend a lot of time sifting through a lot of crap to find those gems.