MTV Defends Video Deals In Face of Justice Probe

Author:
Publish date:

Under investigation by the Department of Justice on
antitrust issues after its purchase of a rival, MTV Networks maintained last week that it
will be cleared and vindicated by the probe.

MTVN officials confirmed that the programmer is cooperating
with the federal probe, giving investigators information relating to its acquisition this
past summer of The Box Music Network, a competing music-video network.

MTVN contended that the focus of the investigation, which
apparently began this past spring, is on its purchase of The Box. But a story last week in
The Wall Street Journal said the probe is also looking into the issue of the
license fees the giant programmer pays to air music videos and the exclusivity of such
videos.

"We're cooperating fully with the Department of
Justice's review of The Box transaction, and we believe that when it is concluded, they
will agree that there is no violation of antitrust laws, and that the program-services
market in which we operate is highly competitive," MTVN spokeswoman Carole Robinson
said.

MTVN -- already a key force in the music industry and the
promotion of records with its services, MTV: Music Television, VH1 and MTV2 -- stands to
become even more dominant as a result of parent company Viacom Inc.'s pending $35 billion
purchase of CBS Corp. As part of that deal, two networks that air country-music videos --
The Nashville Network and Country Music Television -- will join the MTVN stable.

The DOJ, while acknowledging that there is an ongoing MTVN
investigation, declined to offer any details about its precise scope. "What we are
saying is that we are investigating the possibility of anti-competitive practices
involving music-video networks," DOJ spokeswoman Jennifer Rose said.

Rose would not say when the investigation started, why it
was started nor when it would finish. She said the DOJ disclosed the investigation
"because a reporter inquired about it."

Robinson said MTVN started to get questions from the DOJ
prior to the closing of its acquisition of The Box. MTVN bought The Box as part of its
acquisition of TCI Music from Liberty Media Group. The deal was completed in mid-July.
"[The Box purchase] has been the focus," she added.

The Journal reported that one of the linchpins of the
federal investigation is whether MTVN, because of its lack of competition from other
networks, is artificially keeping the fees to air music videos low. But MTVN disputed that
music-video fees were an issue in the investigation.

First of all, Robinson said, MTVN only does exclusive
music-video deals for MTV, not VH1 or MTV2, and it rarely exercises that option anyway.
"This year, we took four videos on an exclusive basis out of 1,000 that were
submitted to us," she added. "It's very rare. It's not a widely exercised
right."

Robinson also claimed that MTV is the only music network
paying to air music videos. Therefore, since it is the only one paying, there can't be any
anti-trade issues relating to such fees and their amount, according to MTVN.

"The amount of money we pay is negotiated with each
label to reflect the promotional value artists get from their exposure on MTV,"
Robinson said. "And since we are the only ones paying for videos, it's a little
difficult to claim that we're not paying fair-market value."

Black Entertainment Television -- which, along with
MuchMusic USA, is among a handful of cable networks outside of the MTVN stable that air
music videos -- has been contacted by the DOJ for its investigation.

During a press conference at the Western Show last week on
BET's 20th anniversary, BET Holdings Inc. president and chief operating officer
Debra Lee confirmed that the company had conversations with the DOJ concerning MTVN's
practices, but she said it was not the source of the allegations.

"We've cooperated fully," Lee said. "We'll
follow the investigation and hope that there wasn't anything done to hurt MTV's
competitors. We don't have any instances where we've been harmed [by MTVN]."

Robinson did confirm that the DOJ has also asked MTVN for
some information relating to the Internet. Some record labels have apparently raised
concerns about whether MTVN will seek exclusive rights to air music videos on the
Internet. MTVN has clustered its online assets, and those of TCI Music's SonicNet.com,
under a company called MTVi.

But Robinson said MTVN is not seeking exclusivity for music
videos on the Web at this point. "Out Internet business is focused on news,
information and audio streaming, Internet radio," she added.

The timing of the DOJ probe is ironic in that during the
past few years, MTV has been moving away from its former strategy of just airing music
videos in rotation. The network has moved to scheduling more series that are related to
music or music videos, rather than just playing the videos. That programming strategy has
sent its ratings soaring.

Nonetheless, some record labels are upset about MTV's
change in direction.

Still, one record executive, who has been a vocal critic of
MTV in the past, said he was surprised to hear about the DOJ investigation, which he found
unwarranted. "We're sitting here scratching our heads," he said.

Ted Hearn and R. Thomas Umstead contributed to this story.

Related