Content

MTV Networks’ Life After Corporate Split

4/07/2006 8:05 PM Eastern

MTV Networks Inc. chairman and CEO Judy McGrath is agnostic about the rapidly expanding ways she can distribute music programming and other entertainment, from cable to satellite to Internet downloads and streams to cell phones.

Now that parent Viacom Inc. has put itself through “corporate bulimia” and split off the CBS Television Network and other assets into a separate company, CBS Corp., MTV Networks is part of a new outfit that is focused purely on creating compelling content.

And under the new Viacom, MTVN can freely pursue all options that surface in new media and old, according to McGrath.

Already, MTVN has agreed to provide entertainment clips that can be pulled up on screen by computer users through Yahoo Video Search and digital programming for portable media players and cell phones, in a partnership with Microsoft Corp.

Now, it’s looking at “moving more into social networking,” having watched Rupert Murdoch take the wildly popular Web site for young people, MySpace.com, off the table for $580 million last year.

That site has become a launching point on the computer for new music, with an estimated one million bands and artists posting to the site to bring attention to their work. A quarter-century ago, those bands would have wanted the flagship MTV: Music Television to play their videos.

So don’t be surprised if MTV soon starts to do “interesting things with the big portals that are out there,’’ as McGrath said, to create buzz and foment interaction with the Internet generation.

But MTVN also plans to go after the over-50 set, the baby boomers, with a suite of channels it’s developing.

And the programmer also will court young bicultural Hispanics — an exploding demographic — with its relaunch of MTV Español. That network will be rebranded MTV Tr3s [meaning MTV Tres, or MTV3] later this year.

Multichannel News editor-in-chief Tom Steinert-Threlkeld and satellite editor Linda Moss recently met with McGrath in her office above the neon lights of Times Square in New York to see what’s in the works.

McGrath’s Motherlode
MTV’s Network of Networks
SOURCE: MTV Networks
• Core networks: MTV, MTV2, VH1, CMT, Nickelodeon, Nick at Nite, Spike TV, Comedy Central, TV Land.
• Digital networks include: VH1 Classic, Noggin/The N
• “Demographic” networks include: MTV Español/MTV Tr3s, Logo, Tempo, MTV Desi, MTV Chi
• On-demand programming from: MTV, MTVU, MTVN Español/MTV Tr3s, Nickelodeon, Noggin, The N, Comedy Central, VH1, CMT, Logo, BET
• Broadband channels include: MTV Overdrive, TurboNick, Vspot, Über, Comedy Central’s Motherload, and En Español’s Revolucion.
124 channels worldwide
169 nations or territories
445 million viewers reached, worldwide
150 million viewers reached in U.S.
Broadband channels generated more than 21 million streams of content in first week of March
Web sites visited by more than 25 million unique users in U.S. in February

MCN: We’re post the Viacom split. What’s been the impact to you and your operations?

JUDY McGRATH: We’re still sort of in the early stages of it. We had a meeting in, I think it was in November, in Arizona. And [Viacom CEO Tom Freston] addressed the staff. He’s a really good communicator and I think his belief in — and enthusiasm for — a company that’s nimble, small and more connected is very compelling.

For me, the one single take-away that he said that I think about — I was thinking about it today — is that we’re a pure content-play company. So I think it’s exciting. Someone called it corporate bulimia, which I thought was interesting.

MCN: Where are the key opportunities for growth for MTV now? Is it international? Is it digital?

JM: All of the above. If you look at the collection of brands we have today, it’s still early in the development — believe it or not — of Comedy Central, Spike TV, TV Land, some of those brands that are going to be as big as Nickelodeon and MTV are today. In addition, we’re looking at some potential launches of new broadband, maybe even linear digital networks, and that’s always exciting.

And the fact that we are the largest media company in the world, in terms of having a footprint everywhere there’s electricity or a Wi-Fi connection. It gives us a chance to really focus on some markets internationally and extract some more growth from those places.

In terms of digital, as a content company, we have the advantage of being able to strike deals with everybody for distribution. And we are — whether it’s telcos, wireless providers — while continuing to enjoy the greatest ratings and sizable audience we’ve ever had on cable.

MCN:Can you broadly describe what the digital strategy is and how far along has [MTVN president] Michael Wolf come in terms of working on that?

JM: We have always been in the sort of niche-consumer business, and that’s still true. We’ve acquired some companies. It’s kind of a tuck-in strategy that made a lot of sense: NeoPets (a “virtual critter” site), iFilm, Game Trailers. And we’re always looking for more.

We are now currently available on just about every platform. We have deals with Yahoo, Google and Microsoft. Today, in fact, in California, there’s a big Yahoo meeting with the Nickelodeon folks to spend a couple of hours thinking about things to do that could be interesting with them in the kids’ space.

MCN: How about the viral-digital area? You bought iFilm last year …

JM: We did.

MCN: … on that premise and it is one of the big sites. But now YouTube has got all the buzz.

JM: But that’s the really exciting part of it.

MCN: How do you figure out which one is going to be the MySpace, if you will, of video?

JM: The fact that video is exploding on the Internet is really fantastic for us. If you think about the last couple of years it was about search and function and all that stuff, when what we’re really good at is video.

There are things that we can do to keep growing the iFilm space, and keep it leapfrogging, and we’re going to extend a lot of what you can do, what their technology allows you to do across some of our own Web sites and broadband sites.

We had reorganized ourselves into a lot of sizable units that are focused solely on kind of keeping their eyes open for the next wave, the next YouTube. And there are some companies we’re looking at and talking to, and also to see what it is that we might build ourselves. This is the era of the consumer as programmer, for sure. You have to embrace that and give it a platform and understand it.

