Viacom, continuing to restructure its operations, particularly in its cable TV businesses, is consolidating its worldwide distribution operations under a single exec.
Denise Denson, a 20-year Viacom veteran, has been named executive VP, global content distribution, a new position for the company. She will report to Philippe Dauman, Viacom CEO.
TV distribution has been going through changes, requiring new strategies to preserve high-margin revenue streams being challenged by technology, while taking advantage of new opportunities.
Traditional distributors have consolidated, which mean fewer deals. But because of TV Everywhere and other options for delayed viewing on a growing array of digital devices, those agreements are becoming increasingly complicated.
At the same time, new distributors are popping up, with some looking to offer lower priced, skinny bundles aimed at cord-cutters and broadband-only homes. Viacom, for example, has signed on with Sony’s Playstation Vue. That requires being able to balance agreements with long-standing partners with opportunities to reach consumers who haven’t found traditional cable attractive or are willing to pay for additional access to content. Viacom’s Nickelodeon is already a player, thanks to its March launch of a Noggin paid subscription service aimed at preschoolers.
International has also become a growth area for companies such as Viacom as the domestic market becomes mature both in terms of the number of new homes available and the difficulty in initiating additional networks.
Timing is Right
For Viacom, distribution is particularly crucial because the company has been hit hard by changes in viewer behavior, and that has led to declining advertising revenue. So far this year, affiliate fees are up 4% to $2.278 billion. Ad revenue is also up 4% to $2.539 billion, boosted by last year’s acquisition of Channel 5 in the U.K. Domestic ad revenue was down.
In reaction to a changing media environment, Viacom has gone through a reorganization designed to realign support functions and increase efficiencies. The structuring resulted in several hundred layoffs and a charge of $785 million against earnings. Management says the changes will save the company $350 million a year.
As a part of the reorganization, Viacom’s cable nets are now organized in three groups, down from four following the departures of veteran MTV executive Van Tofler and TV Land president Larry Jones. Now Doug Herzog is in charge of entertainment networks including MTV, Comedy Central and Spike, and Cyma Zarghami is in charge of Nickelodeon, TV Land and CMT. BET Networks continues to operate separately within Viacom.
Viacom also consolidated most of its ad sales operations, giving Jeff Lucas, who had been in charge of selling the entertainment nets, additional responsibility for the Nickelodeon brands.
On the distribution side, Denson had been executive VP of content distribution for Viacom Media Networks and BET Networks since 2007.
During that time she oversaw multiplatform distribution and affiliate marketing for all of Viacom’s media networks brands, as well as Epix, Viacom’s premium network venture with movie studios Paramount, Lionsgate and MGM.
Denson declined a request for an interview, but Viacom says she will add duties coordinating international content distribution partnerships with Viacom International Media Networks, as well as television distribution partnerships with Paramount Pictures. In addition to Viacom-owned networks, Paramount already does business with Fox, HBO, Epix, Amazon, USA and Hulu.
Last week, Viacom renewed its carriage deal with Mediacom. But because it does not have either a broadcast network or right to must-have sports to use as leverage, some analysts question Viacom’s ability to continue to increase its domestic distribution revenue.
Those concerns were accentuated when two relatively small distributors, Suddenlink and Cable One, with 1.4 million and 730,000 subscribers respectively, dropped Viacom’s channels last year.
Analyst Todd Juenger of Sanford C. Bernstein recently reduced his outlook for Viacom’s long-term affiliate fee growth. He said the change reflected the expectation of weaker renewal rates from distributors going forward.
This year, Viacom faces a renewal from Charter Communications and next year with Dish Network. “We expect Charter will renew, but we believe that is expected, not a catalyst,” Juenger said in a research note. “The risk of losing Dish is real, and the drama will grow as we approach year-end.”
But Marci Ryvicker of Well Fargo, noted that Viacom “management doesn’t seem to be sweating the upcoming affiliation renewals.”
On the company’s second-quarter earnings call, Dauman said that, “Our distribution relationships remain broad and strong. We have longterm agreements with most of our major distributors. We look forward to successfully concluding negotiations with those partners whose agreements are up sooner.”
Dauman noted that, “advances in technology provide even more options for television subscribers and although the path can be complicated, we are finding a great deal of common ground with [multichannel video programming distributors] in working with them on flexible digital delivery.”
In addition to traditional distributors such as cable operators, satellite distributors and telcos, Viacom generates a big chunk of its subscription revenue from streaming video-on-demand services. Viacom has had an on-again, off-again relationship with Netflix and its deal providing content to Amazon Prime expires this year. “Renewal of that [Amazon] deal is key to Viacom’s FY15 affiliate fees,” said Juenger, who believes the damage SVOD does to TV viewership makes whatever revenue it generates in the short term a bad deal for programmers.
International distribution is seen as an opportunity for growth for U.S.-based media companies as the number of channels overseas expands.
“Perhaps the most exciting sustained growth opportunity for Viacom is our rapidly expanding international media networks business,” Dauman said. “We are dramatically expanding our footprint and building major businesses across every continent.”
As part of that effort, Viacom is pushing its Spike and Paramount channels into more markets, so Denson will have plenty to do overseas.
