Viacom Mulling iFilm Buy as Web Video Distribution Booms

Film and television giant Viacom (NYSE: VIAb) is said to be close to announcing a deal to buy video-on-demand site iFilm, a move that would give it an entirely new distribution channel for its deep well of content.

Viacom, which owns MTV, CBS and Nickelodeon, among other TV properties, reportedly will pay about US$50 million for privately held iFilm. Neither company would comment on the potential deal, which was first reported on PaidContent.org.

The move would fit with Viacom's recent moves to expand its Web presence, beefing up the Web sites of existing properties such as MTV.com and VH1.com and buying Neopets.com, a site that caters to pre-teen Web users. Viacom also recently made a deal to distribute Yahoo (Nasdaq: YHOO) ads across its Web network.

Analysts said the buy would underscore the growing importance of the Internet as a distribution channel for video content and extend a trend in which traditional media companies buy Internet properties. It may also show that content owners are becoming more comfortable with the Internet distribution model, slowly but surely putting aside fears of piracy to embrace the medium.

Next Big Network

iFilm was founded in 1998 as an outlet for short films and movie news, but has found traction in recent years by serving as a host for short film trailers and video clips and attracting major advertisers. Backers include Sony (NYSE: SNE) Pictures, Rainbow Media, Liberty Digital and Eastman Kodak (NYSE: EK)

Hollywood trade paper Daily Variety reported that others have kicked the tires of iFilm in the past, including News Corp., which has been on its own Internet-focused buying spree, and online media firm CNET.

Former TV Guide critic Jeff Jarvis called the purchase a "media changing moment," one that "anoints online as the next network."

Jarvis, now the author of the BuzzMachine blog, said the Web's potential as an archive of video that can be played any time has already been displayed. He cited the example of Jon Stewart's CNN "Crossfire" appearance. While some 150,000 viewers were tuned in for the initial broadcast, the clip has since been viewed 3.4 million times on iFilm alone.

But he also said Viacom may be over-reacting to the trend by buying iFilm, since it could just as easily use its existing Web properties to make content from MTV, VH1 and Nickelodeon available on the Internet.

"Viacom is looking to buy iFilm because it recognizes that the old distribution channels -- the networks -- are no longer the only game in town and no longer all-powerful," Jarvis added. "Viacom wants to be part of the next network."

Demanding Market

Forrester analyst Josh Bernoff said many traditional media companies have been forced to take notice of the Web, not only because of its booming importance as a marketing channel, but also because more users are getting video content there.

Media sites that specialize in video are seeing traffic double ever six to eight months, the type of growth that marked other forms of Web content in the early days of the Web. Meanwhile, major marketers are adding video ads to the mix.

Bernoff said now is the time for major players to strike in this market.

"Sites with upscale audiences, existing traffic, and access to content, including many TV networks, should add hundreds of videos to their sites and start selling ads now," Bernoff said.