That’s where SnagFilms comes in. The start-up has distribution rights to more than 3,000 indie movies, which it shoots out to platforms like Netflix and Hulu. The four-year-old company is best known for the documentaries it puts out, like “Casino Jack,” the story of the disgraced political fundraiser Jack Abramoff; others include “Super Size Me” and “Enron: The Smartest Guys in the Room.”

Now SnagFilms has raised another $7 million, following up a $10 million round from a year ago. Earlier investors like Ted Leonsis, New Enterprise Associates and Comcast have re-upped; new investors include Terry Semel, the former Warner Bros. studio and Yahoo boss.

SnagFilms started out by asking bloggers and other Web site operators to embed its films on their sites for free. It made money by selling ads against the films and sharing revenue with the movie owners.

It still does that, but it has expanded to offer free movies on other platforms, like the iPad and Android tablets. It has also started making its movies available on pay-per-view outlets like Apple, Amazon and Comcast’s video-on-demand channels. CEO Rick Allen says that by the end of the year, revenue from transactions will eclipse the company’s ad dollars.

The interesting question for SnagFilms — and a whole lot of digital video companies right now — is whether there’s a way to get consumers to identify and value what distributors do. If they do, then these guys can build lots of value, as consumers learn to trust them as a good source for small, quirky films the big guys missed.

(Image courtesy of Shutterstock/James Steidl)

SnagFilms, the online video distribution site for professional documentaries, has nabbed $10 million in funding from Comcast’s investment arm and New Enterprise Associates, and will also now be distributing fictional independent film releases.

That and the new investment giving SnagFilms a valuation of $50 million should be big news at the 11th Sundance Film Festival, the famous independent film gathering opening in Park City, Utah, on Thursday.

And SnagFilms also announced that well-known industry exec Bingham Ray is joining the start-up to spearhead its distribution of fictional narrative and foreign-produced independent films.

The service, unlike the subscription-based video giant Netflix, currently distributes free non-fiction documentary films with advertising, as well as offers rental streaming and purchase options.

And it is profitable, said Ted Leonsis, the former AOL exec who is the founder and has been the driving investor in SnagFilms.

“It was always my personal frustration as a backer of documentaries that you could not get distribution far and wide,” he said in an interview earlier today.

He noted that while Netflix is really now focused on big studio fare, “what we’ve discovered is a big supply of independent video that has never seen light of day, but that has a big audience.”

SnagFilms’ strategy is to give broader reach to these films, which often don’t even have a theatrical opening–or, if they do, are very small.

Along with its site, which digitizes the films and adds advertising to them, SnagFilms also encourages Web sites and others to grab films and create a “virtual movie theater.” (You can see my effort below.)

It also has video-on-demand deals with Comcast, Verizon and more, as well as purchase options with Apple’s iTunes and others.

Earlier this month, SnagFilms also launched an impressive and free iPad full-movie-watching app.

SnagFilms also owns a popular news site called indieWIRE, which covers the independent film market, and the new funding will also be used to expand it.

That market has been in need of a boost of some kind, since it has been struggling as financing has dried up for the production of quality documentaries and outside-the-Hollywood-machine movies.

It has long been hoped that the Internet would perhaps save and strengthen the genre, with its supposed long-tail magic.

But the going has been slow. Currently, SnagFilms has 2,000 films in its online library, although Leonsis said the aim is to use the new funds to get 10,000 films on the service as soon as possible.

“We’re trying to build a beachhead in the independent film world,” he said of SnagFilms, which currently has about 40 employees in Washington, D.C., and New York. “We think we have a niche and video is the killer app on Web now.”

Leonsis, who has backed such notable documentaries as “The Rape of Nanking,” said NEA’s Peter Barris will join the board, along with existing investor Steve Case.

Case and Leonsis, of course, were the dynamic duo of AOL’s glory days.

So, I am rooting for another win in an arena that needs it.

Thus, here’s my own movie palace online and also the official press release from SnagFilms:

Watch more free documentaries

Industry Powerhouses NEA and Comcast Invest in SnagFilms

$10 million in new funding to distribute documentaries and fictional independent films on all digital platforms and devices, globally

Washington D.C.–January 17, 2011 – SnagFilms announced today it has received $10 million in growth capital from new investors New Enterprise Associates (NEA) and Comcast Interactive Capital (CIC). Existing investors, including Ted Leonsis (SnagFilms’ Founder) and Steve Case, also participated. The financing will be used to expand its distribution of independent films–including, for the first time, fictional independent releases–across all digital platforms and devices, and on a global basis.

