So I went and built the $8B MTV Empire instead | Tom Freston

MTV's Rise and Business Model

• MTV was a highly successful company that grew from zero to billions in revenue, with a high margin money machine business model that included three revenue streams: subscribers, advertising, and consumer products, and it was sort of the height of the cable TV revolution which began to deteriorate in the early 2000s with the digital revolution 10s.
• The company helped create popular shows such as South Park, Chappelle Show, and Steven Coar, and also gave starts to Jimmy Kimmel and Bill Maher on Comedy Central, which was one of the networks owned by the company 42s.
• The company made an offer to buy Facebook, but was turned down, with the bid being around $1.7 billion, and this was one of the attempts to spot winning people or creatives 2m6s.
• The company's business model included owning the IP of popular shows such as Spongebob, and also owned other networks such as VH1, Comedy Central, and Nickelodeon, which became a big thing for the company 4m30s.

The Founder's Background and Early Career

• The founder of the company was 33 years old when it was started, and had previously run a business in India and Afghanistan, designing and making clothes, and had also worked in an ad agency in New York before deciding to start the company 6m40s.
• The founder had graduated number one in their class from getting their MBA at NYU, and had initially gone to business school to stay out of the draft during the Vietnam War, but then became entranced with business and decided to pursue a career in it 8m50s.
• Before starting the company, the founder had taken a gap year, working menial jobs and bartending their way around, and had also encountered people like Peter Drucker in business school, which had a significant impact on their career 10m20s.
• After working in an ad agency, a decision was made to quit and go traveling, which included crossing the Sahara desert, visiting India and Afghanistan, and meeting a woman in Greece who inspired a business idea to design and sell clothes 10s.
• The business idea involved creating a vertically integrated conglomerate, similar to the woman's business in Katmandu, where she would make and design clothes and sell them at beach resorts in the Mediterranean, and at its peak, the revenue was around $8 million, which is equivalent to approximately $40 million today 2m6s.
• The business was successful, with the first million being made in the 20s, specifically at the age of 26 or 27, although the money was mostly tied up in inventory and receivables 4m30s.
• The business was eventually wound down due to a communist coup in Afghanistan and an embargo on clothing imports from India imposed by Jimmy Carter, which put the business out of operation, and attempts to smuggle clothes to meet a delivery date at Bloomingdales were made, but ultimately, the business ended with significant debt 8m40s.

Transition to the Music Television Industry

• After the business was shut down, the decision was made to change careers and find a new line of business, as the friends had grown up, gotten married, and had mortgages, and a new path was needed, which started with reading a book 14m20s.
• The book "What Color Is Your Parachute?" had a significant impact on the person's life, as it helped them identify their transferable skills and determine their career path, leading them to pursue a career in the music business 10s.
• The person got hired at the company that would become MTV and MTV Networks in March 1980, with an initial salary of $35,000 per year, which was more than what the other seven founding members were earning 2m6s.

Formation and Early Development of MTV

• The company was a joint venture between American Express and Warner Communications, with American Express investing in the venture as a way to get into the interactive television business, which was a new and emerging field at the time 4m30s.
• American Express had previously invested in Warner Cable, which developed an interactive television system called Qube, and they saw the joint venture as an opportunity to expand into new areas, including cable television and satellite programming 5m20s.
• The company, Warner Amex Satellite Entertainment Company (WASEC), started by launching the Movie Channel, which was a 24-hour movie channel, and later launched other channels, including Nickelodeon and MTV, which was initially conceived as a music channel that would narrowcast to a specific audience 7m10s.
• The concept of narrowcasting, or programming a single genre of content to a specific segment of the audience, was a key innovation of the company, and it allowed them to build a strong relationship with their viewers and establish a niche in the market 10m30s.
• The concept of MTV was to create a place, not a show, where people could watch music and other content, with the goal of becoming a niche programming platform, similar to FM radio stations that had genres like soft rock or free-form rock and roll music, which was a new idea at the time 10s.
• The initial investment for MTV was $25 million, which was considered a significant amount of money, but the company almost ran out of funds before it became a successful business, with eight people initially developing the concept and later hiring more staff to run the 24-hour network 2m6s.

