News

Returns on Innovation

5/16/2008 8:00 PM Eastern

MTV Networks chairman and CEO Judy McGrath has the company firing on all cylinders. MTV Networks' Comedy Central, VH1, MTV and Spike TV all posted significant primetime audience increases during the first quarter of 2008, compared to the prior year. The group's online business — which includes network-based Web sites such as nick.com and comedycentral.com, as well as acquired sites such as AddictingGames and Neopets — is averaging a combined 90 million unique users a month, up by more than 20 million visitors for the same period in 2007. The group is also looking to leverage its multiplatform offerings with advertisers by offering new ad models and integrated on-air and digital campaigns that it hopes will provide more value for advertisers and revenue for the company.

McGrath recently sat down with Multichannel News editor-in-chief Tom Steinert-Threlkeld and programming editor R. Thomas Umstead to provide a glimpse into MTV Networks' global multiplatform business. An edited transcript follows:

MCN: One of the big things that you talked about during MTV's upfront presentation was a 'return on innovation.' So how do you measure return on innovation exactly?

Judy McGrath: ROI can be a data-driven experience if you need it to be. We took The Hills, one of our biggest franchises, and we plotted out a significant number of questions around the experience of watching it on television and experiencing it online to see whether the virtual experience added something to the audience that's rabid for it. We measured it working with Nielsen [Media Research] and several other companies to explain to a client that each of us enjoyed a bump in perception for doing something beyond what everyone is calling a multiplatform experience.

MCN: How do you measure perception? I can see how you can measure time viewers spend with The Hills on television and online, but I don't easily see how you can measure whether this or that application makes me feel better about The Hills.

JM: We always do qualitative research — we've always found that extremely valuable and we've always asked a series of questions about what is important to a fan of The Hills and whether they're satisfied with the product. It's a qualitative methodology, not a quantitative one.

With quantitative data everyone is slicing and dicing — and some say manipulating it — but when you ask these questions about perception and value, you really get a sense of whether this is the right way to move forward with a property, brand or idea. Do you evoke the right amount of action and feeling about that when you approach it this way? We have data that proves that even more so than we expected.

MCN: So what you're now trying to do is turn commercial time into content time. Talk about some of the methods you're using.

JM: I remember the days when art and commerce were two very separate things. So when you look at the work the creative people here did quite willingly like the “Get Mo” [Mountain Dew] campaign on Spike, which almost looks like a knockoff of The Bourne Identity or Mission: Impossible — or the guys arguing about athlete's foot as they are clearly trying to look like UFC fighters — it fits the humor of the Spike brand and it feels as though it makes product integration not something clunky and obvious. It makes you feel like you like to drink Mountain Dew and you like to watch Spike.

We want to entertain you every minute you spend with us, so let's make the whole experience entertaining.

MCN: Are you concerned that some people won't like having so much product integration on the networks?

JM: Some people don't like getting constant targeted advertising, but personally I think some of this is generational.

MCN: In what respect? Younger people want it more, or can they recognize it better?

JM: I think they understand what it is. It may sound like a contradiction, but there's clearly a desire for authenticity and relevance, and skepticism about being overly promoted to, so we're careful not to go overboard. I think the notion of breaking up content and then going to a commercial that's not relevant to where you were is something that's going to be changing over time.

The good news is that it affords you to do some interesting things with formats. You can literally have a longer stretch of really great content and a more impactful short [advertising message]. As we announced, Levi's has bought a block of time on Logo and they intend to program custom-made, heartfelt reflective marketing and commercials for Logo. There's really a lot of upside to this.

MCN: You seem to be enjoying this multiplatform world, where most executives seem to be having great angst over it. Why is that?

JM: There's nothing worse than living in predictable times, and I think the nature of the MTV Networks is to keep innovating. We've fallen on our noses more times than anybody else, but it's so exciting to realize that we're not just cutting longterm deals that you get together every couple of years to do.

This is a constant period of incubation, experimentation, negotiating — it's definitely a time of trial and error and trial again and trial better with consumers. It's an acknowledgement that they expect to be included in the process because they have more of an opportunity to do that. So I think it encourages you to compete and be your best self — it isn't enough to deliver what you've always delivered — you really have to step up your game. And it's thrilling and very exciting for all of us.

MCN: How is MTV Networks different from what it was two years ago?

JM: For a couple of years after reading in the opening sentence of every article about us that we were the company that didn't get MySpace, I haven't read that in a while. I think that's because we've found our own way to demonstrate that we've understood how to be successful and relevant online. We're not a big portal and not a big social network, but we've launched some really interesting broadband verticals that line up with our programming on television. We've launched several that don't have anything to do with our programming, and we hit magic with [the video console game] Rock Band.

I think we've found a place over the last year in casual gaming that is pretty extraordinary and it will be a good focus for us going forward. AddictingGames and Shockwave have really stepped to the top of that class. I think we've done this smartly — we've made some bets and they're now returning.

