When VMIX got started several years ago, the company realized that online video would be big. So why not be the mega brand in the category?

But thankfully, the company changed its strategy. "While YouTube was still young," said Greg Kostello, the CEO of VMIX, "we realized that they were getting lots of traction and may become the category killer."

As a sign of its success, VMIX raised $16.5 million last week. The investors include JK&B Capital, ATA Ventures, Mission Ventures and Enterprise Partners.

VMIX has built a rich media platform, which allows for not only videos, but also blogs, slide shows, and even social networking. "We focus on technology," said Kostello, "And our customers focus on what they are good at. That is, creating great content."

More than 190 websites use VMIX's technology – handling more than 60 million monthly unique visitors. Customers include Tribune Interactive (NYSE: TRB), Media General (NYSE: MEG), and Lee Enterprises (NYSE: LEE).

Also visit DealProfiles for more recent venture capital activity.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

Tribune Interactive, a subsidiary of Tribune Company (NYSE: TRB), has entered a deal with VMIX Media, an upstart online video company.

Basically, Tribune will leverage VMIX's technologies, such as user-generated videos, blogs and polls to spice things up on its newspaper sites (like the LATimes.com and chicagotribune.com). There will also be access to VMIX's extensive content.

I had a chance to talk to Greg Kostello, who is the CEO and founder of VMIX. According to him:

"Forward-looking newspapers like Tribune are combining the best of the interactive and participatory nature of the web with the value of providing first-rate news for their readership. They are leveraging their built-in regional community and providing the kind of online experience that people have come to expect. This means not just consuming news but interacting with it, responding to it, and even providing content for that community. Video and media sharing is one of the key factors. It helps drive community by allowing people to share their stories. "

For example, he brings up an interesting example: that is, a local newspaper can allow the community to post videos of varsity football and baseball games.

I also asked him about the latest announcement from YouTube, which plans to provide revenue-sharing for its users. His take:

1. I think paying filmmakers is a really good idea, but there are a lot of problems with a pure rev-share model.

2. A rev-share model requires paying the right's holder. Most video-sharing sites, YouTube included, do not ensure that the content provided comes from the owner. Without this information and a system for verification it will be very difficult to ensure that you are paying the true owner of that content. Once you have a paying model, you will also need to make sure that any included media, like the music soundtrack or embedded clips, have also been cleared.

3. "View fraud," similar to click-fraud, is going to be a real problem. When there is a strong financial incentive by someone uploading content to game a system, there will inevitably be problems. Google Inc. (NASDAQ: GOOG) already spends a tremendous amount of ongoing resources trying to prevent click-fraud. A lot of thought and continuous effort will be required to keep the gamers at bay. This isn't just a financial problem; "view fraud" has a real chance of skewing the results for many of the charts on YouTube. If the gamers win, the community will lose.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

This week, the FT.com had an interesting story on Google, Inc.'s (NASDAQ:GOOG) alleged travails with its newest property, YouTube. In other words, the company is trying to avoid massive copyright litigation.

This should not be a surprise. Hey, I actually did an interview with the CEO of vMiX, who provided some great insights on the topic (and perhaps some good warnings as well).

Interestingly enough, the rumor is that about $500 million of the acquisition's $1.65 billion purchase price has been reserved for possible litigation.

Actually, if history is any guide, copyright violation can be lethal for Internet property. This was the case with sites like MP3.com and Napster.

The problem is that Google needs to strike deals with all the big traditional media companies, or else not use the content (which makes YouTube less interesting). Also, might a traditional media company also sue for prior violations? After all, the media industry certainly sees Google as a big threat.

Basically, whether there are lawsuits or settlements, it looks like there will be a big payday for traditional media companies. In other words, content is still king.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

As Melly Alazraki mentioned in her post last night, everyone is mourning, alas poor Yahoo!: the real loser in the Google-YouTube deal. And the best defense is a good offense, right? So naturally the lips of investment bankers are wet with the licking. I can just see (in my imagination silly! I don't have spies) the acquisition pitchbooks being pitched left and right all over Terry Semel's desk.

Is Yahoo! Inc. (NASDAQ:YHOO) buying? And if the company is keeping its fax machines busy with term sheets, who might it buy?

Yahoo!'s never been afraid of a good little acquisition. Hello, Flickr, hello, Facebook.com? Interested parties have mentioned names like Dabble (a sort of online TV Guide, and no, I never heard of it either), Heavy.com (whose co-CEO says that, although he's not selling, he'd of course consider a deal with "a good exit strategy," haha) and our own Tom Taulli's favorite, vMix, whose CEO spoke not a word of acquisition talk in his interview with us.

But Melly makes an excellent point: shouldn't Yahoo! finish Project Panama first? How the heck could the company even monetize an acquisition right now? Maybe eBay should be the one out there buying. Yeah!

I can just hear the investment bankers scurrying back to their PowerPoint files now and doing replace-all for "synergies with" from "Flickr" to "Skype" ...

Greg Kostello is the CEO of a popular video site, vMix. Over the years, he has been involved in a variety of top online companies, such as Netscape and MP3.com.

I had a chance to interview him regarding the rumors of a Google, Inc. (NASDAQ:GOOG) buyout of YouTube.

What's your take on the possible deal between Google/YouTube?

I think that we are probably still at the rumor stage but I would suggest that anyone who thinks about buying YouTube do so with open eyes. A number of issues to consider:

- Deep pockets make great targets -- YouTube may have avoided major lawsuits so far because they have limited funds. Any acquirer with large amounts of cash will make it a great target. While it's true that YouTube has struck deals with a few media companies, notably NBC and Warner Music, they would need to make deals with virtually all of them to avoid major copyright lawsuits. Each copyright holder may want their pound of flesh and the DMCA gives them the ability to demand it.

Google could structure the deal so that pre-acquisition copyright liability falls upon the current owners of YouTube. This means that the current owners will still be on the hook if and when lawsuits happen. This will likely be a sticking point in getting the deal done.

Not long ago, media empires sued file sharers. Now, they strike partnerships.

The latest is from Time Warner's Warner Bros. The deal calls for distribution of Warner Bros.' rich content library of TV shows and movies on Guba.com.

OK, in this deal, "sharing" means selling the movie downloads. Interestingly enough, like other video sites, Guba.com shared copyrighted content for free.  Well, it is changing its ways.

Actually, Warner Bros. has been quite visionary.  The company recently struck a similar deal with another file sharer, BitTorrent.

Warner Bros. also realizes that – if it wants to find its customers – it must move to the Web.  Why not go to places where huge numbers of users gather? Yes, it's not brain surgery.  But, in the entertainment business, often the first inclination is to sue, not partner.