If music is truly an international language, it is little wonder that the world’s leading broadcaster, MTV Networks, reaches 482 million households in more than 170 markets. Despite its global beat, however, MTV is just beginning to secure a presence in the Islamic world. Emboldened by MTV Pakistan’s successful launch last November — itself a telling case in strategizing for markets less trodden — the network is now preparing for a Middle Eastern launch later this year. India Knowledge at Wharton spoke with MTV Asia’s CEO and Wharton faculty about the strategy behind MTV’s latest expansion.

Judging by the success standards for new channels, MTV Pakistan is off to a strong start. It already has an estimated viewer base of about 3.2 million homes, or 80% of the 4 million homes with cable TV in the country, says Amit Jain, managing director and CEO of MTV Networks in South Asia. To put that in perspective, MTV reaches 28 million cable homes in India, 11 years after its launch there. The 24-hour Pakistan channel covers the country’s main cities of Karachi, Lahore, Rawalpindi, Hyderabad and Peshawar.

“The great thing about MTV is it has proven to have a strong international expansion strategy,” says Nelson Gayton, managing director of Wharton’s Media and Entertainment Initiative. “The company has always been good at delivering an experience that is localized in nature and not culturally alienating.”

A Three-part Business Model

Ever since MTV launched in New York City in August 1981 by broadcasting music videos, its business model has centered on three elements. One is that record labels require a strong medium to promote their artists and other videos to reach their core audiences. Second, young people are drawn to a “music supermarket” where they can figure out trends and decide on the music they want to listen to and buy. Third, advertisers want to reach that youth population “in a focused and relevant fashion with minimum wastages,” says Jain.

As MTV goes about its due diligence before deciding to launch in a new market, Jain says it looks for “a robust music video industry that provides readily available software at a very reasonable rate.” That is relatively easily done, says Jain. “[Music videos are] really on tap because we provide a signal service to the record companies in terms of promoting the artists and the labels.”

Although it doesn’t have a strong film industry, Pakistan has a robust music video industry driven in part by the fact that it has a strong music tradition, Jain explains. MTV has up to 90% local content with Pakistani music in Urdu and Pushto languages, says Jain. One of its most popular VJs (video jockeys) is Wiqar Ali Khan. Others include Mahira, with her “MTV’s Most Wanted” show, and “MTV Select” VJ Natasha.

Pent-up Demand

Next, MTV wants to know if a market has a sizable youth population that is musically inclined and willing to spend not just time but also money on music. Pakistan is a young country (born, like independent India, in August 1947) but has been under a totalitarian regime for two-thirds of its history. That stunted the growth of its film industry, and until about five years ago it had mostly state-controlled television. For MTV, that translated into a huge, pent-up demand for music videos and a burgeoning middle class that is willing to spend. The supply side of that equation was also promising, especially with Pakistan’s music tradition built on Sufi and Punjabi music.

Although MTV Asia was rolled out more than a decade ago, Pakistan was never seriously on its radar. But the country’s recent economic expansion — with a 6% to 8% GDP growth rate — has altered its appeal for marketers of foreign brands. “I must confess we haven’t looked at Pakistan, and it wasn’t part of our long term plan. What it has become has forced us to look again,” says Jain. “Over the last four to five years, the Pakistani economy has driven money to youngsters, and they have the spending power and the inclination.” He adds that non-resident Pakistani citizens based in Western Europe and the U.S. also contributed to a “cultural crossbreeding in music videos.”

“I can’t help but think that [going into Pakistan] is representative of MTV’s leadership position in the market,” says Gayton. “Why does it want to be in Pakistan today? Certainly it has the first-mover advantage, but it probably sees Pakistan as a market it has to be in to make an impact in that society.” He adds that MTV perhaps has an inherent advantage over many other multinational corporations in that “its main content — music — transfers so well internationally.”

As for Jain’s focus on advertisers, Pakistan offers a growing market for branded consumer products, made up of especially those aimed at the youth population. “There is a ready acceptance of Pepsi, Coke, KFC (Kentucky Fried Chicken) and other major international brands,” he says. To make his business plan complete, Jain would also like a robust distribution model that allows flow-back of revenues from MTV subscriptions through the network of cable TV operators. The country’s cable TV industry is highly fragmented and not sufficiently organized to channel back subscription revenues from viewer homes. But that’s not an immediate worry, says Jain, because advertising revenues are strong.

