CitySearch partners with WebTV

In an announcement that has some industry watchers scratching their heads, CitySearch, which competes with Microsoft's (MSFT) localized content service Sidewalk, announced today that it has cut a deal with WebTV.

That might lead some to ask why a Microsoft property--WebTV, which was purchased this spring for $425 million--would partner with a company competitor.

CitySearch also said today it made a deal with Planet Direct, which provides content to Internet service providers.

In both nonexclusive deals, WebTV will provide local content for the services.

These kinds of alliances emerge practically on a daily basis. But with competition so heated among localized services, the CitySearch-WebTV news seems a bit baffling.

Of course, it makes perfect sense for CitySearch, which is doing everything it can to extend its brand in cyberspace. Moreover, as one of the only start-ups leading the space--the other local sites are ventures or spinoffs of large media, Internet, and telecommunications companies--CitySearch needs those eyeballs.

It also makes sense for WebTV, whose strategy is to deliver the best content it can to its viewers, according to WebTV CEO Steve Perlman.

In fact, Perlman emphasized that WebTV has been talking with Sidewalk about a partnership "even before the acquisition [of the company]," he said. He added that WebTV is much more like a broadcast network hunting for the best programming from wherever it comes.

"When it comes to content creation, the channel's a little different than shows. You certainly don't want to limit a channel to just the shows your parent company owns. At the same time, you don't want to put your parent stuff at a disadvantage."

Frank Schott, general manager at Sidewalk, downplayed the competitive conflict of the partnership. "It's actually not a big deal at all. It's a short-term, nonexclusive deal. Sidewalk is focusing on the high-volume distribution deals. We're a featured offering on Microsoft Network. We signed an interactive neighborhood deal with MSNBC, and I'm sure we'll do something with WebTV now that they're part of the family."

One of Microsoft's weaknesses is that it keeps signing deals with itself and its offshoots, said Mark Mooradian, an online analyst with Jupiter Communications. "My biggest criticism [with MSN] is that when you go on there, it's almost all Microsoft content," he said. "It becomes this forum for Microsoft properties. I think that's something that eventually has got to change."

This deal may indicate that at least where WebTV is concerned, the software giant is broadening its horizons, even taking on potential competitors. "It's a sign that Microsoft is moving in the right direction rather than the wrong direction," Mooradian said.

CitySearch and its content will be featured in the AroundTown area of the WebTV service. While WebTV Internet terminals offer access to the whole Net, its users are more likely to surf to sites featured on the service because they tend to be novices, according to Charles Conn, CEO of CitySearch.

Conn acknowledges that on the face of it, the deal seems strange. But he added that CitySearch and Sidewalk only compete in one arena: arts and entertainment. While CitySearch tries to be all-inclusive, offering everything from information on local doctors and pharmacies to listings for restaurants and movies, Sidewalk focuses exclusively on arts and entertainment.

In addition, the two services cover different cities. "Even where we do overlap, our content is quite different," Conn said. As far as competition goes, "we're not as head-to-head" as CitySearch is with other local sites. Sidewalk is "more focused on national advertising," he added.