MTV Faces Music with '360'

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MTV Networks Inc. executives last week confirmed a new multimedia convergence strategy designed to drive young music fans from MTV: Music Television to its MTV2 digi-net and Web site (www.mtv.com), then back again to MTV.

The company's plans were unveiled against two significant backdrops: the recent legal blows to the popular music file-sharing service Napster Inc. and recurring reports that AOL Time Warner Inc. is looking to create a new cable music channel.

An AOL Time Warner spokeswoman would not comment on published reports that said a new channel, likely named AOL Music, would be introduced within the next year.

The media giant has other options, in terms of a name. AOL Time Warner's Home Box Office unit launched urban Web site Volume.com last fall, which contains a good deal of music-related content and could potentially be converted into a music-video network.

HBO incorporated a company called Volume Media LLC in November 1999. Among the Web site names registered to parent Time Warner Entertainment are VolumeNetworks.com and VolumeVideo.com.

MTV has been working on its convergence project, called MTV360, for about a year, MTV and MTV2 president Van Toffler said last week.

Although Toffler acknowledged that there has been talk of an AOL music channel for some time, he said, "The strategy of MTV360 is driven by our audience first and foremost."

He noted that the network's core target of viewers 18 to 34 watch TV, get online, talk on wireless phones and listen for their pagers "all at the same time. They like freedom of choice and access to information."

The convergence strategy is constructed to strengthen a fan's relationship with MTV and its musical artists by developing different experiences on MTV, digi-net MTV2 and MTV.com.

In July, the network plans to relaunch its MTV.com web site with additional features such as instant messaging between music fans and a greater emphasis on music downloads, which may be sold on a subscription basis.

Other Viacom Inc. music networks also plan to capitalize on music downloads and convergence.

VH1, for example, plans to relaunch its own VH1.com web site in mid-April. It will incorporate more music downloads from the top five recording labels.

"As long as Napster has been around, it's been hard to get people to pay for downloads or even to come to our site for free downloads," said VH1.com general manager Fred Graver, explaining why the network has not pursued the sale of music downloads in the past.

VH1 also plans to launch an electronic commerce service in July, selling compact discs and VH1-branded merchandise online.

Like VH1, MTV is still trying to determine whether music downloads will be sold according to a subscription or a pay-per-play business model.

Toffler said MTV is still in discussions with studios over a pricing structure for its music-download subscription service.

"First and foremost, the artist should be compensated," Toffler said. MTV does not expect to take the primary cut from music downloads, he added, noting that its Web site derives most of its revenue from advertising.

Cable operators are not expected to share in direct cuts from music downloaded over their broadband pipes. But Toffler said that by promoting the interactive content, MTV could help drive music fans to high-speed services from cable operators.

MTV plans to present advertisers with packages that tie together all three services-MTV, MTV2 and MTV.com.

"We have very rich content on MTV.com that will only get better as we relaunch over the summer," Toffler said.

MTV hopes to protect its brand from possible competition from AOL by adapting its focus to the changing tastes of young music fans as they age into the network's core audience.

"We've chosen not to grow old with our audience, but to remain contemporary with current-day tastes," Toffler said. That means MTV has to reinvent itself every three to four years to keep up, he added.

Because technology plays such an important role in the current target group's day-to-day lives, MTV will beef up its online communities through chats and instant messaging.

"Our audience embraces community and they love to talk to each other about music," Toffler said.

VH1 also plans to develop instant messaging features, in this case to allow slightly older music fans to communicate with each other while at the office. Graver said much of VH1.com's usage occurs during office hours.

"It's clear to us people expect their computers to play music," Graver added.

Black Entertainment Television is also helping to drive convergence between its on-air and online sites, including the African-American-targeted portal BET.com and the music-based www.360hiphop.com Web site.

BET.com Countdown allows fans online to vote for the music videos that will air on the television network.

BET also recently signed a strategic marketing deal with BMG Entertainment to promote musical artists through audience listening parties, online chats, music celebrity news content and online contests.

At present, BET.com provides promotional music downloads and video streaming, but does not offer pay or subscription models.

"The good news is that the changes that the peer-to-peer services are undergoing dramatically enhance the prospects of commercially viable pay or subscription services," BET Interactive chief operating officer Scott Mills said. "What we're all going through now is determining what the magic bullet is for these services."

Mills said music fans might be drawn to pay or subscription download services if they can find exclusive new titles available online before the albums are sold in record stores.

"When it comes to music, there is a big audience that unequivocally wants to get the product first," he said.

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