Tom Freston

MTV's three-stream model: subscribers, ads, consumer products

Tom Freston attributes MTV Networks' high-margin success to running three stacked revenue streams instead of one: carriage fees from cable/satellite operators (~a third to 40%), advertising, and consumer products/movies built on owned IP.

“I mean, because we had, we had 3 revenue streams. We had subscribers, which is like one, about a third to 40%, you know, from cable operators or satellite operators, advertising, and then consumer products, movies, and other things that we would do.”

Steal thisStack three revenue streams on one audience: recurring subscription, advertising, and IP-driven products, so no single channel can sink you.

'What Color Is Your Parachute?' set Freston on the path to MTV

Broke at 33, Freston bought the only self-help book he ever owned, 'What Color Is Your Parachute?', whose exercises on transferable skills led him to conclude he should go into the music business, where he got hired at the company that became MTV.

“Yes, I bought a book. The only self-help book I ever bought is called, and it was the first edition, What Color Is Your Parachute?”

Pick work you love AND a business that's ascendant

Freston's takeaway from 'Parachute': your skills are transferable across industries, so aim for work you love that also sits in an ascendant business, one where external forces are pushing the whole sector up.

“You basically want to do something that you love and you're attracted to. I mean, that's, that's a no-brainer. It would be great to get a business. You go to work in a business that's also not only that you love, but it's ascendant. So it looks like there's some forces that are making this business rise.”

Steal thisChoose a field you love that is also riding a structural tailwind, so the rising tide does part of the work for you.

Narrowcasting: be a place, not a show

MTV and Nickelodeon rejected the broadcast model of doing everything for everyone. Instead they did one genre all the time for one segment, building a relationship so viewers tuned in to the network itself rather than to individual shows.

“We're going to be a niche network, do one thing all the time, do it really well, build up build up a relationship with our viewers. And, you know, so we were sort of existing on the side of the highway. And that was a, you know, wonderful place to be because the major networks would live or die on their shows. People knew the shows. They didn't— they weren't really that conscious of whether it was NBC or ABC or whatever. We were going to be places, not shows.”

Steal thisOwn one niche so completely that the audience bonds to your brand, not to any single piece of content that could leave.

Use a test market to prove demand before the national push

Tulsa had MTV from day one in 100,000 homes, giving Freston a microcosm to see what happened when a community got MTV. People went crazy for it, which gave him the evidence to justify the 'I Want My MTV' campaign.

“I knew 'cause I was the marketing guy, I would go to these towns like Tulsa, which actually had MTV from day one at 100,000 homes. You had a little microcosm where you could see what would happen if MTV was in a community, and people went crazy for it.”

Steal thisFind a small test market where your product already exists, watch the reaction, then use that proof to justify the big swing.

Keep pop-culture moves coming up from the street

Freston deliberately made MTV an eccentric, non-traditional media company that thrived on offbeat, leading-edge talent and then gradually brought it mainstream, keeping a young, loose, casual employee base so the culture stayed close to the street.

“we would thrive on sort of offbeat, leading edge talent, whether that be musical or comedians or whatnot. And we would try and gradually bring them into the mainstream. So we kept our, you know, pop culture kind of moves up from the street. So I wanted to have a really young employee base that was pretty loose and, you know, casual.”

Hire a dedicated 'talent picker' when you've aged out of the audience

Freston realized that, being older and away from the action, he lacked the instincts to spot 20-something talent himself, so he hired people whose specific skill was picking talent and building relationships with creators rather than making things.

“I would hire someone who would be basically the talent picker, if you want, if you get what I mean. Because I realized at some point I don't have necessarily the instincts to do it myself. Because I was a little bit older and away from the action, which always seemed to focus on what's going on with 20-year-olds, what did 20-year-olds want?”

Steal thisIf you've aged out of your audience, hire a dedicated talent-picker who lives in that culture instead of trusting your own dulled instincts.

Hire a dedicated 'talent picker' when you've aged out of the audience

Freston realized that, being older and away from the action, he lacked the instincts to spot 20-something talent himself, so he hired people whose specific skill was picking talent and building relationships with creators rather than making things.

“I would hire someone who would be basically the talent picker, if you want, if you get what I mean. Because I realized at some point I don't have necessarily the instincts to do it myself. Because I was a little bit older and away from the action, which always seemed to focus on what's going on with 20-year-olds, what did 20-year-olds want?”

Steal thisIf you've aged out of your audience, hire a dedicated talent-picker who lives in that culture instead of trusting your own dulled instincts.

No-plus-ones parties to weld your team together

Freston ran company parties with no plus-ones, only employees, deliberately mixing salespeople with the animation department so different functions bonded and the creative ethos spread to accounting and sales. People loved working there and treated the office as their social center.

“And if you have a party, it's not a plus-one party. I mean, people aren't bringing their husbands or wives or boyfriends or girlfriends. It's just the— it's the people who work together. So try and build the bond up with them. So I want the salespeople to get to know some of the people in the animation department.”

Steal thisThrow employees-only parties (no plus-ones) so cross-functional teammates actually become friends and your culture spreads department to department.

At all-hands, lead with creative wins, never financials

In company-wide town halls Freston almost never discussed financial results or the Viacom parent; he led with creative successes, the risks taken, and which paid off, and brought creators out, signaling that creativity, not the abstract public company, was what people came to work for.

