Lion's Gate & YouTube To Share Clips And Ad Revenue - Viacom Frozen Out

YouTube has inked a deal with Hollywood studio Lion’s Gate to show clips from the film maker’s library on a new YouTube/Lion’s Gate branded channel. The duo plan to sell ads surrounding the clips and link to sell-through opportunities of the full length features. The Lion’s Gate library contains such late night rerun classics as “Dirty Dancing” and the “Saw” horror series.  Google CEO Eric Schmidt said his company is pursuing similar deals with other studios.

The irony is that this announcement, which had to be some time in the making, comes just days after the latest struggles between Google and content producer Viacom. One can only speculate as to why Google didn’t adopt this approach from the beginning with Viacom and its hard-nosed boss, Sumner Redstone. Redstone built Viacom based upon his long-standing philosophy that while there will always be new, emerging distribution channels,  “Content is still King”.  Thus, the entire Viacom/YouTube struggle hinges on Redstone’s belief that Viacom should be compensated for the use of  material the company produces and controls. Pretty simple, and from the looks of today’s announcement, something to which, philosophically, Google doesn’t object. Not today, anyway.

In announcing the deal, Schmidt noted that YouTube is not pursuing a similar ad deal with Viacom.  Why not?  Does Google fear that any discussions would be an admission of “guilt” in the present legal proceedings — which could cost it dearly (royalties AND damages) in the long run? Could Redstone be looking for a royalty package that would be far more expensive, especially in guaranteed fees,  than the Lion’s Gate ad sharing deal? 

YouTube will obviously try to replicate the Lion’s Gate deal with other studios — which is more agreeable to YouTube than a guaranteed royality and revenue structure.  Whatever the impediments, bad decisions and blame to be placed,  cooler heads should be able to get past this problem.  Unfortunately, at the moment it appears both sides have dug in for a big fight that could color all future YouTube and other web content deals.  Ultimatley, the problem may be that Google made the mistake of locking horns with Redstone . . . and they don’t come any tougher than Sumner.  Read more.