<PAGE>


                                                                    Exhibit 10.6
                                                                    ------------

CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.  ASTERISKS DENOTE OMISSIONS.

                             INVESTMENT TERM SHEET

                              HIGHLY CONFIDENTIAL



Issuer:                  SeaChange International Inc. (the "Company")

Investor:                Microsoft Corporation ("Investor")

Initial Investment:      Microsoft will purchase 277,162 shares of the Company's
                         common stock, par value $0.01 per share (the "Common
                         Stock") for a purchase price of $10,000,000.

Subsequent Investments:  Upon the achievement of each of the First and Second
                         Commercial Milestones (as defined below), Investor
                         shall purchase additional shares of the Company's
                         Common Stock equal in value to $5,000,000. The per
                         share price to be paid by Investor in such subsequent
                         closing shall be *** below the average closing price
                         of the Company's Common Stock as publicly reported by
                         the Nasdaq Stock Market as of 4:00 p.m. Eastern Time
                         over the ten trading days ending one trading day prior
                         to the date the relevant Commercial Milestone is met.

Commercial Milestones:   (a)  First Commercial Milestone
                              --------------------------

                              The "SeaChange System  Software" (as defined in
                         that certain License and Development Agreement between
                         the parties dated as of May 8, 2000) will demonstrate a
                         high level of system stability and will meet the
                         following performance criteria:

                            (i)     A single and multiple node system will
                                    stream *** Windows Media Format streams at
                                    *** of total system capacity for a period
                                    of ***.

                            (ii)    A single and multiple node system will
                                    stream *** MPEG 2



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<PAGE>

CONFIDENTIAL MATERIAL OMITTED  AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.


                                    streams at *** of total system capacity for
                                    a period of ***.

                         (b)  Second Commercial Milestone
                              ---------------------------

                              Shipment of the commercial release of the
                         "Enhanced Version" (as defined in that certain License
                         and Development Agreement between the parties dated as
                         of May 8, 2000) no more than 18 months after the
                         commercial availability of the Next Generation Windows
                         Media Server.

Registration Rights:     Demand right for immediate registration of shares.

Strategic Relationship:  Both parties will identify a contact within the
                         respective companies for ongoing consultation between
                         the parties. In addition, upon the reasonable request
                         of Microsoft, the Company will make available members
                         of Company management to meet with representatives of
                         Microsoft on a quarterly basis to discuss issues
                         relating to the Microsoft-SeaChange relationship.

Financial Information:   For so long as Investor holds at least 50% of the
                         Common Stock acquired under the transactions
                         contemplated herein, the Company will deliver to the
                         Investor copies of the Company's 10-K's, 10-Q's, 8-K's
                         and Annual Reports to Shareholders promptly after such
                         documents are filed with the Securities and Exchange
                         Commission.

Conditions to Closing:   The obligation of the Investor to purchase the Common
                         Stock will be subject to customary closing conditions
                         including, without limitation:

                           .  Execution of mutually satisfactory definitive
                              documentation in forms substantially similar to
                              those attached hereto as Exhibit A (Stock Purchase
                              Agreement) and Exhibit B (Registration Rights
                              Agreement);

                           .  Any applicable governmental and regulatory
                              approvals;
                           .  Closing certificates; and
                           .  Legal opinions.



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<PAGE>


                         Both parties will use commercially reasonable
                         efforts to cause the foregoing closing conditions to
                         be satisfied.


Confidentiality:         The existence and terms of this proposal will not be
                         disclosed to any third party (other than each party's
                         professional advisors and such third parties as may be
                         required to consent to the transaction) without the
                         prior written consent of the other party. Upon the
                         signing of this Term Sheet, the parties intend to make
                         a mutually-acceptable public statement regarding the
                         transactions contemplated herein.

Effect:                  The parties agree that this Term Sheet is binding upon
                         both parties and neither party may unilaterally
                         terminate the contemplated transactions described
                         herein except based upon the other party's failure to
                         satisfy a closing condition listed above.

                 [Remainder of page intentionally left blank]


                                      -3-
<PAGE>


Dated: May 8, 2000


SeaChange International Inc. ("Company")    Microsoft Corporation ("Investor")



 By: /s/ William L. Fiedler                 By: /s/ Amar Nehru
    ------------------------------              ------------------------------

 Its: Vice President                        Its: Corporate Development, VP
     -----------------------------               -----------------------------



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<PAGE>


                                                                       Exhibit A
                                                                       ---------

Form of Stock Purchase Agreement by and between the Registrant and Microsoft
Corporation incorporated by reference to Exhibit 10.3 hereto.



                                      -5-
<PAGE>


                                                                       Exhibit B
                                                                       ---------

Form of Registration Rights Agreement by and between the Registrant and
Microsoft Corporation incorporated by reference to Exhibit 10.4 hereto.



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