Video embed - pay royalties or allow ads?

At last nights NY Video 2.0 Meetup, AOL demo'ed their new video portal. While some of the content is AOL-specific, most of the videos listed come from other video sites including YouTube. A few questions were asked of the speaker regarding payment to the content producer and the video hoster. He noted that he is a product guy not a finance guy so we did not get any answers. Then there was a discussion about what AOL gives to the video hosting site, it seems to be that they send traffic to them. Or do they?

When Shay from Kaltura presented, he started by sharing a popular ratio, "1% produce 9% might comment, 89% sit back and watch". So this means that 89% just watch. So if someone finds a video from XYZ producer that is hosted on YouTube, but embedded into AOL, what does YouTube really get out of the transaction if the user only watches?

I am not picking on AOL, just using them as an example as it's the most recent one for me. Lots of video sites are doing this. And my question is when are the video hosting companies (YouTube, Viddler, etc.) going to look to monetize the embed?

Let's think about it. I upload a video to YouTube. YouTube displays it. 100 sites embed it and then monetize the page that my video is on. Since we know that most will watch but not go to YouTube, what does YT get in this overall transaction?

My guess is that we will start to see ads within the embeddable players by years end (actually 3Q seems reasonable). Frankly AOL should be returning a portion of their income to the video creator and to the hosting service. So AOL has two choices I see for this future embeddable player:

1. Pay the video hosting service a fee to provide the player on their site
2. Allow ads within the embeddable player

I see non-commercial sites still being able to offer the player at no cost or advertising. Am I offbase? Remember to think with a financial mindset where companies (not mom's blog) need to make a profit to continue operations.

Could the same thing happen with RSS? Maybe.