German media giant Bertelsmann has begun developing plans to build an entertainment-driven social networking website to compete with MySpace and others, a source familiar with the discussions said on Monday.

The news comes less than one week after Bertelsmann agreed to sell video content to the popular internet video site YouTube, which has a social networking component and which was acquired days later by Google for $1.65 billion.

With the new site, Bertelsmann aims to create a community for its music and video projects, according to the source.

The company plans to meet with its RTL television and Sony BMG music divisions to discuss the site, the source said.

Bertelsmann declined to comment.

MySpace, which is owned by News Corp, is one of several social networking sites, including and Live Spaces, that offer a web experience encouraging two-way participation.

A move by Bertelsmann to launch a social networking website would represent yet another curve in the company's winding - and at times unwinding - internet strategy.

During the internet bubble phase, under former CEO Thomas Middelhoff, the media giant acquired a stake in the former American Online (AOL), which had merged with Time Warner, and made an investment in the peer-to-peer music exchange Napster, in addition to launching numerous e-commerce services of its own.

But when the bubble burst, Middelhoff was fired and the company began to retrench, selling its stake in AOL and folding many of its internet businesses and projects.