Q&A: I Want My MTV Video Gamesd

Salmi, who is president of global digital media for parent MTV Networks (MTVN), once headed up business development at RealNetworks, then founded casual game aggregator Atom Entertainment in 1997 (it subsequently merged with Shockwave.com and AddictingGames.com), and shifted to his current role when Atom was bought by Viacom’s MTVN for $200 million last August.

Indeed, Salmi plans to invest well over $500 million in video game production in the next two years, viewing the red-hot entertainment category as a pillar of growth in MTVN’s goal to reach consumers wherever they spend time -- and money.

Columnist Paul Hyman chatted with Salmi about how MTVN targets its game-oriented brands, where MTVN is headed near-term, and why he dissuades other media companies from jumping into gaming.

Paul Hyman: Mika, I’m willing to bet that many of our readers aren’t even aware that MTV is in the video games business.

Mika Salmi: I’m sure you’re right. When MTVN bought my company and I came onboard last year, I expanded MTVN’s video game access. But the company had also gone through a flurry of other purchases, including Harmonix, Xfire, GameTrailers, and NeoPets. In fact, when I got here, I looked around and was surprised to discover how big in games MTVN truly was.

Hyman: Why is that? Why did MTVN get into gaming?

Salmi: I think that’s pretty obvious our audience -- and audiences in general -- simply play a lot of games. Which is why we as a company need to be there. Also, games are incredibly engaging. And since a big part of our business is advertising, we want an engaged audience. This isn’t necessarily a new thing for MTVN. Nickelodeon has always had games on its Web site, and some of our other brands -- like MTV and VH1 -- have always had some sort of gaming element. But MTVN jumped into it in a big way two years ago with the purchase of NeoPets.com [an NeoPets.comonline virtual pet Web site which Viacom bought in June, 2005 for $160 million].

Hyman: MTVN’s gaming efforts are sort of scattershot, aren’t they? I mean, there’s no one particular focus.

Salmi: Well, we participate in three different areas -- casual games, games media, and console/handheld games. Specifically, our three leading casual game brands -- AddictingGames.com, Shockwave.com, and NeoPets.com -- serve kids, teens, and parents. Then there’s our games media efforts which concern information about games and which enable gamers to communicate. Our two biggest properties there are GameTrailers.com -- which broadcasts trailers of games and news about gaming events -- and Xfire.com, which is an instant messenger client that allows gamers to talk to each other while they’re playing. Currently Xfire has 8 million registered users. [MTV paid $102 million for Xfire in April, 2006 after buying GameTrailers in November, 2005 for an undisclosed amount.]

Hyman: And the third area …

Salmi: … is console and handheld game development. MTVN bought Harmonix in September, 2006. Its big hit was “Guitar Hero” in 2005 and its “Rock Band” is scheduled for release this fall.

Hyman: What exactly is MTV’s role here? Are you developing games yourself or are you publishing other developers’ games?

Salmi: Yes. [Laughs.] It really depends on the brand. On GameTrailers, we have a whole production team in the field shooting stuff. Harmonix, of course, is developing “Rock Band.” And Shockwave and AddictingGames develop some games themselves and license others. We really don’t care whether we’re developing the games ourselves or publishing somebody else’s; our real emphasis is that generally we have some kind of exclusive right or control over our gaming properties across all our brands.

Hyman: Can you give me some metrics on what portion of MTVN’s business is video games?

Salmi: No, we don’t break it out. What I can tell you is that for June, across all of our online gaming properties, we had 42 million unique visitors. That rose to 45 million in July. And if you look now at all of our 200-plus Web sites, 50% of the people visiting those Web sites are playing games. I think that says it all right there. Hyman: You’ve said that MTVN will be spending over $500 million over the next two years on increasing your participation in video gaming. That’s quite an investment. Salmi: We want to engage our consumers in a deep way and that’s where games fit in. Gaming is incredibly sticky.

