The struggles at MTV Networks over the past half-year have been widely chronicled, from the ousting of Viacom CEO Tom Freston for failing to keep pace with digital changes to the shortfall in ad revenue in the fourth quarter to the layoffs in February of 250 employees, representing more than 5% of MTVN's staff.
MTVN has been criticized for losing out on the chance to buy MySpace and then for failing to create meaningful digital destinations of its own. Adding insult to injury, weakness in the video-game and beverage sectors caused ad revenue to drop in the fourth quarter.
So what's a media company to do?
First change the guard; then trim staff and restructure.
Three parts, all tied to the web
MTVN has reorganized its ad-sales department into three divisions: one for kids and family, one for music networks and one for entertainment networks. As part of that restructuring, all three units will work closely with digital ad sales, in what MTVN hopes will be an important leap in breaking down the digital walls.
The impact of these changes remains to be seen. But MTVN believes that its pain, for now, is behind it. The company says its focus is to execute a digital strategy to go deep with its brands on the web.
"The analogy is the Gap," says Kaan Yigit, analyst at Solutions Research Group, Toronto. "Both are really Gen X brands with their heyday behind them. ... They are iconic, well-known, well-liked and respected for their past significance but not central to our culture anymore."
Music and video -- the two media that defined MTV at its peak -- are now in the hands of the kids, "democratized, demystified and available on demand and no longer as special as they once were," Mr. Yigit says. "It is a lot more difficult to sustain a lifestyle brand that covers anything and everything targeted at youth."
Amid the seismic changes at MTVN, ad buyers say they aren't pulling back on their advertising investments in the company and its suite of networks, especially MTV, which has long enjoyed one of the highest profiles of any cable network.
"It's clear that they have had a lot of challenges with layoffs and ad hurdles and ratings," says Christine Olson, VP-director, Starcom USA, Chicago. "But we do consider ourselves partners with them and aren't looking for any downfall or pullback. We are looking for them to rise up and continue to have success in the future."
Under the microscope
MTVN has been under a microscope for the past several months because it is such a well-known media company and because of the high-profile nature of its networks. In March, Viacom also took aim at YouTube, suing the Google-owned video-sharing site for more than $1 billion for posting unauthorized content from the Viacom stable of networks, including MTV and Comedy Central.
Still, the challenges MTVN faces aren't that different from those of other cable networks, which also must contend with fickle consumers, rapidly changing tastes and the fractionalization of audiences as thousands of web destinations, small and large, siphon viewers.
"I wouldn't isolate this to MTV Networks," Ms. Olson says. "With consumers being increasingly in control of what they want to watch through the internet or DVRs, consumers are used to being able to fast-forward. And we have to be able to adapt to that."
The task any cable or broadcast network faces is to keep consumers from straying in an era where temptations abound. That's a tougher task for MTVN because the younger viewers of an MTV or Comedy Central are both the hardest to reach and the first to sample new media.
The key to keeping them loyal is going deep, says Mika Salmi, president-global media of MTV Networks. MTVN offers its TV content in more than 160 countries reaching more than 1 billion people. It claims to hit more than 80 wireless carriers. MTV.com delivered 85 million streams in February, which the network says is a record and 228% higher than the year before.
"We have an incredible reach across multiple platforms. We want to go deeper, people want more targeted programming," Mr. Salmi says.
As examples of how to super-serve a niche, Comedy Central, now part of the MTVN Entertainment group, offers a website for Stephen Colbert, anchor of the "The Colbert Report," dubbed Colbert Nation. "There is a huge opportunity to have content and consumers go between the various platforms," Mr. Salmi says. "We have been doing a lot with how to make these platforms connect and have TV as a linchpin, such as [Nickelodeon's] Me:TV."
Drinking digital Pepsi
MTV is rolling out about 20 "web experiences" connected to its shows or MTV-centric themes. Many of these will be tied to shows such as "The Real World," while others will cover MTV- esque topics such as fashion, personal growth and music genres. MTV's "Real World" segment of Virtual Laguna Beach online last year served as a prototype for this mass rollout of mini online channels, with content such as virtual-world experiences and online chats with cast members. Sponsors last year included Procter & Gamble's Secret, Cingular and Pepsi. Participants could have their avatars sip from Pepsi containers, which resulted in 6,800 avatars buying and downing virtual Pepsi. According to MTVN, 80% of VLB visitors interacted with brands on the site.
VH1 is running a series of vertical web experiences through its pop-culture site Bestweekever.tv, which draws content from the eponymous TV show and includes shopping, a blog and video streams. Advertisers include Kraft Foods and Cingular.
Leveraging power of new groups
MTVN is extending across the revamped groups in its bid to engage viewers. Nickelodeon, part of the MTVN Kids & Family group, in March launched Me:TV, which urges kid viewers to submit their content for streaming on the channel.
Advertiser integration is critical, too. As an example of how MTVN wants to work closely with ad partners across all media, Nada Stirratt, exec VP-digital advertising, MTVN, points to a partnership with Sony Pictures' "Spider-Man 3."
In November, MTVN premiered a trailer for the film across seven of its networks, with the film's star Kirsten Dunst urging viewers to visit Viacom-owned iFilm.com to watch a high-definition trailer. MTVN also promoted the iFilm trailer on an array of other Viacom-owned sites. In the first week, the trailer generated more than 9 million views on iFilm, making it the No. 1 movie preview on the site. "You can measure engagement; you can measure traffic," Ms. Stirratt says. "The whole point of this is we were able to offer access to this kind of a demo across multiple platforms, TV and online, and that was a huge value to advertisers."
Repositioning for future
The "Spider-Man 3" experiment also demonstrates that MTVN doesn't relegate digital spinoffs to a "digital ghetto," says Hank Close, president-U.S. ad sales, MTVN. "This is a repositioning of the company for the future. Clients are looking to take advantage of our scale. Prior to the reorganization, we didn't have a way to go about that in terms of process."
Media agencies seem to agree that if any network can reinvent itself, MTVN can. The network has demonstrated that ability to stay relevant throughout the past 25 years, says Michelle Havner, VP-director of strategy and planning, Initiative, Atlanta. The "ability to understand the consumers and move ahead of the trend has been able to keep them going," she says.
Still, because MTV itself has built its reputation as a trendsetter, it bears more of a burden, says Brad Adgate, senior VP-research for Horizon Media. "It's a little bit more of a concern for MTV because of who their core viewer is. They are migrating online, they are early adopters ... so it's a little more critical for MTV then other cable networks."
"They really have to get back to branding themselves the way they did in the cable marketplace" when first launching the brand, he says. "They need an 'I want my MTV' for the digital age. They have been able to do that with programming, to put relevant programming against a very finicky, difficult audience that if things become too mainstream looks for the next thing on the fringe of pop culture."