Music Television's - Company Business and Marketing

Industry Standard, The, April 9, 2001 by Hane C. Lee, Kenneth Li

AOL Time Warner is taking on MTV. Get ready for some noise.

IT WAS ALMOST CALLED "TV-M." BUT during a late-night brainstorming session before the launch of the world's first music-video network, someone suggested that "MTV" might sound better.

Twenty years later, Bob Pittman, the man who sired MTV, is apparently at it again. AOL Time Warner, where Pittman runs the show as co-COO, is mulling a new cable channel to face off against the Viacom-owned music channel. It isn't the first challenge to mighty MTV. But backed by the muscle of the newly merged media empire, it's the most threatening. Or so Pittman hopes.

Since the mid-1980s, media companies, record labels and cable operators have tried -- and failed -- to chip away at MTV's dominance. Among the would-be competitors was Ted Turner, now vice chairman of AOL Time Warner, who launched Turner Broadcasting's Cable Music Channel in October 1984. Two months later, Turner sold CMC to MTV. In 1993, music label BMG teamed up with cable company TCI to create a music and shopping channel. The effort was abandoned less than a year later amid talk of yet another MTV rival being planned by EMI, Polygram, Sony, Ticketmaster and Warner. Faced with a Justice Department antitrust probe, the labels shelved the venture in July 1995.

Today, with an audience of more than 250 million viewers around the world, MTV has come a long way from the days when it had to beg labels for videos to fill airtime. Now, "we service MTV We have to pitch them," says a major-label exec. If MTV turns it down, the label is forced to shop the video to second-tier outlets. That's what happened with Madonna's new video for the single "What It Feels Like for a Girl." Deemed too violent for MTV and VH1, Warner Bros. ran it on the Web through corporate cousin America Online.

Considering the contentious relationship between the labels and MTV, the big music companies should welcome a competing channel. But privately, music executives doubt that any company will be able to rival Viacom's music channels, which also include MTV2, VH1 and BET. Viacom "will do anything they can to squash anybody starting a competing music channel' says one former record-label exec at a large Internet music company.

There's no question that AOL Time Warner is better-positioned than previous contenders. Turner Broadcasting chief Jamie Kellner founded the successful and youth-savvy WB Network. At worst, an AOL music channel would debut with 12.8 million viewers -- the size of Time Warner Cable's network -- and millions more if it were bundled with offerings like CNN or TBS. It could also meld well with AOL's planned music-subscription service. And while mass adoption of interactive TV is years away, AOLTV could some-day glue it all together.

Meanwhile, MTV is girding for the fight. Last week it unveiled a new branding campaign for MTV360, its plan to tie together the offerings of MTV, MTV2 and MTV.com.

The big question, of course, is whether Turner Broadcasting's Kellner will be able to get AOL Time Warner's cable, music, online and TV groups to work together on an integrated music offering. The merger of AOL and Time Warner was all about synergy. This may be its first big test.