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by Lessley Anderson and James Ledbetter

(IDG) -- Visitors to VH1.com this week will get their very own roadie – a cartoon character with a 5 o'clock shadow and greasy hair – an intelligent agent with a rock 'n' roll twist.

"Your Roadie" learns what you like, then presents you with a daily "backpack" of information about features and upcoming events on VH1.com. It's one of many new features being introduced across the MTVi-branded sites, all of which relaunched this week.

VH1.com, MTV.com and the recently acquired SonicNet have all gotten design overhauls, with new features and products. Radio SonicNet is now up and running – the long-awaited retooling of Imagine Radio, which MTV Networks acquired last winter. Personalization features have been scaled back for newbies, but happily the Skip button, which allows you to bypass lame songs, is still there. SonicNet, once an underground music site, has been refocused to cover every genre from country to classical.

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MTV.com's new front page offers easy access to the concerts, interviews, news stories and biographies that were buried in the old site, which was confusing and poorly laid out. VH1.com has had a much-needed makeover, too.

"You've heard of sticky?" asks VH1. com senior VP Fred Graver. "When I got here in May, it was literally repellent."

That's no longer so. VH1.com has added more extensive artist profiles, community features, archived clips of its popular rockumentary series and online auctions. There's also a radio show where artists come by and goof off on the turntables: Meat Loaf brought his old recording of the musical Oklahoma and sang along as it played.

Most interestingly, the sites now offer evidence of MTV's ambitious new focus on "convergence" programming. In the past five months, MTVi has developed truly entertaining companion programming for a handful of MTV cable shows. For instance, a new game show called WebRiot lets people play along at home on the MTV site for real prizes.

Viacom (VIAB) has finally made good on its vow to create real music destinations on the Web. But the delivery has been a long time coming: Viacom announced its intent to revamp its music sites back in February, with the formation of MTV Networks Online, and the sites were supposed to launch in August.

Honing its Web strategy was no small feat for Viacom. Though always a successful traffic draw, MTV.com carried a legacy of fitful programming initiatives, including a failed 1997 portal called UnfURLed.com. VH1.com was little more than a promo for the TV channel. At the time of the February announcement, both MTV.com and VH1.com were sub-brands of the channels, rather than independent business units.

Viacom completely restructured its online division last year. In February, Nickelodeon's Web site, Nick.com, as well as VH1.com and MTV.com, were grouped together to form MTV Networks Online. Fred Seibert, former president of Hanna-Barbera and the original creative director for MTV, was named division president.

But the real jump start came last summer, when MTV bought music site SonicNet from TCI Music and grouped it with VH1.com and MTV.com to form MTV Interactive, at the moment a subdivision of MTV Networks Online. SonicNet's CEO Nicholas Butterworth [see story, page 90] was named president and CEO of MTVi, which Viacom plans to spin off. According to an inside source, Viacom has retained Morgan Stanley's Internet veteran Mary Meeker to handle MTVi's IPO transition.

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MTVi picked up speed. The company, along with Nickelodeon's Nick.com, separated itself from the midtown Manhattan Viacom building and relocated to a temporary office, where its employees await the renovation of their new downtown digs. "It was a message to our staff to start thinking differently – like a Net company," says Seibert.

The stakes are high: After Viacom spins off MTV Interactive, it plans to do the same with Nick.com. Financially, Viacom's Web operations – the 30-plus separate Internet destinations it has a hand in – have seen impressive growth. In the third quarter of 1999, Viacom reported that its online division had revenues of $6.6 million, exactly twice as much as the third quarter of the previous year.

However, those revenues are being counted against huge increases in spending. In the third quarter of 1998, Viacom says that its online division made a small profit of $400,000. But in the first three quarters of 1999, the division lost $23.2 million – a whopping $16.2 million in the third quarter alone. Most of the spending has been to ramp up the MTV Interactive unit, including plans to hire as many as 200 employees.

