The launch of MTV Arabia on Nov. 16 is the biggest test to date of a strategy pioneered by the network's international operations more than two decades ago. The iconic music channel may be struggling to keep audience share in the U.S., but international youth can't get enough of their MTV. The network's international operations are its fastest growing, thanks in large part to its local licensing strategy. In the past two years alone, the international division of the network has launched 22 new television channels through a dozen licensing deals. Local partners put up the bulk of the cash while the network gets sizable licensing fees and a share of all revenues. Bhavneet Singh, MTV's managing director for emerging markets, spoke to BusinessWeek's Kerry Capell in Dubai. Here are some excerpts:
Why has MTV Networks International chosen to expand its global reach through licensing?
The licensing model works well in markets that are difficult to navigate due to either distinctive local cultures and/or regulatory issues. Financially, it's also an effective operating model, with lower risk and attractive returns through strong local partnerships. For us, it's really about tapping into a very capable local player to create a partnership where we're mutually vested in the success of the business. Our take on this model is unique. We invest a lot of resources and support from our global network to work alongside our local partners to ensure they realize all the benefits of our 20 years' experience in this business. By capitalizing on their local consumer and market understanding, as well as their existing infrastructures and talent, we're able to more quickly access markets with an operation that is much more in sync with local audiences and advertisers.
Your MTV partner in the Middle East, Arab Media Group (AMG), is a big media player in the region but has no experience in television. Why did you choose them?
We surprised a lot of people by picking AMG over a number of established, major TV players. What impressed us immediately was they didn't try to gloss over the gaps in their experience, and it didn't concern us too much because we had the TV expertise and they had a ton of other strengths. Most important to us was they demonstrated a deep understanding of the diverse consumers across the Middle East markets. A fundamental tenet of MTVNI's success has been: When you focus on your audiences, the business follows. We saw this was also key to AMG's DNA. The other critical factor: They had the capability and ambition to build a long-term partnership with us across many brands and lines of business, well beyond MTV Arabia. We're already working on the next ventures together.
What are other opportunities for MTV Networks brands in the Middle East region?
The growth trends in the region across all of our industries are some of the most attractive in the world. In fact, when I was closing the MTV deal with Tecom/AMG, our partner said, "This is only a fifth of what I want to do together," and I responded, "It's only a tenth of what I have in mind!" We've just announced plans to launch Nick Arabia in 2008, and earlier this year, we announced that Nick would be an anchor of a new theme park in Dubai. Talks are under way with various partners in digital media, consumer products, hotels, film, and other TV brands.
What is your digital strategy for MTV Arabia?
It's impossible to separate our digital strategies from our TV strategies. They're totally integrated, and we want to make our content accessible across any and all the platforms that matter to Arab youth. We're creating programming blocks where viewers determine via online and mobile what music videos and MTV shows they want to watch. Our Web site design is unlike any other MTV in the world, with an iPod-like interface that will make it easy for young people to blog, chat, and give us feedback. We're building a club where our members will get special access to events, concert promotions, and other one-of-a-kind MTV experiences like tickets to our big events around the world. Ultimately, we'll also have mobile TV channels and downloadable content for mobile and Internet. We're participating in a pilot program for DVB-H (digital video broadcast?andset), which will see mobile users watching broadcast-quality video content in 2008.
You're entering a market with more than 50 music channels. That's a crowded market. How will MTV be different?
We aren't positioning MTV as a music channel. We're a youth lifestyle platform, offering young people a place for self-expression in all aspects of their lives. We've done a lot of research, and we think this is the big gap in the market. Everything we do will reflect what young people are thinking, feeling and experiencing, and we want to empower and inspire them. Purely on the music front, we'll feature underground Arabic music genres like hip-hop, which is incredibly popular, but hasn't been embraced by mass media. And, we're going to play more international music because our audiences have told us they're missing that connection to the global music scene that only MTV can offer.
How difficult has it been to persuade Arab leaders to welcome MTV?
They've welcomed our plans and the most important reason is, the brand has been created by Arabs to reflect and respect Arabic cultural values. MTVN pioneered the local approach to building our brands worldwide, and that credibility mattered. Some had seen our Indian MTV, for example, and they appreciated how MTV was totally reinvented to reflect Indian sensibilities and music tastes. We also found that our vision to create an empowering and uplifting platform for Arab youth is totally in sync with the views of Arab leaders. The officials offered ideas and support for our pro-social platform, which will tap into our audiences' concerns about education and careers through empowering messages and initiatives.
Your businesses span many markets, including Central and Eastern Europe and Russia. What is different about doing business in the Middle East compared to the other regions?
Every region is different in its approach to business, and so is the Middle East. Personal relationships —and most important, one's word—mean more in the Middle East than in any other market. Building trust and understanding is a prerequisite to any deal, and that dynamic has helped my confidence in our choice of partners because we really know each other by the time a deal is done. As a result, the mobile phone rules! Nearly all of my business negotiations were conducted via text and phone conversations, rather than e-mail. It made life difficult for the lawyers, but as we do everywhere, we have to adapt to the way local markets operate.