Coping with the Unknown

The big imponderables weighing on the minds of MTV strategists were all the possible complications that could arise in a country with a strong Islamic tradition, especially with the brand’s considerable cultural baggage. The so-called “MTV Culture” has often been accused of corrupting youth and promoting violence and recreational drug use, among other things.  MTV has consistently rejected that characterization and has sought to clean up its image with some aggressive action. In recent years, it has evolved into a “town square” of sorts for pro-democracy campaigns and discussions of environmental issues, hate crimes, same-sex marriages and wars.

While some of that may have helped facilitate MTV’s entry into Pakistan, Jain and his team knew their task needed a carefully calibrated, step-by-step approach. In the months before launch, MTV created and tested its content with various consumer groups. “For a couple of months we did a lot of test marketing, and that included traditionalists in the society,” says Jain. “We have gone out of our way to ensure that we don’t have content which could be construed as offensive.”

Gayton says American entertainment is probably “the most exportable,” but it often generates more cultural impact than mere revenues. He uses the movie studio business as a reference point for viewing MTV’s situation in Pakistan. Hollywood studios’ earnings in foreign markets fund much of their capital-intensive theatrical exhibition business, “which is all the more reason they have to very sensitive to the quality of their products and how they might be perceived in those markets,” he says. “Cable TV is more ubiquitous than theatrical exhibition, so the resonance will be exponentially louder in terms of the number of households — and the potential for controversy and criticism of American content can become all the greater.”

Building Sensitivity

Pakistan’s regulatory regime requires MTV to work with local partners who would hold the majority stake. MTV’s moves were guided by its local partner and licensee Indus Music Group, a popular Karachi-based satellite channel with a network that extends to 64 other countries. Jain says that together they ensured that MTV Pakistan is entirely manned by Pakistanis. These are people who are born and brought up in Pakistan, and they don’t include even foreign-returned Pakistanis. “There is no international management, so they have a strong sense of the local norms and traditions,” says Jain.

“Most people would tell you that you are only as good as your partners, because they understand the local market well enough to be able to make it accessible, and political risks always are existent,” says Gayton. He attributes MTV’s smooth passage to Pakistan to its choice of “having the right partner and making sure that the programming is local.”

MTV Networks’ executives also understood that the Pakistan launch was best orchestrated locally instead of managing it remotely from New York City. Jain’s India base fit that role. His turf covers India, Pakistan, Sri Lanka, Nepal and other countries in the South Asian Association for Regional Cooperation, known also as SAARC. “The average Pakistani consumer is very close to the average North Indian in terms of consumption patterns,” he says. “If the same decisions were being made by a Western country and driven by what they understand about Pakistan, they would have formed different conclusions.”

Yet, Jain keeps his operations in the two countries at more than arm’s length from each other. “MTV Pakistan has been worked out on its own merits and doesn’t depend on India for anything, except some expertise in creativity, content, design and some soft areas,” he says. He has been particularly careful about airing Indian music videos on MTV Pakistan, even though that is not disallowed. “There is a huge market, but politically we are so far apart and very conscious of the sensibilities of not just the consumers but also the government,” he says. “It was an obvious thing to do, but we eschewed it.”

Quick to the Pink

Presumably, MTV Pakistan is already making money, although Jain won’t discuss its finances. But he does say that music video television typically doesn’t have long gestation periods or require high investments. “Unlike launching a traditional general entertainment model that requires serious investments in creating software, here the breakevens are short,” he says.

MTV has not always been on target in reading market opportunities correctly. In February, it shut down MTV Desi, MTV Chi and MTV K, channels aimed at South Asian Americans, Chinese Americans and Korean Americans, respectively. They were launched in July 2005 under MTV World, which also was shut down in February with the axe falling on 250 jobs. MTV reportedly acknowledged at the time that its “premium distribution model for MTV World proved more challenging than anticipated in this competitive environment.” However, the company plans to integrate the content of those ethnic channels into its other broadcast offerings.

Despite those missteps, MTV’s Pakistan experience should encourage it to enter the Middle Eastern market with MTV Arabiya in the second half of this year. For this effort, it is partnering with Arab Media Group of Dubai, the largest media house in the United Arab Emirates.In a departure from its Pakistan strategy, MTV Arabiya is initially planning to have only about 20% locally produced content, the rest being international programming. Plans are to increase local content to about 50% over time. Still, MTV undoubtedly sees a big opportunity in this market, as more than half the UAE’s population of 4 million is below the age of 25.