Microsoft, Viacom on same team
EmptyViacom and Microsoft are partnering on advertising, content and gaming fronts in a five-year deal valued at $500 million, the companies said Wednesday.
Viacom president and CEO Philippe Dauman said the valuation represents a combination of "revenue sharing, guarantees and licensing fees" between the companies. He said the $500 million is a "baseline" number and that the deal ultimately could net a greater value for the companies.
Under terms of the deal, Microsoft's Atlas division will serve ads for Viacom's Web properties, which number about 300 and include the sites for MTV, VH1, Comedy Central and those channels' programs. The software company will also have the exclusive right to sell remnant display ad inventory for Viacom's Web sites.
Viacom had previously used DoubleClick to power its online ad network. In April, Google said it intended to buy DoubleClick, a potential deal that has come under scrutiny from the European Commission.
Viacom sued Google and its YouTube video-sharing site in March for $1 billion for copyright infringement, and the network's embrace of Atlas could be seen as a further spurn of the search giant by the network. While Dauman didn't comment specifically on the suit, he acknowledged that Microsoft and Google are increasingly at odds in the online ad space, a fight that has already seen Google lose out to Microsoft in October for the right to sell ads for Facebook.
"Certainly there is a battle between Microsoft and Google," Dauman said. "Microsoft wanted to get our business, and as part of this overall relationship we were happy to engage with them. This is a good deal for us."
The deal has been in the works since September, said Dauman, when what was supposed to be a short meeting with Kevin Johnson, the president of Microsoft's platform and services division, turned into a long one as the two execs realized that a close partnership could be beneficial for both companies. Dauman said he's watched as Microsoft has "committed significant resources from an engineering and technological perspective" to its online ad-serving business and that this strategy would help to monetize Viacom's growing Web portfolio.
"We have complementary views about where the business is going," Dauman said. "We're providing brands and marketing prowess, and Microsoft brings great attributes that will help us monetize our business better."
The agreement will also make Viacom content available on Microsoft's MSN.com and Xbox 360, a relationship Dauman likened to his company's deal with AOL, which was announced last week. Paramount Pictures and MTV Networks programming is already available for the Xbox, and the network will now add content from its BET Networks.
Viacom recently launched a Web site for "The Daily Show With Jon Stewart," with a full archive going back to 1999, and the network plans to introduce a similar one for "South Park" next March. The network has a Web strategy of building separate sites for shows and interest areas instead of one centralized location.
In addition, the deal will see the launch of a co-branded Web site in 2008 that will feature content from at least four MTVN and BETN events, including the MTV Video Music Awards and the BET Awards. Microsoft will provide online promotion for the events, and two companies will share ad revenue generated from the site.
The agreement will touch on gaming as well, as Viacom will work with Microsoft to "become a preferred publishing partner" for the tech company's casual gaming platforms.
This agreement caps a busy year in the digital media space for Viacom, which Dauman said has exceeded its expectations for $500 million in online revenue.
In addition to suing Google earlier in the year, the network threw its support behind Internet TV application Joost as a preferred method for Web distribution of its content. In April, Viacom signed an agreement for Yahoo to be the exclusive provider of sponsored search and contextual ads for the Web sites for MTVN and BETN, a deal that is unchanged by Wednesday's announcement.
And earlier this month, the network released Paramount's "Jackass 2.5" online, partnered with AOL and formed its Digital Fusion group, an ad division which will help to further monetize the network's Web presence.