Two men tried to blackmail a member of the Royal Family with a sound recording containing claims he had performed a gay sex act, a court has heard.
The Old Bailey was told that Ian Strachan and Sean McGuigan demanded £50,000 from the unidentified Royal Family member, called Witness A.
The recordings featured a man who had been employed by the royal.
Mr Strachan, 31, of Fulham, and Mr McGuigan, 41, of Battersea, both London, deny blackmail charges.
Mark Ellison QC, prosecuting, said the recordings contained "scandalous and disparaging remarks" about other members of the Royal Family.
They also featured allegations of "impropriety" in business by Witness A, who cannot be identified for legal reasons.
The recordings were made by Mr Strachan on Mr McGuigan's mobile phone in early 2007 and downloaded on to a computer, the jury heard.
The court heard that much of the eight hours of audio and video footage was made when the employee - called Witness D - was drunk or "under the influence of other substances".
Mr Ellison said: "There were three audio files of the man apparently asserting that the member of the Royal Family who employed him had performed an act of oral sex on him."
Mr Strachan is alleged to have approached the Sun, the News of the World, the Sunday Express, the Mail on Sunday and publicist Max Clifford in an attempt to sell the material between March and July 2007.
Mr Ellison said: "The identity of those who featured in the material, as well as the salacious content of it, was clearly recognised to be integral to its value or 'selling point'."
When they had failed to sell the material the defendants decided to "turn their attention from the media to Witness A himself", Mr Ellison said.
The court was told Mr Strachan contacted a friend of the royal - Witness C - and a meeting was arranged at the Hilton Hotel in London's Park Lane on 11 September with a man called "Paul Butler".
Unknown to Mr Strachan and Mr McGuigan, he was an undercover police officer rather than a representative of Witness A.
At the meeting Mr Strachan said the News of the World had offered "just below a quarter of a million pounds".
Mr Ellison said the actions of the men from their first contact with Witness A until their arrest after the meeting "proves that they were together both engaged in blackmail".
After the arrests a completed contract document filled in with the sum of £250,000 was found on Mr Strachan - a "false assertion of a firm offer of payment" as part of the blackmail attempt, Mr Ellison told the jury.
News of the World assistant news editor James Weatherup, then a reporter with the paper who met Mr Strachan a number of times, said the defendant had plucked out a "fantasy figure" of £250,000.
Mr Weatherup said: "£20,000 we had discussed. He had originally asked for £50,000 but £250,000 is something we never discussed at any stage."
He said his impression was that any money they earned from the story would have been split between Mr Strachan and Mr McGuigan.
One one occasion Mr Weatherup was shown a video of Witness D snorting three or four lines of cocaine.
He said there was some interest in the story, but by May the paper had rejected it because "A is not significant enough and no one has heard of D".
Mr Strachan and Mr McGuigan are charged with making "an unwarranted demand with menaces" of £50,000.
The trial was adjourned until Wednesday.