Logicbank Media

When YouTube emerged as one of the Internet’s most popular websites last year, many TV executives dismissed it as a flash in the pan – and a largely illegal one at that. But after Google agreed to pay $1.65 billion (U.S.) for YouTube in October, they adopted a radically different stance: Suddenly they wanted to take it on.

Now, a handful of giant media companies, like NBC Universal, News Corp., Viacom and possibly CBS, are close to announcing a new website that will feature some of their best-known television programming and other clips in an attempt to build a business for distributing video on the Internet to rival YouTube.

Whether or not the new venture goes ahead – and such a collaboration among these companies would be nearly unprecedented – the flurry of activity around its creation underscores the complex and high-stakes dance that media companies are having with new online outlets for their wares, and the potent combination of Google and YouTube in particular.

Executives from the companies have been in intense negotiations over the ownership and management structure of the new entity – which is as yet unnamed – and the talks could continue until the end of the year, or fall apart entirely.

“They really want to do it,” one executive briefed on the talks said of the partners involved. However, this executive, doubting the ability of the competitors to play well together, predicted: “Ten minutes after they do it, they’ll want to kill themselves.”

None of the companies involved would comment for the record, and several executives familiar with the discussions, citing their sensitivity, spoke on condition of anonymity. The site would be supported by advertising, feature shows and clips from each of the participating companies, and encourage viewers to contribute their own videos and other material.

Such a site would face huge obstacles. All the partners in the venture are wary of anything that looks like an industry consortium – especially one that risks looking flat-footed or backward in the face of nimbler technology upstarts.

Despite the outpouring of homespun video-clips loaded onto and viewed from YouTube, many media executives and advertisers believe that traditional media fare – like clips from Comedy Central or the Conan O’Brien show – will attract the bulk of advertising revenue as the market develops.

But each partner in the proposed YouTube competitor brings its own agenda and potential conflicts. For instance, News Corp. also owns both the Fox television network and the popular MySpace social-networking Web site.

Any role to be played by CBS would also potentially be complicated. The company is having separate negotiations with Google relating to a service it is introducing aimed at selling radio advertising.

In forging closer ties to Google, CBS might see less merit in joining with its big media rivals in the new venture. Also, some of the other partners in the venture do not believe CBS’ video assets are as critical to making the site a success.

The idea for the consortium sprang from the conviction by executives at NBC and News Corp. in particular that new avenues of revenue had to be opened beyond the dominant sources, which include network and cable television outlets and DVD sales. Behind the idea was the understanding that the most popular modes of distributing video via the Internet were not bringing the TV networks much income. For instance, the iTunes music and video success pioneered by Apple Computer has led to several million downloads of videos but has not been highly lucrative for the media companies after they paid various rights holders.

And when YouTube suddenly emerged as the most popular site for viewing video of any kind on the Internet TV executives were alarmed that they were receiving nothing from what was essentially a new kind of network. Although clips on YouTube and most video clip sites are limited to a few minutes, new technologies could soon make it possible to view hour-long dramas or movies.

The executives at Fox and NBC who were driving the deal anticipated moves by Google – and indeed the executive involved in the talks said Google has hinted of offers to the participants, some of which might generate a fast infusion of several hundred million dollars.

“I think people have been trying to figure out: `Do we take a cheque from Google, or do we create our own game?’” said another executive who has been involved in the negotiations. “The other option is to create something that is capable of becoming a big asset and controlling our own game.”