Viacom, Microsoft Team Up, Target Google

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There is no love lost between Google and Microsoft. Same holds true for Viacom. So it doesn’t come as a surprise that Microsoft and Viacom have announced a deal that’s essentially You scratch my back and I scratch yours — and with about $500 million worth of scratching. Here is a precis of the news announcement:

What Microsoft Gets:

  • Microsoft will get video from Viacom and all related properties like Comedy Central and it will be available on MSN and XBox 360. Microsoft already distributes a lot of content from Viacom.
  • Microsoft will get casual games from Viacom.
  • Microsoft’s Atlas will be the ad server for Viacom. Viacom will provide unsold display advertising inventory on its digital sites for Microsoft to sell and serve.

What Viacom Gets:

  • Money. A lot of it. “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 shows.”

Who is the winner?
The five-year-deal is pegged at a base value of $500 million, though the two sides are not talking precise financial terms. I suspect it’s going to favor Viacom.

Viacom doesn’t have to spend anything and at the same time it is getting advertising dollars and more distribution for their content. I get a feeling that, going forward, this is going to become a template deal for all large media companies with content assets. For them it’s a green light to pillage Microsoft’s overflowing coffers.

Deals like this will increase the pressure on Google to do similar ones with other content providers, mostly to thwart Microsoft’s advertising ambitions.

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sc

There is also the issue of Google using ad revenues to fund product development for viable substitutes to Microsoft’s cash cows (office productivity and small/mid-range server products). Providing a better advertising deal for advertisers means less money to Google to build products that can compete against Microsoft products.

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