YouTube's Nightmare Scenario Falls Flat

Viacom(VIA Quote), is that all you got?

Tuesday's news that the media giant sued Google(GOOG Quote) for copyright infringement and seeks damages of $1 billion was rightfully brushed off by investors. Shares of Google dropped 2.6% to $443.03 on Tuesday, largely in line with the general market pullback (the stock was off 0.6% in recent Wednesday trading).

Not only is the size of Viacom's claim difficult to understand, its legal case is anything but airtight.

But more importantly, if this is the most Viacom can muster -- and the supposedly nightmare scenario for YouTube that many observers had been predicting -- then Google shareholders have little to fear.

It seems that the size of Viacom's claims is calculated to generate big headlines -- but there is little else in the way of metrics to support its billion-dollars-in-damages price tag. Viacom claims that 160,000 of its clips have been posted on YouTube and that those clips have been viewed 1.5 billion times.

That means Viacom is feels it is owed an astounding $6,250 for each of the usually minutes-long, grainy footage. This also works out to about 67 cents for each time a clip was viewed, an amount that comes nowhere near any licensing deal it could hope to accomplish.

Viacom's deals usually pay it $15 each time its clips are viewed 1,000 times, given the cost-per-thousand-impressions metric usually employed with online content, according to Adam Gold, an analyst at Entrust Capital. Viacom's damages claim therefore amounts to 45 times the 1.5 cents per clip it generally receives. And while the claim would compensate it for future damages and viewings as well, that's inconsistent with another part of Viacom's suit, which calls for an injunction against YouTube from showing the material in the future.