Microsoft and Viacom ink $500 million-plus Web and TV deal

In an online advertising and cable TV entertainment deal of sweeping proportions, Microsoft and Viacom will be teaming up with each other on both the Web as well as on Viacom's broadband network for at least five years.

Although the two companies have declined to disclose specific financial terms, Microsoft officials are projecting a base value of about $500 million in financial considerations and business services over the first five years of the pact, including revenue sharing provisions, guarantees, and content licensing agreements.

The agreements also "contemplate the potential for expansion of the contracts," in the words of Microsoft.

The two ad partners have also unveiled some of the major components of the pact, which seems to epitomize the kind of convergence between the Web and entertainment that many industry analysts are pointing to -- and which is also rapidly becoming a hallmark of the Consumer Electronics Show (CES) in Las Vegas.

For one thing, Viacom will "work with Microsoft on opportunities to become a preferred publishing partner across Microsoft's casual gaming platforms," according to a written statement put out by Microsoft today.

Moreover, for its part, Microsoft will license, on a non-exclusive basis, long-and short-form TV and theatrical content from across Viacom's cable network and motion picture businesses.

Meanwhile, Microsoft's Atlas division will become the ad server for Viacom's US Web site, and Microsoft will get the exclusive right to sell remnant display ad inventory on Viacom's US Web sites.

Microsoft has also agreed to buy advertising on Viacom's broadcast and online networks.

Finally, the two partners will collaborate on promotions and sponsorships for Viacom's MTV Networks and BET Networks award show.

Also denoting convergence between the Web and entertainment worlds, a press conference held during pre-CES festivities in New York this fall, CES officials said they've been encouraging content providers to exhibit at the show.

Exhibitors for the upcoming show in January, 2008 will include NBC Universal and Movielink, for example.