• by David Goetzl  @dgoetzl, May 12, 2006

Viacom's MTV Networks division expects up to 8 percent of its upfront take to go toward digital, non-linear platforms such as broadband and mobile, according to Tom Freston, President-CEO of MTVN parent Viacom.

In a conference call Thursday to discuss Viacom's first-quarter earnings, Freston said that every media plan offered to buyers in the upfront will contain a digital element--and MTVN expects 5 to 8 percent of its dollar intake to be in the digital arena.

That was but one example of Freston's bullishness on MTVN's prospects for capturing ad dollars in the digital space. He said the company is well on its way to reaching $500 million in digital ad revenue by 2009. And it has doubled digital inventory in the last year--and is aggressively trying to add more--with the demand for digital video advertising spiking. Digital video ads can be highly lucrative, with CPMs two or three times higher than what MTVN commands for on-air spots, Freston said.

In another example of MTVN's prospects in off-net opportunities--although not ad-supported--Freston said the company's programs have accounted for 4 million iTunes downloads since January. That's nearly $8 million in revenue, although iTunes operator Apple gets a cut.

In the traditional television realm of spots and dots on its 26 U.S. networks, Viacom executives expressed similar optimism with the upfront around the corner. Freston suggested that dollars will continue to flow to cable. "We're seeing a steady scatter market going into the upfront, which is a good sign," he said. "Demand is up and pricing is strong."

In the first quarter, however, domestic ad dollars at Viacom's cable segment, which includes MTVN and BET, grew 6 percent versus last year--far less than the greater than 20 percent increase a year ago. The cable segment is Viacom's growth driver, accounting for two-thirds of company revenue.

Still, the slowed growth stands in stark contrast to the fortunes of the Discovery Communications cable fleet. In the first quarter, ad revenue for U.S. networks such as the Discovery Channel and TLC declined 6 percent versus a year ago. An earnings release from Discovery Holding Co., which owns 50 percent of Discovery, attributed the decline to "lower advertising sell-out rates combined with lower rates at certain networks." The lower rates likely reflect lower ratings--for example, flagship Discovery is down 20 percent in prime-time this season in the 18-to-49 demo.

Discovery Communications' domestic networks were able to increase revenue 6 percent to $443 million, in large part due to growth in subscriber fees.

Overall, Viacom--which also includes Paramount Pictures--saw profit fall 9 percent to $317.2 million compared to the same quarter a year ago, while revenues rose 12 percent to $2.37 billion.

While the youth-oriented MTV-branded networks and Nickelodeon family are cash cows within MTVN, Freston said the company would make a bid in the upfront to poach dollars from the broadcast networks for its channels that have a significant 18-to-49 skew--Spike, Comedy Central, BET, TV Land, VH1, and CMT. "Pools of broadcast money in 18-to-49 will continue to move to cable--dollars we are confident we will capture our share of," he said.

Freston also signaled out BET as a potential growth driver, with the network's new push to offer original programming after the successful "Lil' Kim: Countdown to Lockdown." He cited the upcoming "Next Level: Vince Young," which follows the college football star as he prepares for his debut in the NFL, as an example.