MTV Networks to invest more than $500 mln in games

By Kenneth Li

NEW YORK (Reuters) - MTV Networks plans to invest well over $500 million in video games, seeing the red-hot entertainment category as a major pillar of growth in its goal to reach consumers wherever they spend time.

The two-year investment is part of a global strategy to incorporate games development at the inception of all new programming plans and not as an afterthought, executives say.

"Games are critical," MTV Networks President of Global Digital Media Mika Salmi said in an interview this week.

Salmi joined MTV after parent company Viacom (VIAb.N) bought Atom Entertainment last year for $200 million. He oversaw Atom's Shockwave.com, a pioneer of online games.

"As we take our brands narrow and deep to serve our targeted, niche audiences, we're putting well over $500 million behind building our games business across all of the brands in our portfolio," MTV Chairman and Chief Executive Judy McGrath told Reuters.

"I'd like to see more game applications on some of our current big brands across the music group," McGrath said, referring to developing games based on the networks' range of shows.

The bet is seen as a risky gambit in an industry littered with failures, as traditional media companies have attempted to break into the $30 billion global games market.

"Media companies are crazy trying to bring video-game development in house," Wedbush Morgan analyst Michael Pachter said about developing complicated console games. "They act like anyone can do this. The fact is not everyone can."

Historians point to Warner Communications' foray into the games business with the 1976 purchase of pioneering arcade and console games developer Atari as one of the biggest failures.

Despite achieving phenomenal success with the iconic game system Atari 2600, it released in 1982 one of the most panned titles of all time, a games version of the blockbuster feature film "E.T.", whose millions of unsold cartridges can still be found buried in a New Mexico landfill.

EYE ON WEB GAMES

The popularity of casual games online that are easy for users to pick up and simpler to develop could reverse the media industry's fortunes in the sector, some industry experts say.

"The history has not been good," UBS Internet analyst Ben Schachter said. But, "it's changing. The Internet is a different ball game, especially for casual games."

MTV Networks, whose two decades of unchallenged hegemony over youth entertainment has shown cracks in recent years, now sees its games portfolio as a key way to keep kids and adult customers transfixed to screens -- whether on television sets or cell phones and laptops.

Its new investment is emboldened by early success with its existing properties such as Xfire, which helps connect players, GameTrailers, Neopets.com and virtual world Nicktropolis.