MTV's Launch and Initial Challenges

• The launch of MTV coincided with the start of other cable networks, such as CNN, ESPN, and USA Network, which were all trying to break down the broadcast monopoly that had a 90-95% market share, with the founders of these networks considering each other as pals 4m6s.
• By the fifth or seventh year, MTV was generating $70 million in revenue, which was a rapid growth, and the company's business model was based on multiple revenue streams, including a narrowcast programming strategy and getting into cable systems, with the goal of getting 10 cents per month from cable operators 6m6s.
• The business model also relied on the inevitability of cable TV becoming widespread in American households, with the company expecting to get $120 per year from each subscriber, which would account for only one-third of the revenue, with the rest coming from advertisers 8m6s.
• In the third or fourth year, MTV had only 2.5 million subscribers, which was behind schedule, and the company was struggling to attract advertisers due to its low subscriber numbers, with the cable operators resisting the idea of paying 10 cents per month for MTV, citing their dislike of the music and content 10m6s.

MTV's Cultural Impact and Music Video Evolution

• The individuals in control of the cable industry at the time were initially hesitant about MTV, similar to their reaction to Elvis Presley, but the network's unique concept of 24-hour music videos eventually gained popularity, with people enjoying the new visual style and irreverent content 10s.
• The initial success of MTV can be attributed to its ability to provide a platform for music fans to discover new artists and groups, with the network featuring fast-cutting music videos that were previously unseen in the US, and this concept is still relevant today with the abundance of music videos available on platforms like YouTube 2m6s.
• The idea of music videos originated in Europe, where television and radio were heavily regulated, leading to the creation of pirate radio stations and the use of music videos as a way to promote album sales, with shows like Top of the Pops and record stores showcasing these videos 4m30s.
• When MTV launched, it only had 160 music videos, mostly from UK and European independent acts, but as the network's popularity grew, more established artists like Bruce Springsteen and ZZ Top began creating music videos, and new artists like Madonna used the medium to their advantage 6m20s.
• The music video industry continued to develop and evolve, with MTV playing a significant role in its growth, but the network eventually shifted its focus away from music videos, a decision that is considered a mistake, as music videos remain a popular and effective way for artists to promote their work 8m40s.

Talent Acquisition and Creative Successes

• The team behind MTV was able to attract and employ talented creative individuals, including Steve Hillenburg, who went on to create the popular animated show Spongebob Squarepants 10m10s.
• The company had a diverse range of talented individuals, including Mike Judge, known for shows like King of the Hill, Daria, and Beavis and Butthead, as well as Matt and Trey from South Park, and the creator of Spongebob Squarepants, who was initially a marine biologist 10s.
• The goal was to create a non-traditional media company that thrived on offbeat and leading-edge talent, whether in music, comedy, or other areas, and to bring them into the mainstream, with a focus on having a young and casual employee base 1m42s.
• The company had a unique dress code, which was simply "no frontal nudity," resulting in a relaxed and casual work environment that encouraged creativity and risk-taking, with the aim of attracting and nurturing creative people 2m6s.
• The approach to finding talent involved looking for individuals who were immersed in the popular culture of the day, similar to how record companies scout for new bands, and the company was successful in spotting and nurturing talent, such as the creators of Yo MTV Raps, which helped bring hip-hop to a wider audience 3m30s.
• The process of discovering new talent often involved giving creative people the freedom to pursue their ideas and build relationships with other talented individuals, with the company acting as a "talent magnet" that attracted a constant stream of new and innovative people 4m40s.
• The company's success in finding and nurturing talent was not just about identifying individual stars, but also about creating an environment that allowed creative people to thrive and produce their best work, with a focus on hiring people who had good instincts, taste, and diplomatic skills 6m10s.

