Behind the Scenes Details Leading to Google/YouTube Losing Viacom & CBS Deals

So the latest news in online video revolves around Viacom signing a deal with YouTube competitor/newcomer Joost. The deal is limited for now (no South Park or Colbert Report) and will include shows like MTV’s My Super Sweet 16, BET’s American Gangster, Comedy Central’s Freak Show, and some movies from Paramount. Financial details weren’t disclosed.

This comes just weeks after Viacom demanded YouTube to take down 100,000+ videos of various shows including the good stuff from Comedy Central. Interestingly enough, the Wall Street Journal (subscription required) has an article out today that details the behind-the-scenes action of Google losing Viacom and CBS deals. The whole thing cites are favorite source: “those familiar with the situation.” But, hey, that source has pulled through for us before.

Viacom Deal Breakdown

Initially, CEO Schmidt claimed that Google might be willing to guarantee $500 million in ad revenue (over who knows how many years) to license Viacom content. This deal would have Google paying Viacom about 70% of advertising revenue generated by Google from Viacom content. What would have Google gotten in return? Viacom promising not to sue over copyright issues.

But then Google withdrew the $500 million offer and Viacom CEO Philippe Dauman wanted to discuss “control of advertising sales and technical matters” before talking dollar figures. Apparently, Schmidt visited Viacom’s New York offices twice but other Google execs weren’t thrilled by his proposals.

Google continued to change its position on certain terms because of Viacom wanting even more than the original offer. One source claims Viacom demanded minimum payment guarantees nearing $1 billion. A Viacom spokesman, of course, says the company never made such a demand.

The million (billion?) dollar question was (and still is): Can online-video advertising Google receives offset the initial expense of paying out for indemnification from copyright lawsuits? Some claim Viacom content might not attract enough advertising for Google to cover the minimum payments.

By the end of the year, the Google and Viacom talks hadn’t made progress: “It just got to the point where it was clear we weren’t getting anywhere,” says an undisclosed source. And now contact between the two companies is only among lawyers.

CBS Deal Breakdown

So Google turned to CBS with a deal that seemed hopeful until last month. The companies were close to a multi-year contract which would enable YouTube users to watch parts of CBS shows like “The Late Show with David Letterman” and “CSI.” The deal would even allow users to splice parts of these shows into homemade videos. Under the agreement, Google would push its advertisers to use CBS Radio advertising spots and guarantee ad revenue for CBS of over $500 million.

Schmidt was to visit Las Vegas for the Consumer Electronics Show in January, where he was going to announce the deal on stage. But the Saturday before the show, CBS backed down and Schmidt canceled his trip. Talks continued, but thoughts on basic details differed. As an example, Google wanted a five-year deal whereas CBS was interested in a shorter run. So now the CBS deal has fallen apart too. At least with CBS, Google is still working on other, smaller initiatives.

NBC Deal Breakdown

As early as last June, NBC was interested in putting promotional content on YouTube. But times have changed: the general counsel of NBC sent Google a six-page letter demanding that it keep unauthorized content off the site.

Google claims its a friend to content owners and reiterates that its plans to use digital fingerprinting technologies to identify copyrighted material on YouTube. The hopes is that such a system would allow the automated removal of content or ad revenue sharing. But Google says the new technology isn’t ready for prime time.

Ready or not, it seems media companies won’t take the search giant seriously until it makes a move in this direction without having a deal first…

For some other takes on the story, check out PaidContent, LostRemote, and Search Engine Land.

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