MCN: How would you define your approach to online?

JM: [MTV Networks Global Digital Media President] Mika Salmi called it the vertical entertainment experience. Our portfolio is broad and wide, but now we've begun to connect our own sites together so that you can search for an artist on VH1 and access the MTV archives easily. You can recommend and post a profile but you don't have to re-register when you move to another MTV Network site.

We did a lot of things to improve the experience. On our own sites we've gone a long way out of the — dare I say — the programmer's dilemma of overdesign and overprogram and really make it easy and simple to connect to what you might like elsewhere. We didn't go out and acquire a massive company to get into the networking space, which everyone is talking about, but we've tried to be bold but smart and focused. [MTV properties reach 90 million unique users a month, up from 68 million a year ago.]

MCN: What's MTV Networks' programming strategy?

JM: I would say that it's all about the hits — it's a great and competitive time for programmers to come up with hit franchises. Obviously, [NBC Universal] recently announced its 52 weeks of programming, but we have been speeding up our development and programming-launch process — we've always programmed the summer months. So in the world of people who are doing television development you still need a hit for TV, but nobody presents a concept without thinking about how it might live on other platforms as well.

MCN: What constitutes a perfect MTV Networks hit? A Shot At Love With Tila Tequila? Flavor Of Love? A concert series?

JM: There are levels of hits. One of the things that I like is a buzzworthy hit … you want to be talked about in the cultural dialogue and I think [MTV's] The Hills and [Comedy Central's The] Sarah SilvermanProgram] are there, and Nickelodeon is building one in iCarly. Those are always important and you get extra credit for them. You still need a decent rating and we've had some tremendous ones. The Hills got a 5 rating in a competitive universe and has pretty much sustained that. Spike has come a long way … how do you have a men's network and not the [National Basketball Association] or [National Football League]? You get the new thing and that's the UFC. And that's been the hallmark of this channel … you don't sit around and say you don't have it. You get the new hit.

MCN: VH1 has come a long way as well.

JM: They have. Celebreality — whether you like it, loathe it or want to talk about it, it's been successful. I love Best Week Ever and I love the way they've kept music front and center on the network. They have that instant absurd nostalgia — I think they're doing I Love The 2000s. At the same time, they've gotten more traction out of those wonderful people most people would call the B-list [celebrities]. If anything defines this era, it's partly profiling yourselves online. Everybody is living their lives in front on the camera.

MCN: How do you define the MTV brand?

JM: The beauty of MTV is you can't capture it in a bottle. It doesn't live under one easy catchphrase. It isn't everything to everybody, but I do believe that under [MTV Networks Music, Logo and Films Group president] Van [Toffler's] watch, MTV is having a fantastic moment of yet another at bat.

On MTV proper, as some people call it, the mother ship is having success in just about everything. There's a level of series like Made, which gets to reflect the audience who wants to live their lives on television and its very sincere and earnest. They had a big hit in Run's House, which does a number of great things — it's literally a family and a great representation of somebody people know. And of course we've talked about The Hills ad nauseum.

MCN: Is Van the one that will lead the charge for MTV, or are you still looking for a replacement for [former MTV president] Christina Norman?

JM: Not at the moment … MTV is definitely on Van's watch. He's really stepping out on innovation with virtual worlds, online and with bringing music back. He's got a great plan for music this summer that will be integrated into the programming that will be really great and really fun.

MCN: With all of the success MTV Networks has had, is it time to seek some license-fee increases from the operators?

JM: I believe that our working relationships with operators and distributors are closer, tighter and more united than ever before. We're fully cognizant of their issues and opportunities, and we've stepped up and supported their initiatives; but I think we can make a compelling case [for increases]. Look at Nickelodeon — almost 14 years as the No. 1-rated cable network, it has enormous value as it has an enormous willingness to participate in all of the [operator-developed] platforms. But I think we think there might be a gap in the Nickelodeon rate and the Nickelodeon value, so of course there's always negotiations and opportunity, but it's very much a focus for us.

MCN: Are we talking double-digit increases?

JM: I'm not sure. I trust that we'll be able to come up with something that is right for us and not crippling for them because that's not the intention either. But sure we see healthy increases on the way, and I think there's a willingness by the operators to engage in conversations. We have closed some deals with Cox and some others – they've been terrific and great and we've put more value in and extracted more value and everybody walked away from the table feeling good, which is what you hope for.

MCN: During the major MTV Network reorganization two years ago, there was a lot of concern about whether you would be sitting here today. Do you see yourself sitting here in another five years?

JM: I think I'm fortunate to have one of the all-time great perches, and by the end of every week, I don't have time to think of what I'll be doing the next couple of years. Right now I think this is a fantastic place to be — it's a great company with great platforms. We're cursed with interesting times, so this would be the very last moment you would want to pack up your bags and move to the next place. I'm only as good as my next idea, so who knows.

September