MCN: You alluded to looking at launches of broadband services and even linear digital channels.

JM: Last year we had a great year in terms of kind of launching a bunch of original — but connected to our brand — broadband services. You probably know them, MTV Overdrive, and MTVU Über, and Comedy Central’s Motherload, which is exceedingly popular.

The things that I’m excited about for the near term is the relaunch of MTV Español, which will happen in fourth quarter. It will come back with a new name [MTV Tr3s].

MCN: Does it use English?

JM: Right now, it’s mostly Spanish. It will be, though, retooled for the bilingual, bicultural young — I mean, you read the demographics — the young Hispanic who, today, over-indexes on the networks we currently have. And if you look at the fact that even Dora the Explorer is a billion-dollar consumer-products business in and of itself.

It’s clear that there’s a lot of opportunity with the young Hispanic American to customize something for them. And it will have original content, and it will develop more and more over time.

MCN: Is there room for more linear channels this year? I guess that segues into the [MTVN president of network development] John Sykes baby-boomer project. Is the baby-boomer audience something that MTV should even be pursuing?

JM: It seemed to me like we have a gap and an opportunity with 40-to-60-year-olds. They’re a big category. And they are also different, sort of attitudinally and in the kind of things they’re interested in — from all of our research and just personal observation — than maybe the way marketers might have thought about them five, 10, 15 years ago.

MCN: How so?

JM: Well, they’re younger longer. They have more disposable income. They’re interested in some of the ideas like we’ve been exploring with John, which would be the ones you might expect — from living well to entertainment-oriented things. There’s music for them that we’re currently not really dealing with in a big way.

So now the question is what’s the right way to launch them. I can tell you they won’t be purely linear or purely broadband. My guess is it will be some combination of both.

MCN: The past year or so Universal Music has had a music service up on EchoStar —

JM: Right, the International Music Feed.

MCN: What are your thoughts about that being a competitor to MTV?

JM: The music space has gotten a tremendous boost over the last couple of years: iTunes and the iPod; that seamless integration of machine and software, which is just fantastic; and lots of channels — Fuse, IMF. There’s always been competition out there.

So I look at this as not an issue of cannibalization, but more of an endorsement and more of a sort of challenge to figure out what’s the best way to provide music to people these days. It’s just sort of driving a lot of the things we’re doing, including the launch of Urge, which I think is launching the end of second quarter with Microsoft.

MCN: How do you take things to an order of magnitude beyond iTunes?

JM: In no way, shape, or form is this a competition with iPod or iTunes. I don’t expect that anyone — nor would I want them — to stop using that. We’re all huge fans of that. But to find our place in the universe, the notion is that there will be a television component to it and it will be a mix of programs, sort of push and pull. … The explosion in video is really good for us and we can move assertively ahead.

So when you get a look at the beta tests of this thing — because I’ve been looking at it almost every week — it feels both user-generated and programmed. It doesn’t feel anything like iTunes, it’s not that kind of experience at all. It has some more layers of editorial to it.

MCN: It’s interactive so the user can control it.

JM: Completely interactive. So it’s sort of like an amped-up version of what you might experience today on one of our web sites. And the partnership with Microsoft really is great and allows us to do a lot of stuff.

MCN: What does that get you?

JM: Well, it gets us sort of positioning in some of their new products, as they’re coming out.

MCN: So Urge will be on the desktop when you install new versions of the (Windows Vista operating system) when it comes out?

JM: Yeah, we’ve confirmed that.

MCN: Cablevision announced that it’s going to be using a new network recording service that won’t require a box. There’s been a lot of talk that programmers are not going to be happy about this, that there will be lawsuits.

JM: I’ve read the same things and heard the same things about copyright infringement. But I find that, just philosophically, our company has never tried to stand in the way of what technology allows people to do. So I’m like going to look at it with a totally open mind and figure out what it means and sort of keep talking to them and see how it plays out.

MCN: We’re in the midst of upfront presentations. What’s your take on what the marketplace is going to be for your services?

JM: Early indications are that it’s going to be a pretty good upfront. It could even be better than last year, which would be great.

MCN: Have you had any experience yet selling advertising on any (video on demand programs)?

JM: We’re doing something with P&G. And you read about “trick mode” and that kind of stuff, where commercials sort of play while you’re fast forwarding. We’re sort of playing around with all this stuff.

MCN: So what’s the next step in corporate growth?

JM: Well, if you think about the focus on young adults and video and the ability to sort of share and communicate, you’ll see us moving more into social networking and doing some interesting things with the big portals. We’re not a technology company, but we are a content company and we understand these consumers. And we will make a few more probably smallish acquisitions to help us get up to speed quickly on some of the functionality we’d like to have.

MCN: That’s an interesting idea. You could create something that would vie with MySpace by working with Yahoo or Google?

JM: We could.

MCN: Is that something you’re looking at?

JM: We’re looking at all the options, but I think that’s kind of an obvious one. [Yahoo CEO] Terry Semel says, 'Well, maybe we’re not going to be making all the content,’ or something along those lines. We’re a perfect partner for a lot of these people.

Our whole business, our brands, are like community sites to begin with. And we want to be smart and safe about the stuff we do. And we want to make reasonable acquisitions.

And listen, I always think Murdoch and Fox are very bold companies and I admire the stuff they do.

And I feel like we have a lot of great assets and tools to both build and extend ourselves. So the games are just beginning.

November