It's reality-check time for MTV.
A growing number of music television fans have been reaching for the remote lately instead of sitting through another episode of Paris Hilton's search for a new BFF or the network's sex-charged "reality" shows.
For that matter, fewer viewers seem to want Nickelodeon, Comedy Central or Spike.
Although recession-weary Americans have turned to entertainment for escape in big numbers this year (see "Potter and Spock vs. the recession"), viewership at the biggest cable channels run by Viacom (VIA.B, news, msgs) has been dropping. Ad sales are down because of the recession. And Viacom has a film division, Paramount, that can't seem to consistently turn a profit.
All of this has had shareholders running away from media magnate Sumner Redstone's cable baby. The stock is down to $21 a share from $45 a year and a half ago.
But as anyone who has watched TV networks battle it out over the years knows, a slump seldom lasts forever. Sadly, Michael Jackson won't be back with a new "Thriller" to jump-start MTV. But sooner or later, Viacom will turn things around.
In fact, there are already early signs that Viacom is fixing its ratings problems with programming tweaks and a management shakeup. Investors may well want to tune in.
Who broke MTV?
Viacom's rating slump is widespread, but the highest-profile setback has been at once-pioneering MTV, celebrated in its early days by the line "I want my MTV."In its target audience of adults ages 19 to 34, MTV ratings plunged 20% in the first quarter of 2009, according to Nielsen Media Research. The network sustained similar declines in April and May.
Who's at fault? Some blame the network's transition to "RTV," or reality TV, from music videos. But that move, begun more than a decade ago, actually looks smart given how the Internet has reshaped the music business, industry insiders say.
"Kids have so many means to find music now," says Johnny Maroney of Moodswing360, which represents popular acts such as DJ Enferno, who has toured with Madonna.
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One of Maroney's bands, LMFAO, performs a song in the current season of MTV's "The Real World: Cancun." But he says the musical acts he represents are much more likely to use Internet sites like YouTube or MySpace to get out their music and videos these days, because that's where the fans are looking. Music lovers now use video on demand to watch the latest releases, even on their TVs.
Rather, MTV's problem may be that it did such a great job with reality shows such as the "Real World" series and "Laguna Beach" that competition arrived in a big way. Now, the space is overcrowded just as older MTV programs are losing some of their appeal, says Ashley Dos Santos, a pop-culture expert with publicity firm Crosby-Volmer International Communications.
Popular reality shows such as "Jon & Kate Plus 8" on TLC and "The Real Housewives of New Jersey" on Bravo are stealing viewers from "The Hills," "The City," "Paris Hilton's My New BFF" and other MTV shows, Dos Santos says.
Viacom concedes it has overworked the genre. "We just kept producing the same kind of show," Viacom chief Philippe Dauman said at a meeting with investors in late May. Producers went "overboard" and worked popular formats "to death," losing audience as a result, he said.
The real ratings world
MTV isn't the only problem for Viacom's TV division:- Ratings for Comedy Central, whose programs include "The Daily Show With Jon Stewart" and "The Colbert Report," fell 10% in the first quarter, based on Nielsen's measure of full-day viewership by its target demographic of 18- to 49-year-olds. They fell again in May and June, by 8% and 11%, respectively.
- Ratings for Viacom's kids network, Nickelodeon, fell 4.3% in June.
- Viewership at Spike, a Viacom channel aimed at male viewers, has been weak for much of this year.
Ratings matter a lot at Viacom because advertising accounts for 54% of Viacom's cable network revenue and about 35% of revenue overall. (Fees from cable companies and Paramount movie earnings account for most of the rest.) Advertisers pay more when ratings are higher.
To get a sense of how big the problem is, it helps to weight these ratings declines based on how much revenue each network contributes. After all, a big ratings decline at a tiny show doesn't mean much.
On a revenue-weighted basis, Viacom's overall ratings declined 7.5% in the first quarter, according to Credit Suisse analyst Spencer Wang. By about mid-June, revenue-weighted ratings at Viacom were down 4.5%, compared with an average increase of 3.8% for Disney (DIS, news, msgs), News Corp. (NWSA, news, msgs) and Time Warner (TWX, news, msgs), Wang says.
Continued: Light at the end of the tunnel
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