SnagFilms is a leader in distributing free, ad-supported titles from a library of over 2,000 non-fiction films. Last year, SnagFilms entered the transactional world with launches of video on demand channels on Comcast and Verizon FiOS, as well as titles for sale through the Apple’s iTunes store. Earlier this month, SnagFilms debuted its iPad application with the largest collection of award-winning U.S. films offered free to iPad users.

“As a profitable company with substantial private investors, SnagFilms didn’t need to raise outside capital,” said company founder Ted Leonsis. “However, we saw overwhelming strategic value in involving NEA, a pioneer and leading venture capital firm, and CIC, the investment arm of Comcast. SnagFilms is very well-financed and uniquely positioned now to bring the full array of independent films–fiction and non-fiction, U.S. and foreign–to global audiences on all platforms and devices. We’ve amassed a library of 2,000 documentaries since our launch, and we’re now building distribution opportunities for tens of thousands of independent films in both categories. That’s great news for film fans and for filmmakers.”

“SnagFilms is perfectly positioned to fuse technology and content in a manner that has marked many of the transformational industry leaders we have helped build in the past,” said NEA Managing General Partner Peter Barris, who joins the Company’s Board of Directors. “New devices and digital platforms will allow consumers unprecedented access to quality content, and SnagFilms will be there to delight them. We are pleased to be able to invest in SnagFilms at this time, and to help them add fictional indie films to their expertise with documentaries–and to take both genres to the full swath of digital platforms and devices.” Among many other investments, Barris serves on the board of Groupon as its first VC investor.

“We are excited about the new opportunities SnagFilms creates, especially for independent filmmakers who historically could not get distribution,” said David Horowitz, Managing Director of Comcast Interactive Capital. “This investment reflects our view that consumers are demanding a diverse selection of high-quality content that can be watched on any platform or device.”

SnagFilms also announced that industry veteran Bingham Ray will join the Company to help guide its entry into distribution of fictional narrative and foreign-produced independent films. Ray, former President of United Artists, October Films and Kimmel Entertainment, and honored for Lifetime Achievement by the Gotham Awards, has deep experience in the acquisition, marketing and distribution of motion pictures, including “Hotel Rwanda,” “Bowling for Columbine,” “Secrets & Lies,” “War Room,” “High Art,” “Last Days” and “Breaking the Waves.”

“Bingham has been an advocate for filmmakers throughout his career,” noted Rick Allen, SnagFilms CEO. “His record of successful distribution on traditional platforms provides a strategic sense and depth of relationships that will be invaluable as we extend our model into a broader array of films. Bingham will be a key member of our large presence at the Sundance Film Festival this week and beyond.”

“I’ve been a big fan of SnagFilms from their earliest days, and am truly thrilled to be part of the team as they expand the service, bringing more filmmakers to bigger audiences on a wider array of platforms,” said Ray. “This is the future of our business.”

“SnagFilms plus Bingham Ray is a great combination,” said Tom Bernard, co-president and co-founder of Sony Pictures Classics. “Bingham knows the indie world as well as anyone alive and is admired for his experience and for always delivering for filmmakers. He’ll be a big asset to SnagFilms’ expansion.”

In addition, SnagFilms intends to use its new growth capital to expand its indieWIRE unit, now in its 15th year as the leading web source of news, reviews and analysis of independent film.

“indieWIRE’s traffic is now ten times what it was when we purchased it two and a half years ago,” Allen said. “Before the Academy Awards are announced later this month, you’ll see new editor-in-chief Dana Harris add ongoing features to our coverage of the indie world, and exciting new blogs to our Network, like the recently-added blog The Playlist.”

About SnagFilms

SnagFilms features free ad-supported viewing of more than 2,000 award-winning titles from some of the greatest names in documentary film. All films are shareable across the web. Since its launch in July 2008, SnagFilms’ library has been featured on over 2 billion web pageviews, with more than 325 million minutes of SnagFilms titles streamed across over more than 100,000 affiliated sites and webpages, including through partners such as Aol, Comcast, Hulu, the Starbucks Digital Network, IMDb, the Miami Herald, hundreds of non-profits, special interest sites and blogs. SnagFilms also offers selected titles via VOD (with Comcast and FiOS), on iTunes and through a new free application for the iPad.

OVGuide has twice named SnagFilms a Top Site and MovieMaker Magazine named SnagFilms to its annual list of “50 Best Websites for Moviemakers.”

Starting Thursday, however, there will be a new online service that aims to change all that. The service, called SnagFilms, allows anyone with a blog, a Web site, or even a page on a social-networking site, to open a virtual movie theater and show these documentaries, free. The virtual theater is a small widget that contains the film, and that can be embedded easily and quickly in a wide variety of popular social-networking services and blog platforms. No technical knowledge is needed.