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 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.

Traffic to AddictingGames.com, which lets players fritter away a few minutes tossing cards into a hat or dressing up a cartoon Paris Hilton in jail, surged 84 percent in July alone.

Some 42 million unique visitors globally dropped by an MTV Networks game-related Web site in June, up 20 percent since January, according to comScore Media Metrix.

About 47 percent of MTV Network's audience played games, compared with about 27 percent of average Web users.

To expand the market beyond kids and teens, MTVN has also signed deals with Verizon Wireless and the world's biggest cell-phone maker Nokia for cell-phone games.

But making money off casual games is another matter, particularly given the variety of devices, analysts said.

Salmi said online games gives MTVN an opportunity to experiment with business models. Neopets has begun generating revenue from sales of items for virtual pets, and mobile games lets it play with subscription services.

Perhaps the splashiest of its plans is the upcoming game Rock Band that lets up to four players strum guitar, pound drums or sing in time to modern and classic rock songs. It will hit store shelves in the fall for Microsoft's Xbox 360 and Sony's PlayStation 3 console game systems.

The game, developed by MTVN's Harmonix division, snatched top industry honors and is now viewed as its most ambitious bet to influence digital entertainment as MTV's cable TV channel transformed the music industry in the 1980s.

MTVN is studying ways to link Rock Band to its traditional cable networks and Web properties. But they are fearful of alienating players by cramming TV and other content into the game.

It's hard to tell where it's going to go, Salmi said. It's in the consumers' hands to take it to the next level.

Therein lies one poignant lesson for a media giant once so adept at defining cool: embrace the unknown.

'Rock Band.' Maybe it will be the next MTV ... Who knows? McGrath said.

(Reporting by Kenneth Li)

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