But when Viacom headed to court, News Corp. and NBC Universal chose another path. News Corp. President Peter Chernin and NBC Universal Chief Executive Jeff Zucker have made the initiative a top priority, and the talks heated up this week.
"It's better to cannibalize yourself than have the competition do it," said EMarketer CEO Geoff Ramsey.
Time Warner, CBS Corp. and Sony Pictures Entertainment could also supply the service with shows and Web-only video clips in exchange for a cut of the advertising revenue. They have yet to sign on.
For now, the News Corp.-NBC Universal venture will pool videos on its website, syndicate videos to other websites and handle advertising sales.
"This is a tremendous opportunity to get our content out there and leverage relationships better," said a person familiar with the talks. "We're not about blocking our content and not allowing opportunities. We just want to do it in a way that's legal and allows us to get paid."
So far, Google has the edge in attracting online audiences. YouTube, which Google bought in November for $1.65 billion, draws more viewers than the television networks' combined online audience, according to measurement firm Hitwise.
Google executives' disdain for the project is evident in their nickname for the consortium: Clown Co.
"The biggest challenge will be to see how the parents of conglomerates work together in decision-making," said Bourkoff, the media analyst. "Is this going to be a great press release, or will it actually function as a business?"
Hollywood has long been the king of entertainment. It believes that viewers will eventually get tired of the amateur videos that populate YouTube and other video-sharing sites, and that professionally produced material will win out.
TV networks have tried different approaches to dealing with YouTube to gain a bigger presence on the Web. NBC and CBS reached agreements to put some promotional clips on YouTube but also joined Viacom and others in complaining that Google hadn't gone far enough to protect their copyrighted material.
Traditional media companies have been unhappy with how much YouTube was willing to pay and the lack of control they would get over how their clips are displayed.
Not only that, they don't want to help build Google into a bigger monster.
By building their own online entertainment platform, News Corp. and NBC Universal are trying to protect their decades-old way of doing business -- controlling not only their programming but the advertising revenue and distribution outlets.
