MTV Plants Its Flag in the Digital World

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 Publicis Groupe. "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 an American Apparel store 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."