Google is engaged in a frantic round of negotiations aimed at persuading traditional media companies to supply their content to YouTube, the video website it bought last month for $1.65bn, and ward off a potentially crippling round of lawsuits.
Chief executive Eric Schmidt and other managers have met CBS, Viacom, Time Warner, NBC Universal, News Corp and others, say people familiar with the talks, offering tens of millions of dollars in upfront payments for the right to broadcast their video content legally on YouTube.
For Google the talks could determine whether its investment in YouTube gives it a leading position in the fast-growing online video market or results in a wave of lawsuits for copyright infringement.
YouTube, founded 18 months ago, serves 100m video clips a day, making it the most popular internet video site, and leading to predictions that it and similar websites could become the dominant means of distributing television, films and other video content to consumers. But much of the material available on the site belongs to the traditional media companies and has been posted without their permission.
Some media executives speculate that if Google fails in its effort YouTube could face the same fate as Napster, the file-sharing service that gained enormous popularity seven years ago before the music companies sued it for copyright infringement and put it out of business.
Recently Mr Schmidt told the Financial Times he wanted media companies to be partners and wanted them to combine Google’s advertising platform with their content to reach a larger audience. “So far people like that message; they are now trying to figure out what to do about it – should they, should they not, under what terms, and those sort of things.”
Traditional media companies must balance the promotional and advertising potential of YouTube, which allows them to reach vast new audiences, against the need to protect material on which they have spent millions of dollars creating.
Many are also wary of helping Google achieve the dominance in distributing video on the internet that it already enjoys in the search advertising market.
“The fact is that in three to six months every media company’s going to decide that their stuff gets taken down or that they get paid for it,” a media executive said, likening the negotiations to “a big chessboard”.
So far Warner Music, Universal Music and Sony BMG have signed agreements with YouTube to supply some of their content in exchange for licensing fees and a share of associated advertising revenue.
In lieu of upfront payments the music companies received equity stakes in YouTube worth tens of millions of dollars.
Google, having averted that threat, has turned its attention to the film and television companies, offering one $100m to license its content over a two-year period, according to a person familiar with the matter.