Rock, Rap & Revenue

[Following is an extended version of the story that appeared in the print edition of CableWORLD.] In the beginning, people had two options. They could listen to the radio or watch MTV on cable. Most did both. And it was good. Today music emanates from TV screens, computer monitors, cell phone displays and a growing list of gadgets and gizmos that seem unstoppable as they multiply across the land. Meanwhile, music-oriented cable channels have multiplied, with genre-specific networks vying for carriage. There’s also a growing universe of video-on-demand offerings. "For everyone who called the music industry dead, it’s more alive than ever," VH1 GM Tom Calderone says. This musical renaissance pressures operators to fit all those channels on their lineups. But it also presents revenue opportunities as subscribers clamor for music-oriented cable content. Viewers are "voting with their remotes and saying that music is of great interest to them," says Page Thompson, Comcast’s SVP and general manager, video products. True, but cable must contend with viewers who are straying from TV—many of whom reside in the key 18-34 youth demo coveted by advertisers. Indeed, global sales of digital music via the Internet and mobile phones exploded last year, reaching $1.1 billion, up from only $380 million in 2004, the International Federation of Phonographic Industry says. Consumers paid for some 420 million tracks in 2005. So, is all this good or bad for cable operators? Operators’ Heavy Move Into Music Since some cable operators and programmers are salivating at the chance to get in on the action, it seems very good. "[The wide-ranging consumption of music] has really shown how important music is in people’s lives," says MTV president Christina Norman. "[Music] really has become the content of choice. If I were a cable operator, I’d be digging for new music services." Some are. Charter Communications, for one, has been selling song downloads on its website since fall and last month launched Charter Music-To-Go, offering an all-you-can-eat download option for a monthly fee. "The music services have gone over well with customers, and we’re getting several million song downloads per month," says Himesh Bhise, Charter’s corporate VP of high-speed Internet product management. MTV and other music channels are already selling song downloads to viewers who visit Charter’s website. "I’d like to see them stay in our ecosystem," Norman says. Flexibility Is Crucial Above all, consumers are demanding flexibility. "It’s been very important for us to follow our viewers and go where they want to go," VH1’s Calderone says. "It’s all about getting what you want, when and where you want it, whether it’s by iPod, TV or cell phone," says Mike Combs, director of solutions marketing for service-reliability software firm Micromuse. "For MSOs and content providers, these are all chances to increase revenue and lock in customers." Charles Humbard, president and CEO of Gospel Music Channel, agrees. Cable operators are "enablers," he says. "They are a very important part of the equation." An optimistic Calderone of VH1 adds: "People—at the end of the day—still like watching television." But it’s a crowded field. There are plenty of Internet music choices, including services by non-cable entities such as Apple, Microsoft, Yahoo and News Corp.-owned networking site MySpace.com, which caters to the youth demographic. On the other hand, the competition has nudged cable to become creative. Competition Breeds Creativity In October, music channel fuse teamed with Cox to launch the "Light the fuse on Your Music Career" promotion, which allows musicians to submit music videos to MySpace.com in hopes of winning a spot on fuse’s VOD network. "We work with cable operators, and our goals are aligned," Catherine Mullen, fuse’s EVP and general manager, says. "We have to work together because if we don’t, we’re all in trouble." That’s not to say fuse isn’t also trying to extend its brand on its own: In November, it announced a deal to provide music video content to MobiTV via its fuseMobile service. Fuse is also working with operators to create a "windowing system" in which new shows would flow more seamlessly between VOD, linear TV and mobile and Internet channels. "You could envision a scenario where it’s on VOD, and there’s a revenue share," Mullen says. "And then it goes to the Web after that. You could then use the Web to promote TV and mobile platforms." Mun2 VP of programming Flavio Morales says cable operators and music networks could forge even closer partnerships. "We could have a private concert, and say the only way to get a ticket is to get cable," he says. "We can be the conduit—that bridge—between the cable operator and that Latino dollar." Your Music Network, a network launched late last year that focuses on undiscovered acts, has even offered to cut MSOs in on ad revenue and website music sales. "I’m trying to sweeten the pot," says Lisa Smith-Putnam, Your Music Network president and CEO. "They’re thinking, `We need other ways to make money.’ I have to think outside the box and help these people benefit more." Another creative option is video on demand. Comcast reports that some 30 million of its 140 million VOD "views" in December were for music-related programming. "The best way to view music is to go to a menu and choose what you want," Thompson says. "We put up a new video and suddenly people find it, and we have hundreds of thousands of views." He says Comcast’s new karaoke offering, in which viewers can sing along with their favorite songs, is averaging 2.5 million to 3 million views per month. Robert Ladd, senior director and digital product manager for Charter, says music-related VOD orders remain small compared to Charter’s overall VOD business, but "music has proven fairly popular on demand and continues to increase its share of the total orders." Of course, the economics of VOD can be a tough sell for many music programmers—especially those still trying to gain penetration. "A lot of operators want to throw us in the video-on-demand bucket," says Smith-Putnam. "That doesn’t work for me." MTV and others, however, are already increasing their VOD mix. "We’re having lots of conversations," Norman says. Cable as Navigator Mullen of fuse says programmers may bring the most value by helping cable operators and their customers navigate the dizzying amount of music choices —especially