This is a good deal for Five, which has not known how best to exploit its VOD. Strategy head Kieron Clifton last year said: “At the moment, we are losing money with the service and, effectively, the more popular it is, the more money we lose, whatever we do with advertising.” Now Five gets the benefit of YouTube hosting, much wider reach and pre- and mid-roll video ads it can sell on the videos. But it covers only Five’s “original” shows, so no FlashForward.

And the deal is sweet, too, for YouTube. An arms race is breaking out for UK TV content amongst VOD operators - but Hulu still has nothing, SeeSaw has only a smidgen of BBCWW shows, BBC has been barred from sharing iPlayer and MSN is quietly winning producers rather than networks…

The addition of a second network, on top of C4, could be a significant advantage for YouTube, which now has shows from half of the UK’s main public-service broadcasters.

What now stands in the way of YouTube becoming the default TV VOD destination? The BBC is quite likely to offer its iPlayer brand through YouTube since it believes in proliferation through multiple platforms. ITV’s outgoing exec chair Michael Grade said in October: “I guarantee an American company will take the lion’s share of our content in the UK very soon.” But paidContent:UK understands ITV (LSE: ITV) is prefering negotiation with Hulu to YouTube, given Hulu’s promise of equity to content partners, and that could be for shows outside of the basic public catch-up window…

In a direct riposte to a sneering description Grade made about YouTube last year, Five CEO Dawn Airey, in the press release, says: “Legitimate internet video operators are far from the ‘parasites’ that some have sought to portray them as in the past.”

YouTube is getting more serious about TV VOD than skateboarding kittens. It this week began advertising the UK Shows section offline and says it will place an interactive installation in a Carnaby Street shopfront this month, letting passersby watch its YouTube TV content.

The Five deal will also see YouTube used to take viewer video uploads ie. an audition for a role in Neighbours. And Five will use the site’s ContentID system to detect unauthorised copies of its shows and, optionally, place ads on those copies. But embedding Five’s shows off YouTube is forbidden and there’s no HD.

Update: Five’s PR man emails to say: “Don’t forget that two of Five’s biggest foreign acqusitions, the Australian soaps Neighbours and Home & Away, ARE now on YouTube.

“As for the situation with US series, while the studios are not necessarily all moving at the same pace, they are nevertheless moving in the right direction. For instance, FlashForward and CSI can be seen at demandfive.five.tv.

“And when our big acquisitions contracts come up for renegotiation we will do our darnedest to try to acquire the additional sets of rights necessary to put that content in front of as many viewers and online users as possible.”