The Game's the Thing at MTV Networks

Its enormous investment in online video games is a bet on their juicy ad prospects

By Tom Lowry

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.