Jumping Jack Crash: Digital kills the video star

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MTV, the cable network at the heart of the Viacom empire, promised that this year’s Video Music Awards would be its best. Yet, in spite of a host of new internet features – and the exuberance of host Jack Black – its pulled in nearly 30 per cent fewer viewers than the previous year.

The performance was emblematic of the difficulties the media company that once dominated youth culture has encountered as it tries to compete in the digital age. Whereas MTV had the youth market to itself in the cable television era, it now has to reckon with a generation of cool newcomers such as MySpace and YouTube as young viewers move to the internet.

Inability to handle that challenge resulted this week in the firing of Tom Freston, the former advertising executive who helped found MTV 25 years ago and oversaw the iconic “I want my MTV” campaign.

Mr Freston, long regarded as one of the best executives in the media industry, was caught off guard when Sumner Redstone, Viacom’s chairman and leading shareholder, called him to his home in Los Angeles on Monday night. In a statement on Tuesday, Mr Freston expressed confidence Viacom would prosper under its new management, and thanked his colleagues.

The transition to a new era of digital distribution has unsettled companies throughout the media sector.

Their share prices have stalled in recent years as investors have sought to determine their potential for selling movies, music, television and other content to an iPod generation.

Viacom was supposed to be well-positioned to extend its dominance. In January, Mr Redstone split it from sister company CBS, which includes mature businesses like television and radio networks. The idea was Viacom would be more nimble without such baggage.

In retrospect, Viacom appears to have made one large misstep when it lost out to News Corp last year in a battle to acquire MySpace, the social networking site.

MySpace now counts more than 100m registered users. What is more, say analysts and media executives, it has formed a sense of coherence and momentum for News Corp’s emerging internet strategy. By contrast, MTV’s homegrown broadband offering, MTV Overdrive, attracts fewer than 4m unique visitors each month.

Viacom has since acquired a series of other internet properties, including Xfire, a networking system for gamers, iFilm, and others. Yet it is unclear to investors how they will fit together.

“Nobody at Viacom is willing to stand-up, communicate a concise global vision across all distribution platforms and effectively execute on implementing that vision,” wrote Richard Greenfield, an analyst at Pali Capital, in a blistering note in July.

While Viacom shares have fallen more than 10 per cent this year, CBS, led by Les Moonves, has outperformed expectations even after it posted strong results last month.

In an interview on Tuesday Mr Redstone said the divergence showed the split had “gone astray”.

At the same time, shares of Walt Disney – which last year was first to announce a television distribution deal with Apple’s iTunes online store – and News Corp, bolstered by MySpace, have begun to rally.

Mr Redstone seemed to be assuring investors on Tuesday that Viacom would not allow the next internet sensation to be snatched up by a competitor. He described Mr Freston’s replacement, Philippe Dauman, and his new chief administrative officer, Thomas Dooley, as “more entrepreneurial, more go-get-it kind of guys”.

He added: “We will seek out every sensible deal – whether in the digital space or otherwise.

“And ... we are determined not to let it get out of our hands.”

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