“When I would speak to the company as a whole, I almost never spoke about our financial results. I never spoke about our relationship to Viacom, which was our parent company, which in many cases was a sin because the parent company always wanted synergy between the various divisions.”

Steal thisOpen every all-hands with creative wins and the risks behind them, not the P&L, so the team stays bonded to the mission rather than the holding company.

Greenlight what you love, ignore 'toyability'

The commodity children's business picked shows by 'toyability', whether a character could become a toy. Nickelodeon instead greenlit shows purely on whether they loved the characters and thought it could resonate, trusting that hits like SpongeBob and Rugrats would generate consumer products anyway.

“But our criteria for greenlighting a show and going in and producing it had nothing to do with toyability. It was, were we in love with these characters and did we think it could be a good show and get good numbers and resonate with the audience in spite of the fact that maybe it isn't going to be a consumer products bonanza?”

Steal thisGreenlight on whether you genuinely love it and the audience will, not on downstream merch potential, the monetization follows the hit, not the other way around.

The 'filters' test for greenlighting content

MTV Networks ran every show idea through 'filters', a set of brand values it had to pass. Nickelodeon's filters were nonviolence, pro-kid, fun, funny, irreverent, modern presentation, positioning it as the hipper, cooler children's network versus Disney.

“We used to have this thing we called filters, which is sort of like that. Does it pass through these filters that we would have? Nickelodeon, the Nickelodeon people were very conscious about having some kind of pro-social appeal. Off the top of my head, I mean, we used to think, I mean, that we had basic values like nonviolence, pro-kid, things kids liked. It was fun, it was funny, it was irreverent. And also, does it have sort of a modern presentation?”

Steal thisDefine 3-5 brand filters every piece of content must pass before greenlight, so the brand stays coherent across hundreds of decisions.

Program to 24-year-olds, never show teenagers on air

MTV targeted a 22-24-year-old core and deliberately never showcased teenagers on air, even though teens were a third of the audience, because the moment a 24-plus viewer saw a teenager they'd quit, refusing to be part of a 'teeny bopper' network.

“The ultimate person was a 24-year-old. That's who we would program to, 22 to 24-year-olds. And that teenagers, we would never talk about anyone younger than that or have them appear on the air because the minute people 24 or older saw a teenager, they were going to say goodbye. They didn't want to be part of some teeny bopper network, even though teenagers were maybe one-third of our audience.”

Steal thisAim your content slightly above your aspirational viewer's age and hide the younger cohort, audiences flee anything that signals it's 'for kids.'

Facebook was doing ~$8M/year when MTV courted it in 2005

When Mark Zuckerberg (then 21, in a hoodie and flip-flops in February) visited MTV's Times Square offices in 2005, Facebook was still college-only and generating roughly $7-8 million a year in revenue.

“And they, their revenue was like $7 or $8 million a year. And Mark Zuckerberg had just moved to California.”

MTV bid $1.7B for Facebook in 2005 and got turned down

MTV Networks put a ~$1.7 billion offer on the table for Facebook in 2005, around $800-900 million in cash with the rest as an earnout. Facebook turned it down, and the negotiation was handled below Freston's level.

“It was like $1.7 billion. Excuse me.”

The richest founders are owners who never check out

Freston argues the people who end up richest, Jobs, Gates, Allen, Knight, started companies because building was interesting and fun, aiming to grow the tree to the sky rather than to flip to an acquirer. They stayed owners and never checked out.

“They wanted to start a company and have it work, you know, and grow and grow to the tree to the sky. It was the same thing with Steve Jobs and, and Bill Gates and Paul Allen. And Phil Knight, they all started companies 'cause they thought that was interesting fun.”

MySpace: $560M from Murdoch to $35M sold to Justin Timberlake

Rupert Murdoch bought MySpace over a weekend with no due diligence for $560 million; it later dissolved and was sold to a group including Justin Timberlake for $35 million, so it 'wasn't much of a prize'. Freston was fired by Sumner Redstone partly for letting MySpace go to Murdoch.

“Which ended up dissolving and being sold to Justin Timberlake for $35 million years later. So it wasn't much of a prize.”

How a budget cut for writers accidentally invented The Real World

Tasked with a soap opera but unable to afford writers (target ~$100K/episode), the producers cut the writer line item and instead put 7-8 kids in a Broadway loft with hidden cameras, leaning on MTV's editing skill. That became The Real World (1992), launching modern reality TV.

“What we're going to do is find 7 or 8 people and stick them in a loft down on Broadway and Prince Street. We found this loft and we're going to put hidden cameras in and we're going to tape them. And then we're going to use what our real skill set was at the time was in post-production and editing. We will edit all this action from these kids and all this interchange into these episodes. And that became The Real World, which really launched the modern version of reality television.”

Oprah was an original 'creator economy' founder

Freston frames Oprah as one of the first creator-economy figures: a creator at the center of a whole media enterprise built around her own ethos, decades before the term existed, owing to her unmatched curiosity and ability to talk to anyone.

“She was one of the first people like in the creator economy, which people would use that word today. I mean, here you have a creator who's— she's at the center of a media enterprise, you know, her ethos and her thing, you know.”