Viacom Settles Legal Dispute with Google - Analyst Blog

Yesterday, Viacom Inc. VIAB settled its legal dispute with Google Inc. GOOG concerning YouTube. In 2007, Viacom had filed a $1 billion lawsuit against Google, accusing that its subsidiary, YouTube, of violating copyrights by allowing users to upload video clips of popular television shows of Viacom without authorization.

Yesterday, the two companies announced the mutual settlement of the long-standing dispute. However, the financial terms of the deal have not been disclosed.

In 2006, Google acquired YouTube for $1.65 billion. Viacom claimed that during 2006 to 2008, as many as 79,000 copyrighted video clips of Viacom's content were broadcasted in YouTube without consent.

Viacom also stated that YouTube generated significant revenues by placing advertisements along with the videos. Currently, both Viacom and Google carry a Zacks Rank #3 (Hold).   

In 2010, the U.S. District Judge Louis Stanton dismissed Viacom's plea and ruled in favor of Google. However, in April 2012, the U.S. Court of Appeals in New York partially overturned that ruling and sent the case back to the district court.

In April 2013, the U.S. District Judge Louis Stanton once again dismissed Viacom's claim. Consequently, Viacom filed yet another appeal in late 2013. The YouTube settlement marks the end to a major copyright litigation in the U.S.

Recently, Viacom extended its deal with Time Warner Cable Inc. TWC. This agreement will allow Viacom to distribute its content over multiple platforms of the latter's cable network.

Earlier, the company also renewed its TV channel agreement with DIRECTV DTV for seven years. The new agreement generated a significant 20% rate hike for the company. Viacom is expected to receive more than $600 million over the seven-year term.

Viacom immensely benefits from its agreement to distribute digital content to online video streaming companies, such as Netflix and Hulu. These businesses generate very high margins, of around 75%, while facilitating the company to significantly improve its bottom line. Viacom is hopeful that it will be able to extend its digital content distribution deals, both in the U.S. and internationally, in the near future.