• New York Times, Monday, April 2, 2007 10:15 AM

For big media, the digital media conundrum comes down to a question of economics, whose answer--thus far, anyway--doesn't look all that promising. The power a site like YouTube gives to its users sets a scary precedent for traditional media companies, underscored by Viacom's $1 billion lawsuit against the Google video site. But what about the bigger problem of illegal file-sharing networks? Meanwhile, the economics of legal services like Apple's iTunes aren't all that favorable either, given what big media is used to.

The News Corp.-NBC Universal joint venture represents a reluctant step forward by big, bulky companies into a fast-paced new world of potentially diminishing returns. Indeed, some skeptics wonder whether there's any benefit at all to media companies posting their content online. Even so, the future of this business is still advertising, and much has yet to be decided. Partnerships need to forged, ad units need to be established and then standardized--and meanwhile, it's only getting easier for consumers to post and share media online.

But News Corp. and NBC are moving forward with the kind of help that can deliver an instant audience: AOL, Yahoo, MSN and MySpace. Insiders tell The New York Times the deal is all about the control and split for media's old guard: 90 percent of ad revenue will go to the new company, while publishers receive the other 10 percent. The same source said YouTube was asking for a 70/30 split, although a more significant detractor to a deal, perhaps, is Google's insistence on handling ad delivery for these videos.

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