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Movies Boost Viacom Fourth-Quarter Earnings


Viacom Questions Nielsen on Lower Nick Ratings

Updated 12:55 p.m. ET

Viacom reported higher fourth-quarter net income thanks to the box office for the latest Transformer movie and solid performances at its cable networks.

Net earnings were $576 million, or $1.01 a share, up from $189 million, or 31 cents a share, a year ago. A year ago, Viacom had losses from discontinued operations worth $299 million.

Revenues rose 22% to $4.05 billion.

"We enter a new fiscal year with a proven track record of managing our operations effectively in every economic environment," CEO Philippe Dauman said in a statement. "Our financial position is as strong as it has ever been, which allows us to continue to invest in the growth of our businesses, including new branded television networks in the U.S. and internationally, and Paramount's recently launched animation label."

Operating income for Viacom's media networks unit, which included MTV, Nickelodeon and Comedy Central, was up 10% to $958 million. Programming expenses were up 5%. Revenues for the media networks unit rose 8% to $2.3 billion. Advertising revenues rose 7% both at the domestic networks and at the company's international operations.

On the company's conference call with analysts, Dauman said that while some of Viacom's networks achieved double-digit ad revenue growth, "positive momentum was tempered somewhat by ratings issues at select networks. This softness is related primarily to the performance of extended repeats of acquired programming."

Dauman said audiences seem to be seeking fresh programming. "Our focus on investing in original programming that we own and control, along with ongoing scheduling refinements and more selectivity in acquiring third-party programming, will help us aggressively address this issue," he said.

Worldwide affiliate revenues were up 11% to $833 million.

In the next quarter, with streaming rights deals kicking in, the company expects affiliate revenue growth to be at a rate in the mid-teens.

"Digital distributors continue to present very attractive partnerships for us. They're high margin and they allow us to monetize library content in effect creating a new syndication window for our franchises," Dauman said. "There is a lot of room for growth in the U.S. and internationally."

Dauman said he expected to networks division to continue its momentum. "Ad sales growth will face some headwinds from a slight softening in volume in the current scatter market, although pricing remains strong, and from ratings issues at certain networks," including what he called an anomalous drop in ratings at Nickelodeon, which the company is investigating with Nielsen.

"To the extent we had aspirations of having double-digit advertising growth in this quarter, that really took that off the table," said Dauman. He added that relative to the company's overall performance "it's a little blip in the quarter, but it's not in my view a fundamental event."

Cancellations of upfront orders were at a normal level, and the company has only about 20% of its upfront inventory left to sell in the scatter market.

Any impact soft ratings or a weaker ad market has "will be offset by continued strong affiliate revenue growth in the quarter from both traditional and digital sources and from continued cost discipline," Dauman said.

Filmed entertainment revenues rose 46% to $1.8 billion because of the performance of Transformers: Dark of the Moon.

Viacom also said it was expanding its stock repurchase program to $10 billion from $4 billion. Most media companies have been buying their own shares.