Viacom makes its Net play

Viacom Inc. is expected to announce a major push onto the Internet, creating a freestanding unit to operate its Internet businesses such as the MTV Networks Web sites.

As part of this new Internet emphasis, the company is also expected to announce the acquisition of Imagine Radio, an Internet radio-station operator.

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Viacom (AMEX:VIA) Chairman and controlling shareholder Sumner Redstone scheduled a news conference Tuesday in Los Angeles to detail the media company's new online strategy. Viacom executives say that establishing the company's scattered Internet operations into a single corporate unit will allow the back-room functions to run more efficiently and highlight the company's fast-growing Web activities, according to people briefed on the company's plans. Viacom declined to comment, and Imagine Radio, Brisbane, Calif., didn't return calls.

The MTV Networks -- MTV, VH1 and Nickelodeon -- will continue to operate separate Web sites.

Unlike other media companies, Viacom does not plan to make a major Internet acquisition, according to people familiar with the company's thinking. Viacom executives have openly questioned the skyrocketing valuations of young Internet companies. Imagine, the Internet radio company, cost a relatively modest $14 million, according to people familiar with the transaction.

Viacom already operates popular Web sites, according to Media Metrix. MTV.com attracted 1.2 million different visitors in December, according to the research firm. The Nickelodeon site attracted 1.4 million the same month, according to Media Metrix.

Analysts say it makes sense for Viacom to ramp up its Web efforts. "They have a good brand name, but they have to accelerate the process" online, says John Tinker, an analyst with NationsBanc Montgomery Securities LLC. Tinker says Viacom has to start turning the popular sites into "dollars" by selling advertising and goods. The Imagine Radio deal was reported Monday in the Hollywood Reporter, a trade magazine.

Making a Net push
Kenneth Londoner, a general partner of Redcoat Capital Management, a New York hedge fund, expects Viacom to begin aggressively promoting its Web sites on its cable networks, much the same way Walt Disney Co. is promoting its Go Network Web site on its ABC and ESPN television networks. "Viacom needed to put its flag in the sand," says Londoner.

Last year, Viacom executives were concerned that the huge interest in the Internet would drain young viewers from its popular cable channels. But MTV and other media companies became more comfortable with the Web after several research reports concluded that heavy Internet viewers are also heavy consumers of other media, including television.

While Viacom plans to sell merchandise over the Internet, people familiar with its plans say that Viacom does not plan to start a major record retailing site. Matt Farber and Kris Bagwell are the two Viacom executives most closely associated with the company's Internet plans.