Creative Processes and Greenlighting New Content

• The greenlighting process for new content was often quick, with decisions being made in a matter of minutes, as seen with the decision to work with Mike Judge, which led to the creation of a series where people would sit on a couch and rate music videos, 10s.
• Matt and Trey, the creators of South Park, were initially commissioned to create a Christmas card for MTV, which featured foulmouthed kids and a talking turd, and this led to the decision to greenlight the show, 10s.
• The decision to greenlight South Park was made because the show was original, offbeat, and pushed the edge, with a unique sense of humor and irreverence, and the creators made six episodes with Matt and Trey, 2m6s.
• The first episode of South Park featured Cartman getting an alien probe, and the show went on to become very successful, with its most recent season being its most successful in terms of ratings and buzz, 2m6s.
• The creators of South Park, Matt and Trey, are talented and generative, and their success has been great to watch, with them going on to create other projects such as the Book of Mormon, 2m6s.
• Hiring creatives can be a challenge, as the best ones are often the biggest pains in the ass, but they are also the most talented and have a unique point of view, and the goal is to increase the hit rate of finding young talented people and giving them a shot, 2m6s.

Hiring and Talent Development Strategy

• The key to success is finding people who can power creators and connect with 20-year-olds, which is why it's important to hire talent pickers who can find and nurture new talent, 2m6s.
• The company's approach to hiring involved seeking out "aberrant people" who were troublemakers and didn't fit into the mainstream, as they were believed to bring the most success, with Judy McGrath being a key figure in this approach 10s.

Company Culture and Social Environment

• Certain companies have unique cultural practices, such as the Japanese company Racketin, where employees are expected to spend 30 minutes cleaning their area every day at 4 pm, which helps to shape the company culture and sweat the details 2m6s.
• To foster a culture of creativity and risk-taking, the company would host wild parties and gatherings, which helped to build bonds among employees and encouraged them to think outside the box, with the goal of achieving a 10x outcome 4m30s.
• These parties were often unconventional and included activities such as chicken fighting and having girls with bandoliers filled with shot glasses and holsters with tequila bottles, which helped to create a sense of camaraderie among employees 6m20s.
• The company's approach to socializing and partying was intentional, with the goal of building relationships among employees from different departments, such as sales and animation, and creating a sense of community and shared creativity 8m40s.
• The company's culture was attractive to young people, with many employees in their 20s, and the office often became the center of their social life, with some employees even sleeping in the office and forming romantic relationships with their coworkers 12m10s.

Employee Relationships and Company Culture

• The company's approach to relationships among employees was somewhat unconventional, with the mantra being "this only ends well if it ends in marriage," and many employees did end up getting married to their coworkers 14m50s.
• The approach to communicating with employees involved showcasing creative successes, discussing risks taken, and highlighting the people behind the programming, rather than focusing on financial results, and this approach helped to build a sense of community and shared purpose among staff 10s.
• The goal was to make employees feel like they were part of a team, regardless of whether they worked at MTV, Nickelodeon, or other divisions, and to create a sense of unity and shared identity among staff who may have had different backgrounds and perspectives 2m6s.

Nickelodeon and Children's Programming

• The Nickelodeon business was a significant part of the overall operation, and it was run by a team that was separate from the MTV team, but still part of the same overall company, and the team at Nickelodeon was known for being more socially conscious and focused on creating content that was good for kids 4m30s.
• The Jim Henson Company and the Sesame Street Workshop are separate entities, but they are both involved in the creation of content for children, and they have a long history of producing high-quality programming that has become a beloved part of many people's childhoods 6m10s.
• Creating a show or piece of content that becomes a legacy and can last for decades requires a combination of factors, including a strong concept, engaging characters, and a deep understanding of the audience, and it also requires a willingness to take risks and try new things, rather than just focusing on creating something that can be spun off into consumer products 8m40s.
• The criteria for greenlighting a show at Nickelodeon involved considering whether the characters and concept were compelling, whether the show could resonate with the audience, and whether it could get good numbers, rather than just focusing on whether the characters had "toyability" or could be turned into consumer products 11m20s.
• The approach to creating content at Nickelodeon was focused on supporting the vision of the creators and bringing their ideas to life, rather than trying to force them into a particular mold or format, and this approach allowed for the creation of unique and innovative programming that resonated with audiences 13m30s.

Consumer Products and Media Expansion

• The company had a lot of consumer products, feature films, and TV shows, including Spongebob and Rugrats, and set up film labels with Paramount to develop films using their IP, which was generated and made famous on the television network 10s.
• A good podcast needs to have one of three things: a unique perspective, high-end production, or world-class delivery, such as a comedian who can make any topic funny and engaging 2m6s.
• The company used filters to evaluate their shows, including pro-social appeal, basic values like nonviolence, and a modern presentation, to position themselves as the hipper and cooler children's network compared to Disney 2m6s.

