Business

I Want My (Web) MTV

Mika Salmi's band of adrenaline-drunk buddies were all thinking the same thing: "Now what, Mika?" On a thrill-seeking sojourn from MTV Networks—where he oversees the cable programmer's sprawling digital realm—Salmi had escorted eight of his Silicon Valley compatriots into the remote Canadian backcountry for some extreme skiing. While soaring off a frighteningly steep slope, Salmi had lost one of his skis midair, and it disappeared into the deep powder. Without the ski, how could he possibly guide them back to civilization? The group worried as they fruitlessly searched for the equipment. But Salmi had been in scarier predicaments before—alone, no less—on mountain treks and while surfing. He'd always come through unscathed, and would again this day. "On one ski, he proceeded to ski about eight kilometers [five miles] down the mountain—and better than any of us on two skis," recalls Richard Barton, a longtime friend of Mika Salmi, is founder of Expedia.com and currently CEO of Zillow.com. "He's a tenacious guy who's always pushing the edge. He picks himself up and moves on and gets it done."

It's that flair for adventure and inventiveness that captured the attention of top executives of Viacom's MTV Networks, who in 2006 tapped Salmi to become the company's Internet czar. Worse than losing a ski in the snow, MTV Networks had lost its footing in the midst of a paradigm shift in media and entertainment. The arrival of broadband video was changing the nature of entertainment, but MTV Networks, which includes, among other channels, VH1, Comedy Central, Nickelodeon and the flagship MTV outlet, had suddenly found itself lagging. It was a humiliating predicament. MTV Networks, which for years had been the arbiter of youth culture, seemed to be squandering its birthright: even as its core audience was embracing the Internet as the next entertainment medium, MTV could not shake its old-media image. But under the guidance of Salmi, 42, a Web video pioneer who got his start in the 1990s before most people knew what streaming media and digital downloads were, MTV Networks is now beginning to take hefty bytes of the Internet business.

MTV and its sibling brands now have more than 300 sites, including some 30 media-rich broadband sites that boast video, music and lots of interactivity. And they have captured an impressive amount of traffic: Nickelodeon alone logged 1.4 billion video streams last year. MTV Networks' Internet sites attracted 90 million unique visitors worldwide in December 2007, up from 76 million the previous year, according to comScore. But the digital empire Salmi is helping to expand and turbocharge goes way beyond streaming video. MTV is now a leading creator of online virtual worlds like Neopets.com, where users' avatars can interact with virtual pets, and Pimp My Ride (named after the popular MTV show), where avatars can customize cars. MTV has also become a major player in videogaming, which is now the hottest category in all entertainment. It owns the leading casual-games site, AddictingGames.com, where simple card games, puzzles and the like can be played free of charge, and has one of the industry's hottest games—the cultural phenom Rock Band: for those of you who are videogame Luddites, Rock Band lets you and up to three friends become a "virtual" band, using video controllers that look like instruments to play along with songs you download from the Internet. Introduced in November by MTV-owned game developer Harmonix, which also created the hit Guitar Hero, Rock Band has sold a remarkable 1.8 million units, as well as 6 million downloaded songs. Fueled by Rock Band, Viacom Media Networks posted $1.1 billion in worldwide "ancillary" revenues in 2007, a figure that includes royalties earned from MTV-owned videogames.

The strategy encompasses more than just the online sites of the branded cable networks. Sites are spawning for actual shows, such as TheDailyShow.com and SouthParkStudios.com, which launched just last week. Still other sites are wholly unrelated to television shows and branded networks, but simply address the interests of the core audience. Nor do you have to go exclusively to MTV Networks' sites to access their content: a rapidly growing number of third-party sites, including Yahoo and iTunes, offer MTV content under syndication deals (that longtime staple of old media). Users themselves can even distribute MTV clips, with MTV-provided tools that let them embed video into e-mails, on their Facebook or MySpace page, or on blogs. The company also distributes MTV and affiliated brands through 80 mobile carriers worldwide. "Freeing the content so that it is accessible from more than just your own site is critical—with Viacom a leader in that respect among its peers," says media analyst Richard Greenfield of Pali Capital, who calls the approach "a key to Viacom's growing success." For Salmi, it's all about capturing eyes in a world of media fragmentation. "We need to make sure our content is everywhere our audiences are … to keep our brands relevant," he says.

Advertisers have embraced MTV's method, because it allows them to reach keenly targeted demographic groups. "It's a clear indication that they are looking at the business from a consumer's perspective," says James Kiernan, digital director for MediaVest, which placed client P&G's Secret deodorant brand in Virtual Laguna, a site based on MTV's hit show "Laguna Beach," to reach young women.

For his part, Salmi merely sees the strategy as a logical next step in MTV's ongoing evolution. MTV "has reinvented itself so many times," he says, noting the flagship channel's shift from music videos to reality series, and its splintering into offshoot channels like MTV2 and mtvU. Whether it's evolution or revolution, Salmi's boss appreciates the results. "It was a television-led company," says Judy McGrath, MTV's CEO. "He took the pieces and made them add up to something greater." From a financial standpoint—the measure that really counts—"we had a fantastic year," McGrath says.

