Microsoft Signs Online Ad, Content Deal With Viacom; Value Of Agreement Pegged At $500 Million

Microsoft (NSDQ: MSFT) has signed a five-year deal with Viacom (NYSE: VIA) covering on ad serving, content distribution, event promotions and games. The agreement marks the software company’s latest effort to build its ad business since its $6 billion acquisition of online ad firm aQuantive in August. Financial details were not disclosed, but the two valued the deal at $500 million. Other elements include:

Distribution: Microsoft will get access to long and short-form TV and movie titles from Viacom units MTV, Comedy Central, BET and Paramount Pictures for use on Microsoft properties such as MSN and Xbox 360. Given that a wide array of Viacom content is already available to Xbox 360 users via Xbox LIVE Marketplace, the deal mainly adds entertainment from BET Networks. Microsoft’s license to run Viacom’s content is also non-exclusive. Lots more in extended entry…

Advertising: Microsoft’s Atlas unit, which is part of aQuantive, will become the exclusive ad server for Viacom’s U.S. websites. Secondly, Microsoft will buy ads across Viacom’s broadcast and online networks over a five-year period and the companies will work together on promotions and sponsorships for MTVN’s and BET’s award shows.

Games: Viacom will work with Microsoft as a publishing partner across Microsoft’s casual gaming platforms.

The agreement comes after a year in which both companies have intensified their respective online efforts. Last week, Microsoft struck an agreement with, taking over the display and contextual ad serving duties previously handled by DoubleClick. Also last week, MTVN updated its online ad sales structure, creating a new unit within its Digital Advertising division called Digital Fusion to unify its networks’ interactive marketing activities. Release

AdAge: While discussions about vague collaborations had been going on for years, this deal appeared to come into focus around the Advertising Week events back in September. Both Microsoft and Viacom executives canvassed marketers’ opinions about the linked strategy and apparently liked what they heard. And Viacom plans to carry the strategy further. Having secured a content syndication arrangement with AOL (NYSE: TWX), Viacom CEO Philippe Dauman says the company is interested in deals with other portals.

Bits: Two of the most interesting aspects of the deal concern what was left unsaid. First, how will the deal fulfill the $500 million promise? Dauman cited licensing fees, revenue sharing, ad sales and other elements, adding that it was a conservative estimate and could rise even higher: