On a Southern California summer night at the after party for the MTV Movie Awards, MTV president Van Toffler is acting like all went as planned, smiling and shaking hands. There was plenty to like: Coldplay performed its new single amid colored confetti, the Pussycat Dolls slithered around for a Vegas-worthy dance number, and show host Mike Myers did a Wayne's World reunion skit with Dana Carvey.
But the truth is, Toffler is relieved the show happened at all. At 4 a.m., he received a call telling him that the event might have to be canceled because of a fire on the Universal Studios backlot. "I think I passed a stone," remembers Toffler, who oversees MTV, VH1, CMT, and their related channels, plus gay-and-lesbian-oriented Logo. "They said that if the wind shifted, we were done." Even after firefighters extinguished the blaze, toxic fumes from burning celluloid hung in the air. He got the final go-ahead just two hours before the live show started.
A tanned 48-year-old with swept-back hair, Toffler works the party with the casual charisma of a good-humored hipster who realizes that having professional conversations with Tila Tequila is inherently absurd but also a nice way to make a living. One of his favorite bits from the Movie Awards involved Pineapple Express costars Seth Rogen and James Franco lighting up what looked like a joint onstage -- which caused a minor stir in the next day's tabloids.
Unfortunately for Toffler, a substantial portion of MTV fans watched Rogen and Franco's stunt online -- and many not at MTV.com. As he would discover the next day, this year's Movie Awards reached about 3 million viewers, an 18% decline from the previous year and about half the audience from a few years ago. Parent company Viacom's Media Networks Division -- which includes Nickelodeon, Comedy Central, and BET as well as the MTV channels -- increased its revenue by 12% in 2007. But MTV has been under pressure, as the attention of its 12- to 24-year-old demographic wanders to online media and video games. The channel's overall ratings fell to an average of 920,000 prime-time viewers in the first half of this year, a 15% drop from 2004.
Toffler sees opportunity for MTV in unexpected realms -- especially digital media -- and he is busy seeding dozens of new initiatives. His prospects have been buoyed by the 2006 acquisition of Harmonix Music Systems, maker of the video game Rock Band, which is on pace to bring in some $700 million in revenue this year, according to Michael Nathanson, an analyst at Sanford C. Bernstein & Co. MTV has also signed a deal with Hollywood producer Jerry Bruckheimer to develop more video games. It just launched the beta version of an online music store, Rhapsody America, which it runs in partnership withand Wireless. In August, it teamed up with the search and advertising network Zvents to produce a Yelp-like series of sites for some 25 major college towns. It has a deal with Vice magazine to produce online video; a deal to turn the indie comic book Invincible into an animated digital series that can be shown on cell phones; and a deal with Hustle & Flow director Craig Brewer to create a new series that could be distributed through mobile networks or iTunes. And in the time it took you to read this paragraph, it probably made a deal with someone else.
If it sounds like MTV is basically spreading bets around the casino to see what hits, that's not too far off the mark. "The culture MTV grew up in -- short form, experimental -- translates well to digital," says Toffler (who helped develop Jackass and Beavis and Butt-Head). "The great thing about growing up in cable as opposed to movies is that in movies, if you fail, you fail big. Our history is littered with shows that didn't work, and you probably couldn't name any of them. You have to take risks."
"The culture MTV grew up in -- short form, experimental -- translates well to digital."
The irony is that, when it comes to digital media, MTV may be best known for a risk it didn't take: In 2005, the company famously passed on an opportunity to buy MySpace (which allegedly cost former Viacom CEO Tom Freston his job). And MTV has made other missteps: Its Overdrive Web-video site never took off as a separate entity (though its underlying technology now fuels video on other MTV sites), and the digital music store Urge flopped. For a few years, MTV seemed to change its digital strategy the way Journey changes lead singers -- often and without regard for the sensibilities of the American public.
Since last year, Toffler says, the plan is to focus the company on finding ways to mine deep vertical slices of pop culture, rather than attempting to build wide horizontal platforms. The media habits of today's MTV viewers, Toffler notes, are far different from those of their predecessors. MTV refers to its 12- to 24-year-old audience as "generation P" -- as in "programmer" -- for the way they want to customize their own entertainment.
"Five years ago, people loved The Osbournes, but there was no way to express that except watching it," says Brian Graden, president of entertainment for the MTV Networks Music Group. "Now we want them to be able to remix it and experience it in new ways." The site dance.mtv.com, for example, based on the show America's Best Dance Crew, lets amateur dancers upload video to show off their moves. Mysupersweetparty.com, based on the show My Super Sweet 16, lets users plan their own parties and post wish lists for gifts and gowns -- and the coolest pages make it on TV every week.
"What they're doing with these smaller properties is very smart," says Vanessa Newkirk, a director at Spark Communications, an ad firm that's part of the. "And the way they market it with a chance to get on TV is a huge draw."
MTV now runs about 50 such vertical sites. The model is to take an idea and run with it using off-the-shelf Web 2.0 technology, then either promote or cut the resulting sites depending on how they fare. The cost of entry is low: Programming vice president Gaurav Misra's team develops verticals in less than six weeks' time for less than $50,000, in part by outsourcing programming to Russia, Argentina, Israel, and India. Says Toffler's boss, MTV Networks CEO Judy McGrath: "We don't always have to swing for the fences."
From a technology perspective, MTV's most ambitious venture is Virtual Lower East Side, an online simulacrum of the iconic Manhattan neighborhood with digital versions of anstore and clubs where users will hear performances by young bands along with crowds of fellow avatars. "There are a lot of potential revenue streams," says Jeff Yapp, MTV's executive vice president of program enterprises. "You have an impression-based ad model if you walk by the American Apparel store, another level of engagement if you walk in, and another level if you decide to buy virtual goods."
So far, the results of the online strategy are encouraging: The number of unique users for MTV Networks' Web sites grew 13% in the first half of this year, according to comScore; the average time spent on the sites grew by 20%, to almost a half hour. And the increased traffic has netted long-term commitments from several advertisers. Says Gartner Research analyst Andrew Frank: "They're changing MTV from a TV brand that has Web support to a more integrated business."
"The beauty of the culture here is that we can pursue innovation without waiting for a clear path in terms of what something will evolve into," Toffler says. "So we're doing more video games, virtual worlds, verticals, and we're going to try 5 to 10 other new things. One might be even bigger than Rock Band."
That would be a tall order. Since its release last November, Rock Band -- which lets gamers play along with music using plastic instrument-shaped controllers -- has sold 3.4 million copies in the United States. The hidden action, Toffler says, is in selling songs to gamers -- for about $2 each. The company has already sold 21 million, with players averaging six songs apiece; iPod owners, by comparison, have bought an average of 20 songs per iPod (for half the price), according to Forrester Research analyst James McQuivey. Toffler and Yapp recommended the $175 million Harmomix purchase to Viacom. "Hopefully," Toffler says, "it will be a billion-dollar-a-year business soon."