• by Wayne Friedman , December 20, 2007

Finally finding a major long-term Internet partner, Viacom has struck a massive five-year program content, distribution and advertising deal with Microsoft Corp. worth $500 million.

Highlighting the multi-prong alliance will be Microsoft's licensing of Viacom programs--coming from MTV, Comedy Central, BET and Paramount Pictures--for use on Microsoft platforms: Web site MSN and game platform Xbox 360. Viacom programs are already distributed to Xbox 360 users. The new deal adds content from BET Networks.

On the Internet ad front, Microsoft's Atlas ad-server division--similar to Google's DoubleClick--will become the exclusive server of ads for Viacom's U.S. Web sites. Microsoft can also sell leftover display advertising inventory on those Viacom sites. Both companies will share in that revenue.

For Viacom's traditional TV ad platforms, Microsoft will buy advertising on Viacom broadcast and online networks over a five-year period, which includes promotions and sponsorships for MTV Networks and BET Networks award shows and sites.

In the gaming arena, Viacom will look to produce games, with Microsoft becoming a preferred publishing partner across Microsoft's game platforms.

Finally, for 2008, Microsoft and Viacom will work on a co-branded event and promotion Web site with exclusive content from at least four MTV Networks and BET Networks events, such as the MTV Video Music Awards and BET Awards. Both companies will share advertising revenue, and Microsoft will offer up online promotion for each event.

Philippe Dauman, president and CEO of Viacom, said in a statement: "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." He added that Microsoft's expertise in the ad-serving business would bring "enhanced value to our digital operations."

Kevin Johnson, president of Microsoft's Platforms and Services Division, said in a statement: "Viacom's portfolio of original content and strong consumer brand connections are a terrific complement to Microsoft's Web, gaming and digital advertising assets." Google has become Microsoft's growing competitor--especially Internet ad-serving, with its DoubleClick division. Viacom has also had a run-in with Google and its popular YouTube video site. The company is angered by what it says is YouTube's illegal use of its content. Since then, Viacom and YouTube have had on-and-off-again licensing discussions.