Google is reported to be in talks to buy the video web site YouTube for $1.6 billion, according to the Wall Street Journal, although it may only be speculation based on a rumour. Despite concerns over copyright, it may not be such a bad idea.

After only 18 months since its launch from a garage in Menlo Park, YouTube has emerged as the leading web site for users to upload and share video files, some of which are their own, many of which contain copyright material.

Serving over 100 million video clips a day, YouTube receives more than 65,000 uploads daily.

The company, founded by three early employees of PayPal, has received $11.5 million in funding from Sequoia Capital but faces significant costs for hosting and bandwidth.

YouTube has nevertheless outshone an attempt by Google to provide a similar online video service and has been seen as a hot online property, despite not having established a viable business model and pending concerns over copyright litigation.

It is possible that Google could acquire YouTube to prevent it falling into the hands of competitors, use its infrastructure to scale its video delivery, and apply its advertising model to monetize the traffic it generates.

With its market capitalisation, Google could easily offer $1.6 billion in cash and stock. However, with significant money behind it, YouTube could become a target for long-running law suits.

On the other hand, media companies and rights holders are beginning to realise that video sharing sites provide a powerful promotional vehicle and some are already seeing YouTube as a legitimate distribution channel.

Warner Music Group recently signed a deal enabling YouTube to host their music videos, while user contributed videos will be allowed to use Warner music in their soundtracks, with the companies sharing advertising revenues.

The Warner music video library and supporting material will be made available simultaneously with the launch of a new YouTube content identification and royalty reporting system.

Edgar Bronfman, the chairman and chief executive of Warner Music Group, said: “Consumer-empowering destinations like YouTube have created a two-way dialogue that will transform entertainment and media forever”.

If YouTube, with or without the assistance of Google, can change the perception of user-contributed video, major media groups may follow the lead established by Warner and enable a viable business model for all concerned.

In which case, acquiring YouTube may not seem such a bad idea.