MTV—MTV Slows Down Its Internet Unit and Cuts Payroll

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MTV Networks is pulling out all the stops to reorganize its money-losing Internet unit, MTVi, and bring its content more in line with the company’s basic TV programming.

It recently laid off 105 of the 400 or so employees who had been running MTV.com, VH1.com, SonicNet and Country.com. While most were members of the editorial staff, marketing and technical departments were also downsized. Also late last month, MTV dropped plans to take MTVi public through an initial public offering.

“This was a really major reorganization in which we took a hard look at what we were doing and where we needed to go,” said MTVi President and CEO Nicholas Butterworth. “I don’t anticipate anything like this ever happening again.”

Launched ambitiously in August 1999, MTVi’s difficulties mirror those some traditional media companies like Walt Disney Co. and General Electric Co. are having with their own Internet spinoff efforts.

MTVi spokesman Mark Pasetsky said the unit will continue to operate autonomously, but MTV Networks will now use it to leverage parent company Viacom’s music-oriented television content.

Some high-level talent took flight from MTVi even before the layoffs. Departing staffers included Alex Maghan, chief technology officer; Peggy Mansfield, head of sales; Michael Goldberg, editor in chief of SonicNet; and David Hyman, head of marketing at MTVi.

“Even if they were doing the job well, it was redundant,” Pasetsky said. “This move really positioned us for the long term.”

MTV Networks President Judy McGrath was named chairwoman of MTVi and Butterworth will stay on as president and CEO, reporting to McGrath.

The San Francisco office was closed and all operations were consolidated in New York to focus on cross-convergence efforts, according to Pasetsky.

Butterworth said MTVi will generate “less wholly original content than previously,” but it will “continue to have a balance between original online experiences and content driven by television.”

That approach is working, according to Butterworth, who said MTVi’s revenues this year are on track to be double the amount generated last year.

According to a filing with the Securities and Exchange Commission, MTVi reported a net loss in 1999 of $46.4 million on revenues of $18.2 million.

But MTVi continues to report high traffic at its sites, with some 18 million total page views during the month of August, according to Pasetsky.

James Goss, a media and entertainment analyst with Barrington Research, views the recent changes at MTVi as an opportunity for Viacom to distribute more content that its music-oriented television stations create.

“MTV is still going to be a powerful brand, globally, and a major presence on the Internet, and that is not going to change,” Goss said. “There’s going to be no less interest in maximizing the Internet presence of MTV now as opposed to before. The Internet will be approached as an adjunct, as an added distribution vehicle within the brand umbrella.”

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