Google hasn't been impressed.
Today Microsoft received a takedown notice from Google, demanding removal of the app. And now we get to see how these two slug it out.
Microsoft is in the wrong here, if you look at the pure black and white of the situation, its app infringes on Google's terms of service. Yet Google has denied Microsoft the APIs necessary to build a compliant YouTube app and refuses to publish one of its own. That's disappointingly monopolistic and hurts Google's own users who choose Windows Phone 8.
Given that Google has chided Microsoft recently for the way that Outlook.com hooks into Google Chat and not allowing Google the same ability to link into Messenger (well, Skype now I suppose), its become a clear case of who's the pot and who's the kettle.
I suspect that Google will change the YouTube site to break Microsoft's app and Microsoft will fix it. We'll end up with the equivalent of the Palm - Apple battle over iTunes syncing.
Unfortunately Google has a de facto monopoly in the video market - and for that reason it should be forced to work with Microsoft whether it likes it or not.
Now, I wonder if Microsoft has the front to hack a Facetime client together for WP8?