Viacom's (NYSE:VIA) MTV Networks did a little buying in the marketplace the other day. The item? NeoPets, the proprietor of Neopets.com, an online destination devoted to the world of virtual pets.
The press release laid out the company's case for the purchase, and I have to admit, upon first inspection, I wasn't necessarily too impressed. I mean, NeoPets, of all things? Not that there is anything wrong with NeoPets, mind you: I was just thinking that MTV and NeoPets don't necessarily go together.
But, in a sense they do, because while I was thinking MTV as in The Real World and The Osbournes, I forgot, quite frankly, about the Nickelodeon part of the equation. Nick.com was clearly mentioned in the release as being partly what this was about; after all, with 25 million registered young users -- who, by the way, are very active and return to the site a lot, judging by the "stickiness" grade given by major ratings companies -- the chance to mine Nick's demographic even further is manifest. A very interesting statistic proffered by Herb Scannell, who is both vice chairman of MTV Networks and president of Nickelodeon Networks, is that 60% of the NeoPets base is over the age of 13; furthermore, he is quoted as saying this scenario "aligns with the audiences of many of our MTV Network brands."
Hmmm ... sounds like synergy to me. And I thought that concept was dead. Seriously, this acquisition does sound intriguing from the vertical integration aspect. The NeoPets world may or may not have a long shelf life; sure, I understand that its clientele has gone from less than 100,000 to multiple millions in five years, but like the Disney (NYSE:DIS) Princess brand, I do worry about the fad potential for this asset.
The Wall Street Journal pegged the deal at about $160 million -- that's not a small amount of money to MTV Networks, considering that the division's programming is oftentimes very cheap. Scannell apparently thinks the best use of that capital is to solidify relationships with the Nick crowd by capturing the community where it tends to hang out, not to create economical reality shows and/or low-budget films. If his bet is correct, he'll be able to energize both the Nickelodeon and MTV channels.
This is an issue that investors might want to watch, considering that MTV Networks will soon be on its own (along with Paramount Studios) when Viacom splits. The moves this division makes now will be considered when it comes time for Wall Street to value the currency. And if the split succeeds -- i.e., the sum of the parts turns out to be greater than the whole -- one has to wonder about the future of other conglomerates, such as Time Warner (NYSE:TWX), Sony (NYSE:SNE), and Disney.
Hooking NeoPets' members up with products from MTV and Paramount (not to mention other offline markets such as movies, merchandise, and television) might prove rewarding, as long as the interest in the virtual beings remains. I admit, I'm a bit biased. If I had $160 million to spend, I'd probably look to green-light some movies directly as a way of adding value instead of going through the world of digital critters. Then again, I heard from a Foolish colleague that his daughters, as well as their friends, are completely into NeoPets. Perhaps Scannell knows what he's doing.
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Fool contributor Steven Mallas owns shares of Disney. The Fool has a disclosure policy.
