MTV Networks Inc.

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MTV Networks Inc.

founded: 1984



Contact Information:

headquarters: 1515 broadway
new york, ny 10036 phone: (212)258-8000 toll free: url: http://www.mtv.com

OVERVIEW

MTV Networks is a group of four cable networks: VH1 (Video Hits One), Nickelodeon/Nick at Nite, Nick at Nite's TV Land, and the network's flagship enterprise, MTV Music Television. MTV, the first 24-hour music video network, reaches approximately 281.7 million households across the globe. The audiences for the other networks are significantly less. Because many households receiving MTV receive the other networks as well, the numbers are included within the MTV total: 68 million for Nickelodeon, 18.3 million for TV Land, and 56.3 million for VH1.

Individual network survival often depends on staying current with trends. Nickelodeon, for instance, has been successful with innovative programming for children of all ages. In 1998, MTV decided to overhaul its programming. Management's concern was that the network had become too corporate, interested more in profit than its original design of music programming. The network was alienating the target audience with increasing levels of non-music programming, which had originally been designed to raise ratings. Due to this evaluation, MTV decided to cut back on its non-music programming and was scheduled to return to more music and music news.




COMPANY FINANCES

In 1997 Viacom, MTV Networks' parent, reached $13.2 billion in revenues. Of that, MTV contributed $2.7 billion, or 20.6 percent of revenues. In 1996, MTV's contribution was 19.9 percent of Viacom's revenues. MTV's earnings before interest, taxes, depreciation, and amortization (EBITDA) was $881.6 million, up from $755.3 million in 1996, or 16.7 percent. MTV subscribers reached a total of 515 million people in 1997, up from 457.9 million people, or 12.5 percent in 1996.

Profits steadily increased throughout the 1990s at a rate of approximately 25 percent per year. MTV's cash flow margin was 40 percent in 1995 and 41 percent in both 1996 and 1997—considered a high percentage in the industry. While about one-third of MTV's revenue comes from cable subscription fees, advertisers will pay high rates to get the 12-34 year old audience, despite low Nielsen ratings. The rates for advertising on MTV have grown an average of 10 percent per year.




ANALYSTS' OPINIONS

Observers have noted the ironies surrounding MTV. One of these ironies is that it is a network for 20-year-olds run by people in their 40s and 50s. Another is that it is a highly profitable marketing machine that promotes anti-materialism. Perhaps, the greatest irony is that its programming promotes the idea of conforming, even as it urges viewers to be themselves. Rolling Stone has focused on MTV's "vague direction" in the difficult search for "alternative music" rather than the repackaged sounds of the mainstream. Proponents of educational or moral improvement have blamed MTV for the intellectual or spiritual "dumbing down" of America.

Some analysts have indicated that they think the biggest danger for MTV, in particular, would be the influence of too many corporate managers. This could exploit the MTV brand further, and alienate even more viewers. The possibility of losing its younger talent who have a keen knowledge of important trends, especially in music, would likely increase as well.



HISTORY

MTV was the creation of a small group of people who sought to take advantage of the new industry in rock videos. It began with a $15-million investment from Warner Amex Satellite Entertainment. The debut video of the network, in August of 1981, was Video Killed the Radio Star, by the Buggles.

In 1984, the year MTV held its first Video Music Awards, MTV and children's network Nickelodeon, established in 1979, were brought together as MTV Networks. On the first day of 1985, with the establishment of VH1, a 24-hour video network appealing to an older audience, MTV Networks had an audience that ranged in age from preschool to the late 40s. Meanwhile, Warner put MTV Networks up for sale in order to raise cash. In September 1985, entertainment conglomerate Viacom International purchased it. The next year, Viacom itself was bought by National Amusements Inc., largely owned by multi-millionaire investor Sumner Redstone.

Under its new ownership, Nickelodeon went from last place among basic cable channels to first place. The network adopted some of the same graphic-intensive qualities of MTV, which proved to be successful. The flagship network, however, entered a slump in the late 1980s, as the novelty of the video craze wore off. The network moved away from videos and toward game shows to stem this decline. It began with the launch of Remote Control in December 1987. News and other types of programming, such as the acoustic concert series called MTV Unplugged, were introduced in 1990.

FAST FACTS: About MTV Networks Inc.


Ownership: MTV Networks Inc. is a wholly owned subsidiary of Viacom International Inc., a publicly owned company traded on the American Stock Exchange.

