Microsoft and Viacom in content, advertising deal

20 Dec 2007

Software giant Microsoft and entertainment monolith Viacom have signed a landmark deal to collaborate on advertising, content distribution, event promotions and games.

The comprehensive agreement will last initially for five years. Detailed financial terms were not disclosed but the deal has a projected base value of approximately US$500m in financial considerations and business services between the two companies over this time.

Under the terms of the deal, Microsoft will license, on a non-exclusive basis, long- and short-form television and theatrical content from across Viacom’s cable network and motion picture businesses, including MTV, Comedy Central, BET and Paramount Pictures, for use on Microsoft properties such as MSN and Xbox 360.

The deal will also see Microsoft’s Atlas division becoming the ad server for Viacom’s US websites and Microsoft will have the exclusive right to sell remnant display advertising inventory on Viacom’s US websites.

Microsoft has committed to buying advertising on Viacom’s broadcast and online networks over a five-year period and the companies will work together on promotions and sponsorships for MTV Networks and BET Networks award shows.

Viacom will also work with Microsoft on opportunities to become a preferred publishing partner across Microsoft’s casual gaming platforms.

“We are very impressed with how closely Microsoft’s business plans complement our strategic objectives,” said Philippe Dauman, president and CEO of Viacom. “This is a novel and comprehensive partnership that demonstrates the scale of our digital operation and the value of our branded content across all distribution platforms.

“By taking advantage of industry-leading assets at both our companies, this landmark alliance brings valuable promotional power and increased monetisation to our wide portfolio of branded websites, which collectively represent the leading entertainment presence online. Microsoft’s superior assets and expertise in the ad serving and sales business will drive enhanced value to our digital operations. This deal is an important example of how the growing success of our digital properties is driving greater revenue for Viacom as a whole.”

“Viacom’s portfolio of original content and strong consumer brand connections are a terrific complement to Microsoft’s web, gaming and digital advertising assets,” said Kevin Johnson, president of Microsoft’s Platforms & Services Division. “This deal is another milestone in our quest to build a world-class advertising platform to serve the broad needs of advertisers and publishers.”

The content distribution part of the deal will see Viacom provide Microsoft with a broad selection of short-form and long-form audio-visual content from MTV Networks, Paramount and BET Networks for distribution by Microsoft on and Xbox 360. A wide range of content from Viacom properties is already distributed to Xbox 360 users through Xbox LIVE Marketplace and this deal adds popular content from BET Networks.

In addition, Viacom will work with Microsoft’s casual gaming platforms (MSN, Windows and Xbox) to provide downloadable casual games to the substantial base of consumers playing quick-to-develop, easy-to-learn games on these platforms.

Microsoft will provide Viacom with its proprietary ad serving solution, Atlas AdManager. AdManager — which operates within Microsoft’s newly created Advertiser & Publisher Solutions Group — will enable Viacom to better monetise its US web properties, such as MTV, VH1 and Comedy Central, by serving graphical and video ads on those sites, providing an ad serving solution, optimisation features, inventory forecasting, real-time reporting and precise audience advertising targeting.

Viacom will provide unsold display advertising inventory on its digital sites for Microsoft to sell and serve through both Microsoft Digital Advertising Solutions and DRIVEpm. Revenue generated from the sale of this inventory by Microsoft will be shared between the two companies.

During 2008, Microsoft and Viacom will partner to promote a co-branded website with exclusive content from at least four MTV Networks and BET Networks events, such as the MTV Video Music Awards and BET Awards, and will share certain advertising revenue generated by the site. Microsoft will provide a predetermined amount of online promotion for each event.

By Niall Byrne