Hyman: Which is why you see other media companies dabbling in games, I’m sure. For example, even though NBC’s main business is TV, if you go to its Web site, you see games there that are obviously meant to lure gamers onto the site and eventually to watch their TV shows. But the major product is still the TV show and the gaming is sort of ancillary. Is that the same situation at MTVN?

Salmi: No. For us, gaming is a revenue producer. Five years ago, TV was driving everything at MTVN. But, over the last few years, we’ve broadened out and games have become a big part of our business, one that now stands on its own and isn’t necessarily about attracting consumers to our TV shows. For us, games are absolutely a revenue producer and aren’t just a marketing vehicle.

Hyman: So let’s talk about the $500 million investment. How will that be spent?

Salmi: Totally across the board … on everything from game development to marketing …

Hyman: … to acquisitions of more companies?

Salmi: No, it’s not necessarily earmarked for that. It’s money that we have put into the budgets of the properties we currently have.

Hyman: You began by saying that one of the reasons MTVN got into gaming was that the demographics are very similar. Would you therefore recommend that every single media company get into gaming? I mean, is there some reason why gaming is good for MTVN and not good for, say, XM Satellite Radio? Salmi: I don’t believe that the other media companies are as focused on targeted demographics as we are. We have lots of brands -- at last count about 30 globally -- and each is very focused on its own demographics. I don’t think XM, for example, is focused on demographics; they just want everyone to have a satellite radio. Similarly, NBC wants to reach a pretty broad range of people. But our The-N.com site, for example, is all about teen girl experiences. And AddictingGames is teen boy-oriented. That’s why our company is very different from other media companies; our approach historically in TV really maps well to our approach in gaming. We think it’s best to be very specific.

Hyman: And so your best advice to other media companies is -- what?

Salmi: Don’t get into gaming unless you’re really committed to it. I’ve seen some media companies attempt to just kind of tack on games; there’s a little tab on their Web site that takes you to a game page. But I believe there needs to be some kind of commitment level to really understand your audience so you can provide them with the kind of games they want. I think a media company needs to decide what they’re going to do with gaming. How do they intend to make money with them? Where do they intend to take them? There needs to be a real plan of attack.

I don’t know if any of the other media companies -- other than Disney, perhaps -- really are as well-suited; I think most aren’t prepared to go as deeply into games as we have. If they aren’t just as prepared, they probably won’t be very successful with games.

Hyman: So you would dissuade other media companies from doing what MTVN is doing with games unless they’re truly prepared to dive in and make it a big part of their business?

Salmi: Absolutely.

Hyman: If your intention isn’t to acquire other companies in the near future, what is your strategy down the road -- say, for the next two or three years?

Salmi: We’re trying to engage our audience much more deeply by, perhaps, bringing brands that appeal to the same audience much closer. For instance, GameTrailer and Xfire. We’ve been thinking about where we can go with the two of them. I’m not going to reveal all our plans, but that’s the gist of what we’re doing. Similarly, Harmonix makes music-based games. And MTV is a TV channel that’s all about music. So we’re asking ourselves are there more music-based things we can do to take advantage of both brands together.

In addition, we’ve been looking at virtual worlds; we have at least a half dozen now -- like Nicktropolis, NeoPets, virtual The Hills, and virtual Laguna. If we determine, based on demographics, that our audience wants more, we may either build out more properties or extend the properties we already have.

Hyman: Do you see the day when gaming will be an equal partner with TV programming at MTVN in terms of ...

Salmi: I think you’re already seeing that. You’re already seeing that, online, 50% of our audience is playing games or watching game-related videos.

Hyman: It sounds to me like you wouldn’t mind it if, in a few years, MTVN is thought of as a gaming company as opposed to a rock video company, as it is by some.

Salmi: Well, our TV channels are still a big driver of our business, but games are growing fast and they are a huge portion of what we’re doing. I’m not ready to crown gaming as the future of our company. I don’t think that’s our intent. So let’s just say that we want to be seen as an entertainment company and we want to entertain people with whatever it is they want to do. And surely gaming is currently a big part of that.