when it comes to the growing area of VOD content. "People will become overwhelmed with choice, and they’ll need some structure," she says. Then there’s MTV, which launched its Overdrive broadband music service in April and just last month partnered with Microsoft to sell music downloads. The MTV-branded Urge service will be embedded in the new version of Windows Media Player. In addition, MTV inked a deal with iTunes to sell $1.99 downloads of some 40 shows on MTV Networks channels. Of course, some wonder what took so long. "Why isn’t MTV running iTunes?" ponders Paul Scanlon, COO and co-founder of MobiTV, which offers streaming video services to mobile devices. "MTV could have owned that, but they were too slow, and now Apple owns that." Citing MTV’s dominance, Miriam Smith, associate professor of broadcast and electronic communication at San Francisco State University, says, "It’s sort of astounding that they didn’t end up with MySpace. Rupert Murdoch got it." MTV, Music Rule But make no mistake: MTV remains the leading global music brand. That rubs off on cable operators, who are keen to work with the music industry at large to forge closer partnerships. "It would be wrong to say that cable TV is waning as a channel for finding out about new music," says New York City-based music attorney Steven Masur. "Just look at how many people view these channels compared to the numbers of people who spend significant time on websites, and it becomes very clear that cable TV is an important channel for the music industry and will be until people tire of watching cable TV, which will not be soon." (In fact, MobiTV’s Scanlon says MobiTV is talking to MTV about launching an MTV mobile video service.) Meanwhile, the maturation of music programming has led to segmentation in order to feed specific niches, witness the Gospel Music Channel. "There is really nothing out there quite like us," Gospel Music Channel’s Humbard boasts. "It’s a huge, hungry audience that has been underserved." Other networks are targeting underserved ethnic groups. Telemundo’s newly revamped Mun2, for example, targets Hispanic youth. The hope is that the younger generation will nudge their parents to subscribe to cable or upgrade existing service. "We can get that kid who is going to convince his mom to spend an extra $15," says Mun2’s Morales. Many music programmers are constrained from re-purposing music-video content for new non-cable screens such as mobile phones. "We’ve got to convince the music community to let us show [their] videos in all of these new areas," says John Baird, executive VP of affiliate sales and marketing at Scripps Networks, which owns music channel Great American Country. "Therein lies one of the speed bumps." At the same time, cable operators also may have to revisit contracts with programmers if they ever want to create MSO-branded music services that extend well beyond the cable universe. "It comes down to the money trail and making sure that everybody’s making money on the deal," says Scott Durand, GAC’s VP of marketing. "As these opportunities become available, these contracts change." Roundup: Music Programmers Here’s an overview of some of cable’s music-oriented programmers. Black Entertainment Television
Launched: Jan. 1980
Owner: Viacom
Target: African-Americans
Mgmt: Debra Lee, chmn/CEO
Status: BET’s launch of BET Jazz, BET Gospel and BET Hip-Hop has cemented its role as a strong niche music programmer. BlueHighways TV
Launched: August 2005 (VOD); linear channel launch planned for late 2006
Owner: Network Creative Group
Target: 25-54
Mgmt: Stan Hitchcock, chairman and CEO
Status: Although BlueHighways TV isn’t entirely music-oriented, its focus on American life and heritage has led to strong coverage of roots music and traditions. Country Music Television
Launched: March 1983
Owner: MTV Networks/Viacom
Target: 18-49
Mgmt: Brian Philips, EVP/GM
Status: With more than 78 million households, CMT produces original country music programming and specials. fuse
Launched: May 2003
Owner: Rainbow Media
Target: 12-34
Mgmt: Catherine Mullen, EVP and general manager
Status: With a three-pronged strategy to extend its brand across TV, Internet and mobile platforms, fuse is available in 44 million homes, and focuses on younger, tech-savvy viewers. Gospel Music Channel
Launched: Oct. 2004
Owner: Charles Humbard, Brad Siegel, Alpine Equity Partners L.P. and Constellation Ventures
Target: 18-49 (12-24, secondary)
Mgmt: Charles Humbard, president and CEO
Status: Gospel Music Channel is now available to more than 4 million digital subscribers in 75 markets. Musical styles featured on the network include contemporary, soul, rock, sacred, pop and hip-hop. Great American Country
Launched: Dec. 1995
Owner: Scripps Networks
Target: 25-54
Mgmt: Ed Hardy, president
Status: Even with penetration approaching 40 million households, GAC still plays second fiddle to CMT. But the network continues to grow market share and differentiate itself from its Viacom-backed competitor, stressing more music-based content. MTV
Launched: Aug. 1981
Owner: Viacom
Target: 12-34
Mgmt: Christina Norman, president of MTV; Van Toffler, president of MTV Networks
Related networks: MTV2, mtvU, MTV Hits, MTV Jams, MTV Espanol, MTV World (MTV Chi, MTV Desi)
Status: The most globally well-recognized music brand. MTV recently launched broadband network Overdrive and music download service Urge. Music Choice
Launched: May 1990
Owner: Partnership among subsidiaries of Microsoft, Motorola, Sony, EMI Music, Adelphia, Comcast, Cox and Time Warner Cable.
Target: 12-34
Mgmt: David Del Beccaro, president and CEO
Status: The multi-platform music network offering commercial-free content has become a VOD powerhouse, surpassing 200 million views since its launch in Comcast VOD-enabled markets in November 2004. VH1
Launched: Jan. 1985
Owner: MTV Networks/Viacom
Target: 18-49 (focus on 25-34)
Mgmt: Tom Calderone, GM
Related networks: VH1 Classic, VH1 Soul and VHUno
Status: VH1 focuses on a slightly more mature demographic than MTV and has expanded into the broadband universe with services such as Vspot. Your Music Network
Launch date: July 2006
Owner: Lisa Smith-Putnam (majority owner)
Target: 14-40
Mgmt: Lisa Smith-Putnam, president
Status: YMN plans to create a repository of music videos and other content from independent artists who cannot gain access to music networks that are focused on major-label acts. —Compiled by Michael Grebb