One of the big assumptions behind Google's $1.65 billion purchase of video-sharing site YouTube last year was that it would be able to use its heft to settle any copyright-infringement lawsuits and strike advertising deals with the big media companies whose pirated TV and movie clips drive much of the traffic to the site. Increasingly, the big media companies are walking away from their negotiations with YouTube to strike advertising deals. The latest walk-out is CBS, which the WSJ reports was not happy with the $500 million Google (GOOG) was offering. That's about the same amount Google earlier offered Viacom (VIA), before Sumner Redstone's lawyers told YouTube to take down 100,000 copyright-infringing clips. NBC is also giving YouTube take-down notices.
Maybe the media companies are reviving their idea to create a YouTube killer (bad idea), or maybe they just realize that there are many more online video platforms to choose from. As Albert Cheng, vice president for digital media at Disney-ABC Television told me in a recent interview: "With YouTube, a lot of the assumption is that it is the only place for video. But that is not true."
Apparently, Viacom liked the terms that peer-to-peer TV service Joost offered enough to strike a licensing deal with them instead of YouTube. The fact that Joost allows media partners to sell their own advertising on its platform was probably a big selling point. But apparently not a big enough selling point for Viacom to license some of its hottest shows like The Daily Show or The Colbert Report (rather, Joost viewers will get unlimited reruns of MTV's Beavis and Butthead, Real World, and Punk'd).
And there is still the legal question hanging over YouTube. For instance, ABC does not have a marketing deal with YouTube, nor does it even have it's own branded channel, as does NBC. While acknowledging the power of YouTube to deliver marketing buzz, Cheng explains why ABC has abstained from embracing the site: "As a company, we are still grappling with the legality of what they are doing."
With content deals blowing up and legal questions remaining, buying YouTube may end up costing Google a lot more than $1.65 billion.