What exactly did Viacom get for its spending? It's not as if the sites have been building e-commerce empires: The vast majority of Viacom's Web revenues come from advertising. MTVi says it will begin selling digital downloads in December, but that won't be a significant revenue stream for some time.

If Viacom's online division is going to show a profit again, it's going to have to drive more traffic to the sites. Recently, the opposite has occurred. According to Media Metrix, Viacom's online network lost about 12.5 percent of its audience in the third quarter. Between July and September of this year, Viacom Online dropped from 6.5 million unique visitors to 5.6 million.

The audience picture is complicated. During that period, MTV.com actually gained audience, topping 2.2 million visitors. But the Nickelodeon Network fell (possibly because its target audience returned to school), and VH1.com plummeted from 435,000 unique visitors to just 190,000.

Seibert acknowledged the drop-off at VH1.com, arguing that "for the last number of months, VH1.com has really been playing catch-up."

It's likely that Viacom is experiencing the limitations of cable-Web synergy. Like its broadcast brethren ABC and NBC, Viacom has put much faith in the notion that it can balloon Web properties by plugging them on TV through complimentary ads or a stream of on-air references to dot-com cousins. MTVi is pouring $300 million into on-air promotion of its three Net music properties over a number of years.

While access to TV promotion is a vast advantage, it appears to be reaching a plateau. For one thing, only a few million Americans at most ever tune in to any single cable channel. So MTV could theoretically promote MTV.com every minute of the day and still find that its growth curve becomes asymptotic after 2 or 3 million visitors. In addition, dot-com properties are hitting a saturation point throughout the media universe.

So Viacom needs to look beyond cable promotion. As with the pending CBS (CBS) merger, Viacom's future relationship with Blockbuster may affect what the company does online. The corporate plan had been for Viacom to sell most or all of its Blockbuster holdings. (It owns 80 percent of Blockbuster's equity.) However, the video chain, which went public in August, has been on a run lately, and the CBS merger may give Viacom a reason to hold on.

Blockbuster.com is an interesting experiment. The brand is arguably the most widely known Viacom-related property. Ironically, the site won't let you do the one thing the company is known for: rent videos. However, it's planning to relaunch on November 22; by the middle of next year it will allow members to rent videos online.

Even without adding significant online revenues, Blockbuster's vast customer database may prove valuable for online marketing. Over the next year, MTV Networks is scheduled to pay Blockbuster $18 million to license the company's customer database.

Blockbuster's SEC filings clearly anticipate that MTV Networks Online will benefit from that data, though it doesn't say exactly how. The implication is that the Web properties would use the list for direct marketing, though Seibert says he has no immediate plans in that vein.

Nevertheless, other commerce schemes are under way, at least at soon-to-go-public MTVi. "We want there to be a commerce element in everything that we do," says Butterworth.

SonicNet, for instance, will partner with an unnamed fulfillment company to launch its own online music store. MTV.com and VH1.com will continue to sell CDs through CDnow (CDNW) until their contract ends in 2001, but will sell other merchandise through SonicNet's store.

Meanwhile, MTVi has plans for interactive TV. Without naming a date, Butterworth says the company will begin trials in Europe, where customers are already buying things like plane tickets and pizzas with their remote controls. The idea is for consumers to be able to buy merchandise through SonicNet's store while watching music programs.

Butterworth's preoccupation with building e-commerce revenue streams might explain why MTVi has been slow to get into the unproven digital download business. MTVi has handed off res- ponsibility of creating a download offering to a third-party partner, Rioport. Rioport has done a few free trials with MTV.com, but has yet to build digital download sections for any MTVi sites.

Likewise, MTVi hasn't yet built a music-video-on-demand channel. The feature has proved wildly popular for competitors like Launch.com and Entertainment Boulevard, but it doesn't bring in revenue. The company promises this feature is in the works.

Even without much in the way of digital downloads or music videos, MTVi's relaunched sites have a lot to keep people busy. And now that the company has officially transformed itself into a startup, it doesn't plan to rest.

"At SonicNet I learned to program with planned obsolescence," says Butterworth. "We have a million ideas."