After a long slide, advertising revenues at Viacom's media
networks turned positive, but the operating income at the networks slipped in
the quarter and the company's overall earnings were also lower because of lower
movie box office results and viewer home video titles.
Second-quarter net earnings fell 18% to $478 million, or 96
cents a share, from $585 million, or $1.07 a share, a year ago. The earnings
were slightly better than Wall Street expectations.
Revenue fell 6% to $3.1 billion.
Viacom CEO Philippe Dauman had earlier predicted that ad
revenues would turn up this quarter. He said the improvement came mainly
because ratings at Nickelodeon had turned up after a deep decline. The kids
network has revamped its programming management and is in the process of
launching a wave of new series.
MTV, which is trying to recover from the departure of its
hit Jersey Shore, is planning to run
more series and run new seasons of those series more frequently, Dauman said.
Overall, he said the ad market is also showing improving
demand, particular in the categories where Viacom is strong, including toys,
video games, autos and quick-serve restaurants. Pricing has also be strong in
the scatter market, with scatter pricing up 20%, and scatter prices versus the
upfront showing double-digit gains.
Dauman said he expected ad revenues to show further
improvement in the current quarter.
Since Netflix announced that it would not be renewing its
current deal to stream Viacom library titles, analysts have been concerned
about how that will affect Viacom's affiliate revenues. Dauman said that for
this year Viacom was on target to achieve its target of 10% affiliate growth
this year. He said Viacom is in talks with streaming VOD companies including
Netflix about future deals and that it would consider licensing some content on
an exclusive basis, if that maximizes revenues. Long term, he said that digital
revenue would remain a growth area for the company.
Dauman also said that the company would continue its stock
repurchase plan and that its directors would be reviewing the company's
dividend at its next board meeting.
Operating income for Viacom's media networks unit fell 2% to
$873 million in the quarter. Revenues rose 2% to $2.2 billion. Domestic and
worldwide advertising revenues both increased 2%. Domestic affiliate revenues
increased 3%. Excluding digital distribution, domestic affiliate revenue growth
was up at a low double-digit rate, the company said.
John Janedis of UBS Securities said advertising results and media networks
earnings were better than forecast. "We expect the combination of better ad
growth and likelihood of a positive tone around the SVOD business (despite the
recent comment from Netflix) will drive the stock higher today," he said in a
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