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Dauman Frustrated by Nick Ratings Shortfall

Viacom CEO Philippe Dauman remains "frustrated" by the "inexplicable" ratings drop at Nickelodeon, and says that despite an inquiry into Nielsen's methodology, he'll have to live with the numbers for the kids network, which will hurt the company's ad sales for the quarter.

"As of now, however imperfect Nielsen is, it's the only game in town so we have to live with it," said Dauman, speaking at the 39th annual UBS Media and Communications Conference for investors in New York on Monday.

Dauman had brought up the issue on Viacom's most recent earnings call. He said Nielsen and the Media Rating Council were looking into Nickelodeon's ratings. But at the UBS conference, he said he had nothing new to report. When asked if he thought it was an error that drove ratings down, he said he he'd stand on what he's said before. "No one's more frustrated by that than myself, but we just have to move on."

Lower ratings means Nickelodeon has less advertising inventory to sell to holiday advertisers, partly because it has had to give make good spots to some of its upfront clients.

"As I said on the earnings call, the timing's unfortunate given the quarter that we're in. This is by far the most important quarter at Nickelodeon with the so-called "hard eight" period before the holidays, so it was unfortunate," Dauman said. "Going back to the larger picture, if you look at this quarter, yes, that and some softness over the last several weeks in the general scatter demand means that our sales growth has been weakened by those factors. But nevertheless, our margins will grow year on year in the media networks business this quarter, thanks to our strong affiliate sales, cost containment, so the underlying dynamics are good."

Dauman said the rest of the year should be better for Viacom. "As we look to the next quarter, we expect to see stronger ad sales growth because we won't have that issue," he said. "We're feeling very good about transitioning from this difficult, unexpected in part, situation that we had, and nevertheless delivering good performance at our media networks group and segueing into what I think will be the remainder of what will be a good year for Viacom."