Viacom CEO Philippe Dauman has even more reason to be pleased, given that he'd publicly staked his credibility largely on MTV's ability to meet the aggressive goal of doubling Viacom's digital revenue to $500 million in 2007. Dauman recently announced that Viacom had exceeded the target (Viacom overall generated 2007 revenues of $13.4 billion). "Today, our digital operations have reached a critical mass," he stated in announcing year-end results. Dauman is expecting even more this year. Although he's not specific, Salmi says the 2008 target set by Dauman is "very aggressive."

The growth in part reflects the rising numbers of new MTV Network sites. Its 300-plus total sites represents an increase of roughly one third from 2006. The pace of expansion continues this year: in recent days, Nickelodeon has unveiled plans to introduce 1,600 new games this year, including 600 original offerings (not sequels or spinoffs) across its kidcentric Web sites. Companywide, MTV boasts a library of 5,000 games. At the flagship MTV channel, more virtual worlds are on the drawing boards. "If you watch our shows, you'll want to live them," says Jeff Yapp, another of MTV Networks' top digital executives. Debuting soon, for example, is Lower East Side, in which avatars will explore the music scene of the edgy Manhattan neighborhood. And the company is continuing to launch Web site offshoots of its various TV shows and brands. "We'll never be done," says Salmi. At the same time, visitors are spending more time on many of MTV Networks' sites. At its most "sticky" site, Nick.com, for example, the visiting tykes linger an average of 50 minutes, about double 2006's duration.

Salmi's anointment as MTV's digital savior seems almost manifest destiny. With his global background and experience—not to mention his derring-do pursuits and laid-back temperament—Salmi is the embodiment of the MTV Generation, an audience now spread over 160 countries. Born in Helsinki, he arrived in the United States at the age of 2 when his father, a pro hockey player and Olympian who became an international salesman for Finnair, relocated the family to New York (his mother, a nurse, hailed from a town in the Arctic Circle). After high school, Salmi enrolled in the University of Vermont on a scholarship he earned for his ski-racing skills (that's only one of Salmi's extreme sports: as a teen he taught windsurfing, favored hard-core mountain biking and craved the heavy waves and shark-infested waters off San Francisco). Ultimately, he earned an undergrad finance degree at the University of Wisconsin (while working as a DJ on the side for pocket money), then a master's degree at an institute in France. He landed in the music business in the late 1980s, where he discovered and signed the rock band Nine Inch Nails to indie label TVT Records. Later, in France, he worked for recording giant EMI Group.

In France, Salmi also cultivated a taste for the kind of video shorts that are now a Web staple (he first saw them on television there). His sensibilities were decidedly MTV-esque: think offbeat and crude, à la the signature MTV series "Beavis & Butt-head" and "Jackass." In 1994, he returned to the United States and landed a job at RealNetworks, a vanguard company in online entertainment.

The stint helped him crystallize a vision for the nexus of the Net and film, and in 1998 he put that vision into action with the launch of AtomFilms.com. "I saw an explosion of video content about to happen as digital technologies took hold and made it easier and cheaper to produce," Salmi says. "The Web was perfect for this output because Web consumers were hungry for video, but due to slow bandwidths only short videos were tolerable to watch." He made a thriving business of it, buying up thousands of short films that attracted a mass audience of downloading fans. Market researcher Forrester Research went on to describe AtomFilms as "the Paramount of the Internet."

In 2000, the Internet bubble burst, and the punishing business environment proved just another formidable test of Salmi's survival instincts. That December, he merged Atom with Adobe's Shockwave, one of the first technologies for viewing rich media. Salmi cut costs at the combined companies. "Those were tough days," says Bob Daly, the former co-head of Warner Bros. studio and an early Shockwave investor. "With the merger, Mika basically made us cash-viable. We didn't have to borrow any more money. And he also knew how to trim the overhead. He was a great salesman, a very bright and personable guy who worked hard, and didn't just care about himself."

By the summer of 2006, MTV parent Viacom, like every other old-media company, had become keenly aware of the staggering implications of broadband Internet. During the previous year, Disney had agreed to provide hit shows from its ABC network for download on Apple's iTunes, YouTube was launched, and Facebook's active users swelled to 5.5 million. "In short, the 'user revolution' really democratized content creation and distribution," Salmi said in a major industry address last year. The flagship MTV channel was on the move, too, launching one of the first broadband sites, MTV Overdrive. To bolster MTV Networks' digital presence, Viacom went on a buying spree. Among the acquisitions: Salmi's Atom Entertainment, including AtomFilms .com and the gaming sites Shockwave .com and AddictingGames .com. The price tag was $200 million.

But the deal that attracted the most attention—much of it negative—was the one that was never consummated. Rupert Murdoch's News Corp. snatched MySpace, the "it" site of social networking, from Viacom's embrace. In that deal's wake, Viacom's cantankerous founder, Sumner Redstone, blamed his longtime lieutenant, CEO Tom Freston, for letting the Web's then hottest brand get away. He fired Freston, replacing him with Dauman, and charged the new CEO with this mandate: make MTV digitally cool. The trick was, he didn't want Dauman making any gazillion-dollar acquisitions to do it (no old-media company wants to make the same mistake Time Warner did with AOL). And that's where Salmi came in. "The reason I took the job was because it was clear that the media business was undergoing a major transformation, and I was excited to have a part in that," Salmi says. Sure, it's a treacherous ride at times, but Mika seems to be hurtling along effortlessly on both skis.

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