Ticker symbol: VIA

Officers: Tom Freston, Chmn. & CEO; Judy McGrath, Pres., MTV; John Sykes, Pres., VH1; Herb Scan-nell, Pres., Nickelodeon

Employees: 1,100

Principal Subsidiary Companies: MTV Networks' three major subsidiaries are MTV Music Television, VH1, and Nickelodeon.

Chief Competitors: MTV Networks compete with television and cable stations broadcasting music and children's shows. Major competitors include: ABC; CBS; NBC; Fox; and The Family Channel.




In the 1990s, MTV became heavily involved with politics, starting with the "Rock the Vote" campaign, and continuing with the "Choose or Lose" election coverage in 1992. Also in 1992, MTV premiered the popular show The Real World. In 1993 Beavis and Butt-Head was introduced. MTV established a strong presence in cyberspace with the launch of MTV Online, in cooperation with America Online, in 1994. In 1996, MTV created a sister channel, M2: Music Television. Also in 1996, MTV Productions released the feature film Beavis and Butt-Head Do America.

STRATEGY

MTV's strategic focus has been its awareness of its core audience's preferences and tastes. MTV and its Networks spin off products in order to hold on to the attention of their focus age group. Movies, new networks, and merchandise keep the brand name in front of consumers. As far as MTV itself, videos are not the product—MTV is. By the late 1990s, MTV worked to define itself and to keep viewers. With 50 to 100 cable channels available to the average household, competition was fierce. Videos, too, were available to any network. MTV had to be unique to hold on to a respectable market share.

MTV goes beyond the usual focus groups to stay on the cutting edge. The network sends researchers into the field, to go through the closets, rooms, and CD collections of young adults—anything that could provide a clue to their tastes. The age range chosen was 18-24 because younger teens want to be seen as older, and older adults want to be seen as younger.

The Networks' Nickelodeon channel opened an animation studio in California in early 1998, the first in Los Angeles in 35 years. This was expected to allow Nick-elodeon more flexibility in programming. The network also started a comic strip based on the Rugrats show in 1998, continuing the strategy of spinning off brands.

Overall, MTV Networks commands an impressive spectrum of age groups. Rounding out MTV's demographic on either side are Nickelodeon, which was originally geared toward the under-16 group, and VH1, which appeals to viewers 18 to 49 years old. Nick at Nite and Nick at Nite's TV Land, with their nostalgic offerings of television shows from the 1950s into the 1980s, further solidified MTV Networks' hold on the older age group.



INFLUENCES

MTV's popularity created a contradiction. In its early days, part of the appeal to a young audience was the underground nature of the network. This sensation was heightened by the obvious fact that it did not have much money. Soon, MTV was realizing tremendous profits, and found itself in an ironic situation. It promoted rebellion and anti-materialism, yet it was an extremely profitable corporate entity. This irony was heightened in 1985, when it became the property of the conglomerate Viacom.

Soon the complaints rolled in. An "MTV Hater's web site" even surfaced on the Internet. The general opinion was that there was too much non-music programming. The shows that had been hits were running their course, and nothing substantial was replacing them. The public decided the network was not in touch with the trends.

A document, referred to as the "Melissa Memo," served to change MTV's direction. Written by two interns named Melissa, the memo made its way to Judy McGrath, MTV's president. It said, in effect, that MTV had become too dark, too lame, and not happy, clean and bright. They wanted their MTV back. McGrath immediately acted on the critique, which coincided with her latest research.

MTV underwent a makeover. It got rid of the shows considered dull, and replaced the VJs with people who knew music. A new animation series, Daria, debuted to enthusiastic responses. A new studio in Times Square was built, with music hours shown live for the first time. Interviews with and programs about musicians, along with more focus on news, brought back the network's popularity.




CURRENT TRENDS

In the 1990s, three of the leading trends at MTV were politics, the Internet, and the tension between musical programming and non-musical programming. The focus on politics began with the 1990 "Rock the Vote" advertising campaign. This featured performers such as Madonna urging young viewers to go out and vote for the candidate of their choice in the national elections held that year. In 1992 and 1996, MTV stepped up its involvement in the presidential elections with its "Choose or Lose" campaign. Then-Governor Bill Clinton gained huge points with the youth vote by telling MTV viewers that he had tried marijuana, but "didn't inhale." Even such conservative politicians as Senator Bob Dole and House Speaker Newt Gingrich appeared on MTV. According to a Rolling Stone article, however, it appeared that neither "Rock the Vote" or "Choose or Lose" had exercised any noticeable impact on getting out the youth vote.

