As Rival Gains, MTV Locks Up New Videos

MTV built itself into an entertainment powerhouse by keeping an ear tuned to pop-music trends. The channel probably doesn’t like what it’s hearing now: the footsteps of a competitor.

Since its debut seven months ago, Fuse has been steadily picking up music video viewers. Viacom Inc., which owns MTV, is playing hardball in response, industry sources say, exercising a provision in contracts with record labels that requires them to provide music videos for Viacom’s exclusive use.

Executives at the five major record conglomerates won’t talk publicly about the move. Privately, they’re griping about what they say is MTV’s bid to strong-arm them in order to keep its near-monopoly status in the music TV business.

The labels agreed to the exclusivity provisions in contracts signed years ago. But executives say those deals were signed back when MTV had little serious competition.

MTV has claimed exclusive rights to some eagerly awaited clips, including Radiohead’s “There There,” Beyonce Knowles’ “Crazy in Love,” Limp Bizkit’s “Eat You Alive,” Puddle of Mudd’s “Away From Me,” Blink-182’s “Feeling This,” and Linkin Park’s “Numb.”

Under the labels’ contracts, the Viacom network can air a video exclusively for as long as six months, sources say.

MTV’s position as the dominant force in music television has never before been seriously challenged. In 1994, major record companies launched plans to start their own 24-hour music channel but scrapped the idea in the face of a Justice Department antitrust inquiry.

Right now, Fuse’s reach is limited. It is available through cable and satellite systems in about 34 million households, while MTV2 is in 50 million and MTV is in more than 86 million.

But Fuse has been winning points among music executives and media analysts.

“Fuse has been very successful in establishing a relevant brand in a very short period of time,” said Jack Myers, a media analyst and publisher of the Jack Myers Report. “MTV is in a position of being forced to pay attention.”

The upstart channel is emerging as an MTV rival at a time when the music industry is suffering from a three-year slide in CD sales.

“Given the current crisis in the music industry, it’s a shame that anyone would seek to prevent the work of today’s artists from getting to as many people as possible,” said Marc Juris, president of Fuse Networks, which is owned by Cablevision Systems Corp.

Relations between MTV and the labels recently have been tense. Music executives say they are tired of footing bills that seem to benefit MTV as the companies’ fortunes decline.

For instance, a label pays to produce a music video and to cover a wide array of other expenses, including the costs of an artist’s travel to MTV events, stage sets at the events and other fees whenever the artist appears on the channel. MTV pays the label’s licensing fees, about $5 million a year for the bigger companies, but music executives say that doesn’t come close to covering their expenses.

For MTV, the arrangement has been rewarding: By keeping its programming costs low, it has generated some the biggest profit margins in the media world -- an estimated 56% this year on sales of $929 million, according to Kagan World Media.

Lately, some labels have refused to pay the costs of some high-profile acts’ appearances; labels also have been offsetting their costs by cutting product placement deals with companies such as General Motors Corp. and Verizon Communications Inc. without MTV’s approval.

Whether there will be changes in the channel’s deals with the labels is unclear. Viacom’s MTV division has a contract with every major record conglomerate that guarantees the channel exclusive permission to air for a certain period of time a percentage of the music videos a company produces each year. MTV can claim exclusive rights to as much as 20% of a label’s videos in some instances, sources said. In return, they said, MTV offers the record company free advertising spots,

MTV executives declined to discuss details of the channel’s contracts. A spokeswoman said MTV decides when to claim exclusive rights to a video based on an assessment of audience taste, “not what any other network may or may not be doing.” For popular acts, she said, “it only makes sense for us to want to brand with the artist.”

Cablevision started Fuse in May, revamping a lackluster channel called MuchMusic USA that Cablevision had owned since 2000.

“Whether anybody wants to admit it or not, the Fuse is becoming a player,” said one artist representative who spoke on condition of anonymity. MTV “is seeing a spark, and they want to keep them from playing.”

*

(BEGIN TEXT OF INFOBOX)

Music upstart

The Fuse music channel has been attracting the attention of viewers -- and MTV.

Name: Fuse Networks

Headquarters: New York

Owner: Rainbow Media Holdings, a subsidiary of Cablevision Systems

Launched: May 2003

Service area: Available nationwide

Reach (in millions of U.S. households)

MTV: 86

MTV2: 50

Fuse: 34

Sources: Company reports, Times research