Viacom goes online for $49 mil

Conglom ponys up coin for Netco iFilm

Viacom has plunked down $49 million for online video site iFilm, which will become part of MTV Networks.

The Netco has gained prominence and created buzz over the past couple of years by hosting “viral video” clips, such as Jon Stewart’s contentious appearance on “Crossfire.” The clips are spread by users, who email an iFilm link to their friends, who in turn pass it on to others, sometimes reaching millions of people.

CEO Blair Harrison will continue to run iFilm out of its Hollywood office, reporting to MTV Networks senior VP of digital music and media Jason Hirschhorn.

Deal has been expected for the past month (Daily Variety, Sept. 21). It’s the latest in a rash of bold and costly Internet moves by media congloms, including News Corp.’s purchase of IGN Entertainment and for $580 million and $650 million, respectively.

Viacom bought kids site in June for $160 million.

IFilm acquisition immediately gives MTV a bigger imprint on the Web, particularly in the fast-growing area of online video.

MTV Networks has been getting heavily into Web video recently, with MTV, VH1 and Nickelodeon all launching broadband channels. Comedy Central is expected to follow suit soon.

Conglom is hoping to integrate more of its content into iFilm as well as tap Netco’s expertise to build out its other brands online.

“First and foremost our priority is to build iFilm as a bigger brand,” Hirschhorn said. “But we see an opportunity for an iFilm imprint on our sites and our stuff having a home on iFilm. We can also use promotional airspace to drive traffic to them and maybe even get show ideas from their viral video content.”

MTV is counting on iFilm to give it a big inventory boost that will help it grow online ad revenue.

Hirschhorn added that Viacom, like its competitors, is keeping an eye out for other potential Net acquisitions. With its growing library, a video search company to help users sort through the huge number of clips would be a natural play.

Because much of iFilm’s content comes from users, and site is built around what’s popular, there’s likely to be some suspicion among Netizens about a big media conglom taking over, much as there was on social networking site MySpace when News Corp. bought it. That could especially be true if Netco is perceived as becoming too much of an MTV promotional vehicle.

“We want to remain what we have been for some time,” Harrison insisted. “We got where we are by listening to our users and what they watch and contribute and share. They vote with their feet.”

Acquisition lets a number of investors in iFilm cash out, including Sony Pictures, Rainbow Media, Liberty Digital and Eastman Kodak as well as industryites Jeff Berg and Brad Grey.

Several other potential buyers made a play for iFilm, including News Corp. and CNET Networks. But deal is worth significantly more than prices floated just a year ago, and it aligns Netco with a conglom that has a similar profile of young users who spend much of their time online.

Founded in 1998 as a home for short films, iFilm nearly collapsed in the dot-com bust. However, it has rebounded in the past few years after switching its focus to viral video.

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