That sounds plausible but this story stinks more of a jealous lover than a selfish business dispute.  An anonymous source tells us that Hilton was singing this song the whole time he was watching the video of Drudge;

Heard it from a friend who
Heard it from a friend who
Heard it from another you been messin' around
They say you got a boyfriend
You're out late every weekend
They're talkin' about you and
it's bringin' me down
But I know the neighborhood
And talk is cheap when the story is good
And the tales grow taller on down the line
But I'm telling you, babe
That I don't think it's true, babe
And even if it is keep this in mind
You take it on the run baby
If that's the way you want it baby
Then I don't want you around
I don't believe it
Not for a minute
You're under the gun so you take it on the run
You're thinking up your white lies
You're putting on your bedroom eyes
You say you're coming home
but you won't say when
But I can feel it coming
If you leave tonight keep running
And you need never look back again

As gossip goes anything is possible.  This could be real or a PR stunt by Drudge to get Alec Baldwin off his jock.  Either way it appears that Drudge has written his last headline or has he?

This didn't happen...but it could.

Welcome to the STATE OF AMERICAN JOURNALISM

Clearly this is a super-duper fantastical tale but not far from some of the yarns that Drudge spins on a daily basis.  He's not a journalist but a marketer of stories and a good one at that.  He knows that the power of suggestion is often times all the reality one needs to form an opinion and he bathes in the power of it.

Pat Buchanan says “Matt Drudge is just about the most powerful journalist in America".  My question is simple how can the most powerful journalist in America not be a journalist.  WTF is happening to our media when a gossip working days at the CBS gift shop can become the most trusted voice in America. Seriously.

This man does not write...he imagines...what if, consider this, suppose that and then he finds a picture that illustrates his nonsense and presto a news story.  Here's todays headline;

PRESIDENT-ELECT INTERVIEWED BY PROSECUTORS 

What is Drudge saying here?  Since this is the extent of his work you'll have to decide but rest assured its disingenuous. 

Newspapers are dying in part because gunslingers like Drudge are happy to spin yarns and pull the trigger when responsible journalists hesitate.  He describes his rag as a worldwide clearing house for uncensored, unapologetic news but contends that he is simply keeping the MSM honest.  Is Drudge the future of American journalism? Sad.