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Viacom, Microsoft team for online deal

Five-year alliance to combat the likes of Google

Viacom and Microsoft announced a five-year strategic alliance Wednesday that redirects Viacom’s Web efforts away from Google, its opponent in a bitter $1 billion copyright infringement suit.

The pact will see divisions of both companies team on advertising, content distribution, event promotions and games. The companies would not divulge the deal’s exact value, but estimated its “projected base value” at $500 million in financial considerations.

Among its key elements:

  • Microsoft will get non-exclusive rights to Viacom TV and film content for use on Microsoft properties such as MSN and Xbox 360

  • Viacom’s 300-plus Websites will use Microsoft’s Atlas division as their ad server, a switch from Doubleclick, whose acquisition by Google is awaiting regulatory approval. Microsoft will have the exclusive right to sell “remnant,” or leftover, display ad inventory on Viacom’s U.S. sites

  • Microsoft will pay an undisclosed sum for ads on Viacom broadcast and online networks over five years, and the companies will jointly promote MTV Networks and BET Networks award shows

  • Viacom will pursue opportunities to become a preferred publishing partner in Microsoft’s casual gaming businesses.

Microsoft stands to see the most upside from the deal, which advances the company’s standing in the still-hot online ad market, which has grown at a 25% clip in 2007 to reach about $20 billion. With Xbox posting healthy results, Microsoft needs content to maximize the player’s Web video capability, and the “gamer” fare delivered by Viacom properties Comedy Central, Spike, MTV and others fits the bill.

Atlas, which Microsoft bought for $6 billion last May, has swiftly signed other media clients, including CNBC.com and the news site Digg. Kevin Johnson, prexy of Microsoft’s Platforms & Services Division, called the deal “another milestone in our quest to build a world-class advertising platform to serve the broad needs of advertisers and publishers.”

Viacom chief exec Philippe Dauman praised Microsoft’s M.O., pointedly but subtly noting its “respect for copyright.” He added, “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.”

Viacom shares, which have been trading near a 52-week high lately, closed up 30 cents at $43.37. Microsoft gained a nickel to $34.79.

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