Streaming with the Enemy: Viacom and Google's Love-Hate Story

There's no point in letting an unresolved $1 billion lawsuit get in the way of a good thing.

Even though Viacom (VIA) and Google's (GOOG) YouTube are still embroiled in a five-year legal tussle over unauthorized clips showing up on the world's leading video-sharing website, the two companies are coming together on a digital streaming deal.

Viacom's Paramount is now renting hundreds of its releases through YouTube's fledgling premium video service. Paramount flicks will also be available as piecemeal rentals through Google's new Google Play platform.

YouTube Is Still Not Dues Tube

If you didn't know that YouTube was offering digital rentals, you're not alone. The vast majority of the site's traffic comes from folks looking to catch free clips of dogs riding skateboards or music videos with dogs riding skateboards.

YouTube's first experiment with rentals went badly. It offered up five Sundance films and documentaries two years ago at $3.99 per rental. Despite YouTube's wide visibility, the five films sold just hundreds of digital rentals apiece during the service's first three days.

These days, Google's fast-growing video site has turned to more polished Hollywood fare, and striking a deal with Paramount means that YouTube now has streaming deals in place with all of the six major studios except for 20th Century Fox.

Coming Soon to a Screen Near You

YouTube still doesn't want to force its visitors into its virtual box office. A nondescript "Movies" tab at the top takes users to a page offering 24-hour passes to stream recent retail DVD releases including War Horse and Hop for as little as $2.99.

Having Paramount aboard means that folks can pay to check out roughly 500 hit movies, including Transformers and The Godfather trilogy.

Renters aren't necessarily tethered to their computers. The streams are available across a wide range of devices, and the new Google Play Movies app makes it seamless to check out the rentals on Android phones and tablets.

See You in Court

This deal probably won't get in the way of the prolonged legal battle in which Viacom is accusing YouTube of profiting from the popular practice of registered users uploading clips from Viacom shows and movies.

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However, Viacom is smart enough to realize that there's an opportunity here that could generate incremental revenue if it pays off.

We're still early in this game. Consumers have been hesitant to pay up for digital rentals, especially when they are typically available for less as overnight DVD rentals, or are easier to check out through a cable provider's "on demand" offerings. If that mindset changes, Paramount wants to make sure its properties are front and center on the platform that video junkies have leaned on the most for their free-clip fixes.

Streaming with the enemy makes perfect sense here.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google.


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