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In this paper, we present a video streaming system for wireless networks that employs utility optimization of pre-compressed video at the application layer, together with a novel cooperative wireless physical layer (PHY) that allows interfering transmissions. Our system model considers multiple and independent unicast or multicast transmissions between network nodes while a number of them serve as relays. For this new PHY the average transmission rate that each sender-destination pair can achieve is estimated first. Next, we show that the utility optimization problem can be simplified due to the features of the proposed PHY. Subsequently, we devise a utility optimization algorithm that is executed independently at each sender and it derives the optimal video packets that should be sent in the wireless link given the calculated rate constraint. Simulation results demonstrate that for unicast video streaming scenarios and with the utility optimization framework, allowing packets to interfere is a better choice than employing a typical cooperative PHY. For the case of multicast video delivery the performance of the proposed scheme is significantly improved for good channel conditions while the improvement is minimized in the low channel SNR regime when compared to the unicast scenario.