Viacom 3Q Down
Media conglomerate Viacom Inc. said Monday its third-quarter profits fell 37 percent from a year ago as film studio Paramount Pictures’ theatrical revenue fell more than a third and advertising revenue also declined, worsened by lackluster ratings at MTV.
Net earnings fell to $401 million, or 65 cents per share, down from $641 million, or 96 cents per share a year ago. There was an operating loss of $19 million in “filmed entertainment,” which includes Paramount, compared with an operating profit of $72 million in third-quarter 2007.
Among Paramount’s theatrical bombs in the third quarter were the Mike Myers comedy “Love Guru,” which came out in late June, and “Ghost Town” with Ricky Gervais.
Viacom Chairman Sumner Redstone — who sold $233 million worth of Viacom and CBS Corp. shares held by his National Amusements Inc. holding company last month — repeated a pledge he made last week not to sell any more. He sold the shares to stay in compliance with loan agreements at National Amusements.
“This was an extraordinary action brought on by an unprecedented situation and let me assure you of one thing,” Redstone told analysts. “National does not intend to sell one more share of stock in Viacom or CBS.”
Viacom’s revenue rose 4 percent to $3.4 billion in the third quarter, while adjusted earnings from continuing operations fell 15 percent to 55 cents per share.
Those results were in line with expectations of analysts polled by Thomson Reuters, who expected 55 cents per share on a 1 percent increase in revenue to $3.3 billion. Analysts generally base their estimates on adjusted earnings.
Shares rose 27 cents, or 1.3 percent, to $21.35 in aftermarket trading, after dropping 37 cents to $21.08 in the regular session before the earnings were announced.
Chief Executive Philippe Dauman said the company moved to pare six movies from its annual film slate to a maximum of 20, and said it would save $50 million a year by parting ways with Steven Spielberg’s DreamWorks SKG.
Dauman said the strategy would allow the studio to compete “more effectively in a crowded marketplace.”
Viacom blamed the poor movie performance on comparisons to last year’s successful “Transformers.”
Overall film revenue was flat at $1.3 billion. While theatrical revenue fell 36 percent to $312 million, home entertainment revenue rose 30 percent to $593 million and TV license fees rose 16 percent to $342 million.
Viacom’s revenue from media networks, such as MTV and BET, grew 6 percent to $2.1 billion.
Global ad revenue for the networks fell 2 percent to $1.2 billion, in line with downgraded guidance the company gave in October.
Cable and satellite affiliate revenues grew 12 percent to $660 million. Ancillary revenue surged 36 percent to $313 million, driven by sales of its video game franchise “Rock Band.”
Dauman said weak macroeconomic trends compounded “lower than expected” ratings performance at its networks — MTV, VH1 and BET. He vowed to turn around the networks by increasing original programming and creating more Internet-based tie-ins to shows such as “The Hills,” “Exiled” and “America’s Best Dance Crew.”
“In the first four weeks of the quarter we have already seen the ratings trend begin to turn,” he said.
But analysts were not entirely convinced.
Barclays Capital analyst Anthony DiClemente said a fundamental shift toward viewing content online among 12- to 24-year-olds — MTV’s core demographic — created troubling headwinds for Viacom.
“If any media company is vulnerable to this secular shift online, it’s MTV and Viacom given their dependency on younger demographics,” he said. “It feels like Viacom is running the New York City marathon uphill.”