Viacom Inc. and Microsoft Corporation announced a broad-based, strategic alliance under which major divisions of both companies will collaborate on advertising, content distribution, event promotions and games over the next several years.
The comprehensive agreement spans across the two companies and includes a number of significant components. Among them:
— 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
— Microsoft’s Atlas division will become the ad server for Viacom’s U.S.
websites and Microsoft will have the exclusive right to sell remnant
display advertising inventory on Viacom’s U.S. websites.
— Microsoft will buy advertising on Viacom 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
— Viacom will work with Microsoft on opportunities to become a preferred
publishing partner across Microsoft’s casual gaming platforms.
Detailed financial terms were not disclosed, but the deal has a projected base value of approximately $500 million in financial considerations and business services between the two companies over the initial five-year length of the agreement. The deal includes a combination of revenue sharing provisions, guarantees and content licensing agreements. The agreements contemplate the potential for expansion of the transactions.
Philippe Dauman, President and Chief Executive Officer of Viacom, said, “We are very impressed with how closely Microsoft’s business plans complement our strategic objectives. 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 monetization 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.”
Dauman added, “We look forward to collaborating closely with Microsoft. This partnership will generate significant value on both sides. This deal is an important example of how the growing success of our digital properties is driving greater revenue for Viacom as a whole.”
Kevin Johnson, president of Microsoft’s Platforms & Services Division, said, “We are delighted to establish this long-term partnership with Viacom. Viacom’s portfolio of original content and strong consumer brand connections are a terrific complement to Microsoft’s web, gaming and digital advertising assets. This deal is another milestone in our quest to build a world-class advertising platform to serve the broad needs of advertisers and publishers. If ever there was a ‘win-win’ partnership across two companies, this is it.”
Viacom will 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 properties such as MSN.com 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 and Windows) 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, known as Atlas AdManager. AdManager is an offering that Microsoft obtained upon completion of its $6 billion acquisition of aQuantive, Inc. in August 2007. AdManager — which operates within Microsoft’s newly created Advertiser & Publisher Solutions division — will enable Viacom to better monetize its U.S. web properties, such as MTV, VH1 and Comedy Central, by serving graphical and video ads on those sites, providing an ad serving solution, optimization 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 (MDAS) and DRIVEpm. Revenue generated from the sale of this inventory by Microsoft will be shared between the two companies.
Events and Promotions
During calendar year 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 pre-determined amount of online promotion for each event.