Viacom CEO Philippe Dauman has begun a painful restructuring plan that will split the cable programmer into two divisions and hopefully return the once-proud giant to its former prominence.

The latest move will cleave the company into the Music & Entertainment Group, including MTV, MTV2, VH1, Logo, Comedy Central and Spike TV, headed by Entertainment Group president Doug Herzog. The new Kids and Family Group, which will include Nickelodeon, Nick Jr., TeenNick, Nick at Nite, NickMom and NickToons, TV Land, CMT and CMT Pure Country, will be led by Nickelodeon Group president and 30-year Viacom veteran Cyma Zarghami.

The moves come directly on the heels of two high-profile executive departures — MTV Music & Entertainment chief Van Toffler, who will leave in April, and TV Land president Larry Jones.

VETS AT THE HELM

Herzog is a Viacom veteran — he helped launch The Daily Show and South Park when he served as president of Comedy Central from 1995-98 — and the restructuring basically adds MTV, MTV2, VH1 and Logo to his oversight. He joined Viacom in 1984 as News Director, Music News at MTV and steadily moved up the ranks, leaving the company between 1998 and 2004 to serve as president of entertainment at Fox Broadcasting Co. and then as president of USA Network before returning to Viacom.

Zarghami has been with Viacom for 30 years, was part of Nick’s original launch team and is a highly respected executive in the industry. But even these two seasoned and valued executives have their work cut out for them in their new positions.

Comedy Central, one of Viacom’s most popular brands with the sought-after young male demo, is facing one of its toughest years ever without two of its most popular stars — The Colbert Report’s Stephen Colbert, who left in December to replace David Letterman on CBS’s Late Show after he retires this year; and The Daily Show’s Jon Stewart, who will be leaving later this year.

And Nickelodeon, which appeared to have recovered from the ratings debacle of March 2012, when it lost the monthly crown for the first time to Disney Channel — which Viacom partly blamed on Nielsen measurement glitches — has started to slide again. According to Sanford Bernstein media analyst Todd Juenger, Nick’s total-day ratings were down 40% in the week ended Feb. 8 compared with the previous year.

In a memo to employees announcing the changes, Dauman said he sees the reorganization as a way to breathe new life into the channels, which have been rocked by ratings declines and sluggish ad revenue. In the fiscal fourth quarter, domestic ad sales at Viacom’s TV networks were down 6%, the second consecutive quarter of declines.

Whether the changes will be enough to right the Viacom ship remains to be seen. Aside from the ad and ratings pressures, the company is increasingly being targeted as an example of out-of-control affiliate-fee increases. Two midsized cable operators have already dropped Viacom’s channels, with what they say is little impact to their subscriber bases.

Cable One, which reported its fourthquarter results recently, lost about 25,000 basic-video customers in the period, more than double its losses before it dropped Viacom on April 1. And Suddenlink Communications, which dropped the networks on Oct. 1, has said in the past that the absence of the channels has not had a material impact.

DAUMAN: ‘GREAT CONFIDENCE’

Dauman realizes that the market is changing and said last month that the programmer was considering launching its own over-the-top version of Nickelodeon — which some analysts said could be a positive as it would address the channel’s core market of techsavvy tweens and teens.

“Our industry is in transition and change does not always come easy, but we have a tremendous amount of talent at Viacom and we are innovating at every level and at every brand,” Dauman said in the memo. “We are working hard to adapt to changing audience behavior, to incorporate new forms of distribution and to better integrate technology into everything we do. … I have great confidence that by working together to embrace the changing landscape and by continuing to bring our best creative work to audiences — we will succeed.”

Viacom’s first-quarter earnings fell in the first quarter as the company’s domestic ad revenues fell 6%

Net earnings were $500 million, or $1.20 a share, down 9% from $547 million, or $1.20 a share, a year ago..

Total revenue increased 5% to $3.34 billion.

The figures were mostly below Wall Street’s expectations.

Operating income for Viacom’s Media Networks unit, which includes Nickelodeon and MTV, were down 1% to $1.104 billion in the quarter. Revenues were up 4%.The company said domestic affiliate revenue rose 8% and worldwide affiliate revenues were up 6%.

Domestic advertising revenues were down 6%. Worldwide advertising revenue were up 3%, with the acquisition of Channel 5 in London creating a 60% increase in international advertising revenues.

“Viacom's focus on developing popular franchise properties and constantly expanding our growing international presence drove solid top line results and record earnings per share this quarter,” CEO Phillippe Dauman said in a statement. “We continued to deliver increased revenues in our media networks operations driven by steady growth in affiliate revenues, and also benefited from Paramount Pictures' Oscar-nominated Interstellar and our very successful company-wide franchise, Teenage Mutant Ninja Turtles.”

Dauman added that “the media business is evolving faster than ever, but our mission remains unchanged: to continually develop more and better entertainment programming and deliver it to our engaged audiences on every screen and on every platform worldwide.”

He said that “to maintain our leadership position, we will continue to innovate and to manage our business as effectively and efficiently as possible, embracing change and adopting new technologies to better measure and monetize our content and meet industry-wide challenges. Viacom is financially strong and extremely well positioned for the future, with the talent and the creativity to grow our core business and continue to deliver increasing value to our investors."

Before the results were announced analyst Marci Ryvicker lowered her estimates for Viacom, noting that the company’s issues include soft ratings and currency headwinds.

Ryvicker said that despite adding new original programming to its lineup during the important holiday season, Nickelodeon’s viewership slid in the quarter. “The same goes for MTV and virtually every other net in the portfolio,” she said in a research note. “While a portion of the decline can be attributed to the Nielsen measurement issue, ratings are still down a bit more than we anticipated.”

Viacom CEO Philippe Dauman threw down the gauntlet with ratings-measurement giant Nielsen, vowing to generate more than half of the media conglomerate’s advertising revenue from non-Nielsen-related sources (up from 30%) and calling for techniques that accurately measure the growing digital content universe.

Viacom and Nielsen have had a testy relationship since 2011, when the programmer’s kids’ network Nickelodeon lost its firstever monthly ratings crown to Disney Channel. At the time, Viacom claimed that Nielsen’s measurement of Nickelodeon was inaccurate — Viacom had cited data from set-top box data measurement company Rentrak that showed higher ratings — a notion that Nielsen refuted.

While Viacom networks like MTV and Nickelodeon have experienced ratings softness, the falloff in viewership is industry-wide. Viacom, Discovery Communications and AMC Networks have all experienced double-digit ratings declines in the most recent quarter, according to Sanford Bernstein media analyst Todd Juenger.

Dauman blamed some of that on Nielsen’s decision to include broadband-only homes in its sample and on increased content consumption on digital platforms that is not being measured. To that end, Viacom called for new industry standards that reflect the growth of multiplatform viewership. Dauman said Viacom hopes to achieve its non-Nielsen depe dent goal through new apps, new mobile products, dynamic ad insertion and increased sponsorship revenue.

“We are in a transitional moment where the existing measurement services have not caught up to the marketplace,” Dauman said. “They are trying to catch up; I am sure they will eventually catch up. In the meantime, we are not waiting for that.”

In an apparent response, Viacom executive vice president of global product leadership Megan Clarken blogged that the company has proposed two new standards — Total Audience and Total Commercial — to address the problem. Total Audience would combine the total audience for a program or content regardless of the mode of access, including subscription video-on-demand, while Total Commercial would count views for an ad campaign regardless of where and how it’s consumed.