The Game's the Thing at MTV Networks
Tom Lowry
Business Week
February 7, 2008
When Rupert Murdoch snatched MySpace.com (NWS) out from
under Viacom (VIA) in 2005, a pall of self-doubt and
recrimination descended on the folks at MTV Networks,
owner of VH1, Spike, and Comedy Central, among others
properties (VIA). They wondered: Was the Viacom division
that had once dominated youth culture blowing it on the
Web, where young eyeballs were congregating?
Today, any regrets over MySpace are a fading memory.
MTVN is pushing hard into online games in pursuit of
their rich advertising potential and can't have failed
to notice that traffic growth is slowing at social
networks.
No Old Media company has placed a more far-reaching bet
on gaming. MTVN operates more than 5,000 mobile,
console, and online games and virtual worlds—many of
them based on TV shows such as MTV's The Real World and
Nickelodeon's SpongeBob SquarePants. MTVN has even cut a
deal to develop new titles with Hollywood über-producer
Jerry Bruckheimer of CSI and Armaggedon fame. And this
isn't just about kids. The network is keen to hook the
growing ranks of so-called casual gamers, including
women old enough to have a couple of teenagers in the
house.
The appeal of games is simple enough. They are
addictive—like "digital crack," says Jeffrey Yapp, an
MTVN executive charged with developing new digital
ventures. How addictive? Total time spent gaming online
hit 11.4 billion minutes in December, up 27% over the
previous year, according to Web-traffic tracker comScore.
Only e-mail and shopping keep people online longer
nowadays. "Of the traffic to our more than 300 Web
sites," says Mika Salmi, MTVN's top digital executive,
"we know nearly half [of the visitors] have played a
game."
AVATAR AUDIENCES
MTVN started to ratchet up its game strategy three years
ago with a series of acquisitions. The company has
plowed $800 million into properties that appeal to a
range of ages, from Neopets (VIA), a virtual world where
kids create their own cartoon critters, to Harmonix
Music Systems (VIA), which created the all-ages Rock
Band, MTVN's rival to the ultra-popular Guitar Hero. The
network plans to spend an additional $500 million over
the next couple of years buying new titles or building
them from scratch.
One big push: adding gaming to virtual worlds—of which
MTVN now has 11. One (currently in alphaII testing and
open to the public) is Virtual Lower East Side (VIA),
where music fans' avatars wander New York's hip Ludlow
Street and sample tunes. To add a competitive vibe, MTVN
has invited indie bands to perform virtually in clubs
for crowds of avatars, who choose their favorite acts.
The winners—the actual human beings, that is—will play
on the old-fashioned television channel MTV2. "We can
blur the line between fantasy and reality in a way that
has never been done before," says Salmi.
MTVN doesn't break out its gaming ad revenues but says
it has signed up dozens of advertisers. Staples Inc. (SPLS)
recently sponsored a game on ShockWave.com (VIA), an
MTVN site that attracts millions of women users. The
game features the Easy Button from its TV spots that,
when pressed, magically makes chores disappear. Women
visitors were asked to submit photos showing why they
needed an Easy Button. They voted on the top
five—including a messy garage—and the winning photos
were converted into digital jigsaw puzzles, which happen
to be a favorite among women gamers.
MTVN has been putting product placements in its TV shows
for years. Now it's doing the same thing online.
Consider Virtual Laguna Beach, a world based on the hit
MTV show about wealthy teenagers. Here visitors can
compete in paintball and other contests. Winners earn
points that can be used to buy garments, virtual or
real, from Pepsi Style, the soda maker's line of youth
apparel. Oh, yes, and when PepsiCo (PEP) introduces new
graphics on its cans in the real world, MTVN updates
them on its virtual soda machines. If your avatar
recycles a can after 10 sips, you get a free garment for
your avatar or a 10% discount at the real Pepsi Style
store online.
What started as a "test" for Pepsi two years ago is a
growing part of its ad strategy, says John Vail,
director of interactive marketing for Pepsi-Cola North
America. "We can count on that audience being baked-in,"
says Vail. "If they are engaged with us in the virtual
world, we know they will be engaged with our products in
the real world." Pepsi has a similar recycling incentive
program for its MP3 song giveaway, launched during the
Super Bowl with spokesman Justin Timberlake.
Advertising is the main act, and that's not likely to
change, but MTVN also hopes to sell tons of virtual and
nonvirtual stuff in its online worlds. It recently cut a
deal with Nexon of South Korea, a leader in digital
money transactions, to help create this business. Last
fall, Neopets began offering a gift card (for sale in
the real world) that kids can use to buy any of 200 toys
and accessories for their virtual pets.
Does MTVN have the goods to make a go of gaming? It
faces the classic problem of the Digital Age: how to
best monetize its Web properties—read: stick ads
everywhere—without alienating its audience. Plus, MTVN
will have to find ways of nurturing the creative spark
at the game companies it has bought. As David Cole, an
analyst with video game consultancy DFC Intelligence,
says: "The weight of a media giant may force a young
industry to dance to an old tune."