Target Audience and Programming Strategy

• The target audience for programming was a 24-year-old, with a focus on 22 to 24-year-olds, and the company avoided showcasing teenagers on the air to appeal to an older demographic 4m6s.
• The company's core audience was 18 to 24-year-olds, but they would shift their focus to 22 to 24-year-olds, and they also attracted older viewers 4m6s.

MTV's Leadership and Business Decisions

• After being fired by Sumner Redstone for not buying MySpace, which was later acquired by Rupert Murdoch, the individual was recruited by several high-profile figures, including Rupert Murdoch, Bono, Steve Jobs, and David Geffen 6m6s.
• The individual had connections with famous artists, including David Bowie and Mick Jagger, and they even made an offer to buy Facebook for $800 million cash with a $900 million earnout 8m6s.
• Mark Zuckerberg was introduced by Kevin Wall, who was known from the music business, and this meeting took place in 2005 when Facebook was still a relatively new platform, only available to college kids, with a revenue of around $7-8 million per year 42s.
• At the time, Mark Zuckerberg was 21 years old and was considering expanding Facebook to high school kids, which was a significant decision for the company's growth, and he met with representatives from MTV in their Time Square offices 2m6s.
• The meeting with Mark Zuckerberg led to discussions about a potential acquisition, with MTV putting a bid of around $800-900 million in cash on the table, plus an earnout, but the offer was ultimately turned down by Facebook 4m6s.
• The negotiations for the acquisition were led by Michael Wolf from MTV Networks, and at one point, he even offered Mark Zuckerberg a ride on a plane to try to make progress in the negotiations, but it did not work out 6m38s.
• MTV did not invest in Facebook, as they were not set up as a venture firm and were not thinking of making an investment, but rather were considering buying and owning the company outright 8m10s.

Mark Zuckerberg and the Facebook Acquisition Attempt

• Mark Zuckerberg's decision to turn down the acquisition offer from MTV, as well as subsequent offers from other companies like Microsoft and Yahoo, demonstrated his confidence in Facebook's potential for growth and his commitment to building the company 10m30s.
• The story of Mark Zuckerberg and Facebook is seen as an example of an entrepreneur who started a company with the goal of making it successful, rather than just looking to sell it to a larger company, which is a refreshing approach to business 12m40s.

Interactions with Industry Leaders

• The owners of a business can choose to stay involved after selling, and some individuals are true believers in their work, such as those who built the MTV empire 10s.
• A meeting with Steve Jobs was arranged to discuss a potential joint venture between MTV and Apple, before the launch of iTunes, and an employee named Jason Hershorn suggested a music streaming service, but Steve Jobs rejected the idea 42s.
• Steve Jobs was admired for his creative leadership and had a unique approach to business, having also been influenced by his experiences in India, and he was known to have an unconventional mindset 1m6s.
• Another iconic figure who was met was Rupert Murdoch, a bold and old-school media mogul who took big risks, and his approach to business was different from that of Sumner Redstone, with a focus on understanding the operations of his companies 2m6s.
• Rupert Murdoch was known to be a workaholic and would often get involved in the details of his businesses, including calling editors to suggest changes to headlines, and he had a reputation for making big bets, such as buying MySpace for $560 million over a weekend with no due diligence 3m30s.
• The purchase of MySpace was a significant bet, and although it ultimately did not pay off, it was a notable example of Rupert Murdoch's willingness to take risks, especially at a time when many were cautious about investing in digital media after the failed Time Warner AOL merger 5m0s.
• The purchase of MySpace by Rupert Murdoch was seen as a significant move, making him appear as a media savant, and this aggravated Sumner Redstone, who had not previously heard of MySpace until the purchase was made 10s.

MySpace and the Digital Media Landscape

• MySpace ultimately ended up dissolving and being sold to Justin Timberlake for $35 million, which in hindsight made it not much of a prize, and the person involved was able to make money personally from the experience 2m6s.

