Paramount was desperate at the time it sold the library and was thrilled to get the money. Actually they didn't sell the library to Universal, they sold it to MCA which distributed it for a number of years. Universal didn't get involved until MCA became its parent company.
I can't remember the exact selling price, but it was in the low millions and everybody in the business thought MCA was nuts spending all that money on "old movies", most of them in b/w no less. But MCA had the last laugh and made well over a hundred million dollars from that deal. A really huge sum back then.
When MCA got out of the picture, I don't think Universal's new owners really had any idea what a gold mine they had sitting in their vaults. When the original MCA contracts with TV stations expired, Universal never made an effort to repackage the Paramount library and put it on the market again. As a result, many Paramount titless (not to mention a lot of Universal's own films) weren't shown again for twenty years.
Universal has never been the most forward thinking studio and always seemed a couple of steps behind the others when it came to new things like home video. Perhaps, now that they've seen Warner's success with "on demand" DVDs they'll realize what they have and how much they can make. At least we can hope.