Viacom Ponies Up $102M to Buy Game Networker Xfire

Viacom Inc. (VIA) on Monday said it will buy Xfire, an online games technology company, for $102 million in a bid to dominate the youth market on the Internet as it has on television.

Viacom, owner of MTV Networks, Nickelodeon and the Paramount movie studios, said Xfire has 4 million registered members who use its instant messaging and social networking technologies to accompany their massively multiplayer online role-playing games (MMPORGs).

"It's a wonderful component of our overall digital strategy, particularly on the gaming front," Viacom Chief Executive Tom Freston told Reuters. "Our key audiences are and probably will remain kids, teens, young adults — we want to be anywhere these audiences are."

Freston said Viacom continues to look at other Internet properties as potential acquisitions, mostly deals valued well under $1 billion, and said further purchases were possible this year.

At the same time, he said, Viacom is investing in building up entertainment channels it already owns into new formats for its audience.

Social networking and online gaming sites are two of the hottest investment areas for top U.S. media companies as they try to hold on to younger consumers dividing their time between the Internet and traditional outlets like television.

MTV last year acquired, a site that allows users to invent and care for virtual pets. Rival News Corp. (NWS) purchased social networking site as well as gaming company IGN Entertainment.


Two-year-old Xfire does not actually create games, but provides the underlying technology that connects online gamers. Xfire's services are advertising-based and its features will be incorporated into MTV's online properties.

The company's technology also allows users to share such entertainment as their favorite music videos, lending itself well to distribute video from MTV.

"Online gaming is an intensely social phenomenon, with millions of young adults around the globe interacting constantly," said Judy McGrath, CEO of MTV Networks.

McGrath said MTV would seek to expand Xfire's base regionally, particularly in countries with ardent gaming communities like Japan and Korea. MTV will also promote the community network, possibly with plugs on its television shows and Internet sites.

Xfire's business began with 100 users, growing "virally" as its audience recommended its technology to friends, said company CEO Mike Cassidy.

"We grow about 2 percent per week," Cassidy said. With the backing of MTV's broad media and advertising resources, Xfire is readying its computer servers to handle four times its current traffic "if we had to."

Viacom shares rose 15 cents to $38.95 Monday on the New York Stock Exchange.