MTV's Public Offering and Employee Incentives

• In 1995, the company decided to make one-third of MTV Networks public, which allowed employees to receive stock options, and when the company was sold, these stock options vested and paid out, although no one became a billionaire or millionaire 4m42s.

MTV's Experimentation with New Formats

• The concept of a writer's room was not commonly used at MTV, as most content was created individually, but an experiment with a writer's room-like setup was conducted for a soap opera project, which ultimately led to the development of the reality TV show "The Real World" 6m15s.
• The creation of "The Real World" involved placing seven or eight people in a loft with hidden cameras and editing their interactions into episodes, which launched the modern version of reality television in 1992 8m30s.
• The first season of "The Real World" featured people who had no idea they would become reality stars, as the concept of reality TV stardom did not exist at the time 10m45s.
• The success of reality shows, such as "The Real World," was significant because young people wanted to see other young people on television, and it led to the creation of various categories of reality shows, with the first celebrity reality show being "The Osbornes," which was inspired by a conversation between Sharon Osbourne and the head of programming, Brian Graden, 10s.

Reality TV and Its Impact

• The idea for "The Osbornes" was well-received, with everyone in the room agreeing to move forward with the show, and it was Buena Murray who had the initial idea, with Doug Herszog championing it internally, 2m6s.

Post-MTV Career and Consulting

• After being fired from Viacom, a consultant position was taken with Oprah Winfrey, who had called to meet and discuss potential opportunities, and this led to a good friendship, with Oprah helping to promote a book and being described as easy to talk to and curious, 4m42s.
• Oprah Winfrey's company, OWN, was originally a joint venture with Discovery, which was initially called the Discovery Health Network, and she hired a consultant to help with the transition, with the goal of creating something original and noteworthy, 8m10s.
• OWN is now owned by Discovery, and Oprah Winfrey is considered a pioneer in the creator economy, having built a media enterprise around her ethos and personality, 10m40s.

The Shift to Digital Media and Creator Economy

• The era of monoculture, where editors controlled the narrative and there was a barrier to entry, has given way to a new landscape where anyone can create and distribute content, which has both pros and cons, including increased competition 10s.
• Having a built-in audience and a head start can be a significant advantage, as seen in the case of Oprah, but now everyone has to compete with a vast number of other creators and broadcasters 42s.
• The rise of digital media has disrupted the traditional business model of companies like MTV, affecting their relevance and margins, and has led to the emergence of new platforms and models, such as the creator economy 2m6s.
• Platforms like Patreon and Substack are examples of the creator economy, where individuals can support their favorite creators and access exclusive content, and mastering social media is crucial for success in this space 2m6s.
• The founder of a company called The Hustle was inspired by Ted Turner and studied the cable industry, and saw an opportunity to create a successful business through a daily newsletter, which was initially met with skepticism but ultimately led to a successful sale 4m14s.

The Hustle and Newsletter Business Model

• The idea to start a newsletter company was influenced by Bob Pitman, who had a similar concept called the Pilot Group, which funded newsletter companies, including Daily Candy, which sold for $100 million 6m30s.
• The founder of The Hustle also drew inspiration from other successful newsletter companies, such as Thrillist, and saw an opportunity to create a similar business model focused on business news 8m30s.

Digital Media's Impact and Business Challenges

• The era of digital media has had a significant impact, with companies like Substack and Patreon being inspired by earlier innovations, and the technology created during that time has proven to be highly lucrative 10s.
• The decision to sell a company was made due to financial difficulties, with the owner not paying themselves much money, only $2,000 per month for the first two years, and although the company was growing rapidly with $12 million in revenue in the trailing year and a projected $18 million for the forward year, the owner was broke and took the opportunity to cash out for financial security during a time of uncertainty with the Black Lives Matter protests and COVID 42s.
• The experience has led to a key takeaway that the owner should have paid themselves more money, highlighting the challenges of being an innovator with limited financial resources and a life to support 2m6s.
• A book titled "Unplugged" has been written, which summarizes the experiences and lessons learned during that era, and it has been well-received, with one reader enjoying it and finding it awesome 4m30s.

Reflections and Personal Experiences

• The conversation also touched on past mistakes, including getting busted for having hundreds of pounds of pot, and the importance of learning from both smart and stupid decisions 5m30s.