In addition to its political involvement, MTV became heavily involved with the Internet. In addition to its own web site, in 1994 the network joined with America Online in establishing MTV Online, which offered users an opportunity for online MTV chat, and to gain a direct link to "The MTV Beach House."

Non-musical programming such as The MTV Beach House raised charges from critics that MTV was no longer a music network. In August 1996, exactly 15 years to the minute after the launch of MTV, the network introduced M2: Music Television, a "free-form" 24-hour music station with a broad playlist of artists and a heavy concentration on music.



PRODUCTS

MTV and VH1 began developing networks to suit the tastes of different people and keep up with competitors. The company created several new products, including: MTV Ritmo, Latino music; MTV Indie, college and independent label music; MTV Rocks, hard rock and heavy metal; VH1 Soul; VH1 Country; and VH1 Smooth, featuring jazz. In 1997 MTV introduced MTV News Un-filtered, which allows for audience participation. In 1998 MTV had 20 pilots in development for original programming, including "Ultra Sound" and "True Life," both documentary series.

Nickelodeon planned to extend its prime time programming in 1998. Since the network began primetime programming for children in September of 1996, more than 2.5 million children tune in each night, more than any competitor. Nickelodeon acquired the rights to the Peanuts series in 1998, and launched a new cartoon, OhYeah! Cartoons! featuring new characters each week. The network also opened three Nickelodeon stores in 1997, selling clothes, games, videos, and other merchandise stamped with Nickelodeon characters.

AS REAL AS THEY WANT TO BE

One of MTV's more popular programs has been The Real World, a show designed to appeal to the voyeur in all of us. The concept consists of taking a group of people aged 18-26 and making them live together for 16 weeks in a large metropolis such as New York, London, Miami, or San Francisco. You then surround them with microphones and cameras and record everything they say and do for the amusement of a sector of the American public. The crew is forbidden from talking to the cast, and they remain as hidden as possible, being referred to by the cast as "the invisible people." While the cities and people change, some things do remain the same; for example, the pool table provided in all of the living accommodations. Happily enough (from MTV's perspective), the pool table has proved to be an excellent breeding ground for all kinds of arguments and confrontations. America's youth can sit back, slam down a couple of burritos, and watch their supposed peers go at each others' throats.




CORPORATE CITIZENSHIP

MTV devotes millions of dollars' worth of air time each year to programming that serves the community by highlighting issues such as teenage violence, AIDS, drugs, education, and the environment. VH1's "Save the Music" campaign aims to restore music programs to public schools. Since its inception in 1997, the program has restored music classes to 91 schools, affecting 27,000 children.


GLOBAL PRESENCE

Into the late 1990s, the MTV Networks reached viewers all over the world. MTV alone was viewed by 68 million households in America, and millions more through its various global affiliates, which create their own programming, geared to a local audience. Affiliates include: MTV Australia; MTV Brazil, MTV Europe, an English-language network that reaches viewers in 38 countries; MTV India; MTV Japan; the Spanish-language MTV Latin America, based in Miami; MTV Mandarin; and MTV in the United Kingdom, launched in 1997. Nickelodeon's networks reach the Australian, British, German, and Latin American markets. VH1 has German and British affiliates.


EMPLOYMENT

The corporate culture at MTV Networks is nonexistent in the expected sense. Employees are generally young and dress casually. Bosses are friendly co-workers, not critical overseers. Those at the top of MTV's management believe that work should be fun and everyone's ideas should be encouraged and examined by all.

SOURCES OF INFORMATION

Bibliography

boehlert, eric. "rock the vote." rolling stone, 23 january 1997.

gunther, marc. "this gang controls your kid's brains." fortune, 27 october 1997.

james, caryn. "party pitch' and 'politically incorrect' put their spin on convention." the new york times, 15 august 1996.

lewis, michael. "the herd of independent minds." the new republic, 3 june 1996.

murphy, mary. "defying convention." tv guide, 31 august 1996.

seabrook, john. "rocking in shangri-la." the new yorker, 10 october 1994.

"star woes." economist, 11 april 1998.

stein, joel. "the m is back in mtv." time, 1 december 1997.

wild, david. "television: techno, anyone?" rolling stone, 6 february 1997.


For an annual report:

on the internet at: http://www.viacom.comor write: investor relations, viacom, 1515 broadway, new york, ny 10036


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. mtv's primary sic is:

4841 cable & other pay television stations