This post could be entirely fictitious, but it’s absolutely fascinating anyway. It’s a fantastic scenario that would explain how Google rationalized the $1.65 purchase of YouTube. The source? Mark Cuban’s anonymous but trusted source — who first posted this theory on the Pho List.

Here’s how the saucy story goes:

1. Google actually paid $1.15 billion to YouTube, and maintained $500 million to handle the ensuing copyright-infringement battles.
2. If you’re a big media company (network or studio) trying to sue YouTube, you have two options: 1) Take a $50 million check and leave Google alone for 6 months… maybe sue some of the other guys, or 2) fight a long legal battle.
3. The $50 million check wouldn’t be a payment, of course. That might be illegal. Instead the payment has to be engineered as ANYTHING but a licensing arrangement. Otherwise the media houses would have to (gasp) share the proceeds with creators.
4. The transaction, instead, is YouTube granting $50 million in stock to the media house, which Google promptly buys.
5. Now Google has the “monkey off its back” for long enough to figure out how to make YouTube sustainable. And gets to enjoy watching the big media players sue its competitors… which, in turn, makes them worse and blemished to potential buyers.

 Here are some of the problems I’m having with the story

• Secrets like this are impossible to keep.
• A competitor can claim colusion, and copyright owners will legitimately argue they’ve been shut from a retroactive royalty mayment.
• This is like feeding a dog. He’ll be back minutes later begging for more.
• Someone small is going to be turned away at the $50 million handout window, and they’re going to be pissed and determined.

Said one comment on the blog… Eliot Spitzer would be all over this like a fat kid on a smarty.