Media companies put the squeeze on GooTube

YouTube, YouPay

Mark Cuban was labelled a "Cassandra" for his skepticism about Google's takeover of revenue-free video sharing site YouTube. But the thing about Cassandra that people often forget, is that Cassandra was right.

Cuban's skepticism looks a lot more justified today. The Wall Street Journal reports that a group of the largest media companies are co-ordinating their negotiations with the copyright-busting site. General Electric (which owns NBC and Viacom), Rupert Murdoch's News International and others are pooling their litigation efforts. The Journal reports that Time Warner isn't a member of the group, but it's just as keen to ensure there's a settlement in its favour.

"You can assume we're in negotiations with YouTube and that those negotiations will be kicked up to the Google level in the hope that we can get to some acceptable position," Time Warner CEO Dick Parsons said last week.

YouTube has evaded such intention, because with zero revenues it hasn't been worth pursuing.

Now YouTube's dilemma looks like this. The only way Google can justify the $1.65bn acquisition is because YouTube currently has a lot of traffic. Large volumes, it argues, should eventually be monetised successfully...er, somehow.

But YouTube only has a lot of traffic because of this copyright-breaching content, most of which it's carrying illegally. By contrast, the much vaunted market for "user generated content" will be a paltry $850m by 2010, Faultline reported here on Friday.

All of which means that Google writes off its acquisition as a white elephant, or it strikes a deal. There's no other option. So all roads lead inexorably to negotiations with the media owners - on terms that Google can't set.

Did Google's lawyers really perform due diligence on this acquisition? ®

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