Networks, Box Office Take Toll On Viacom -- WSJ
November 10 2016 - 2:03AM
Dow Jones News
By Keach Hagey and Joshua Jamerson
Viacom Inc., in the midst of exploring a possible merger with
CBS Corp., on Wednesday reported its profit plunged 71% in the
latest quarter, hurt by continued soft performance at its networks
and a weaker showing at the box office.
On an earnings call with analysts Wednesday, the company's
incoming acting chief executive, Bob Bakish, said he has been
charged with running Viacom as an independent company, even as it
evaluates the possibility of the merger.
He will have his work cut out for him.
In the fiscal fourth quarter ended in September, Viacom's media
networks revenue declined 11% to $2.48 billion due to declines in
affiliate and advertising revenues.
Domestic affiliate revenues decreased 19%, primarily because the
company made what Chief Financial Officer Wade Davis called a
"strategic decision to reduce the amount of programming" the
company sold to subscription video on demand services. Domestic
advertising revenue was down 8%, due to lower ratings and a
decision to reduce ad loads.
Revenue in the filmed entertainment division declined 24% to
$774 million, as theatrical revenues fell 55% on a lower showing at
the box office compared with the prior year's quarter.
Mr. Bakish said he plans to bring lessons from the international
division that he spent the last decade running, including a tight
focus on a small number of channels, to the job he will take over
from interim Viacom CEO Tom Dooley on Nov. 15.
"I believe a lot of our successful international approach can be
brought home to the domestic market," Mr. Bakish said on the
conference call, adding that he planned to focus on turning around
MTV, Comedy Central and the Paramount film and television
studio.
Over all, Viacom posted a profit of $254 million, or 64 cents a
share, compared with $884 million, or $2.21 a share, in the prior
year's quarter. Excluding items, Viacom earned 69 cents a share.
The company had forecast adjusted earnings in a range of 65 cents
to 70 cents.
Revenue slipped 15% to $3.23 billion; analysts had expected
revenue of $3.3 billion.
Mr. Dooley declined to give an update on the merger exploration
process, except to say that its board's special committee is
continuing to work with its advisers to "explore the merits of a
combination with CBS."
Last week, CBS CEO Leslie Moonves said a decision on whether to
reunite with Viacom was "still in the very early stages." CBS
reported profit grew 12% in the latest quarter, thanks to
continuing growth in fees from pay-TV distributors.
Looking forward, Mr. Dooley predicted that Viacom's advertising
performance during the current quarter would improve by 5% over the
fourth quarter's year-over-year decline, due to a strong
advertising marketplace in the December quarter. And the company
expects to see domestic affiliate growth in the "low single
digits," even accounting for an expected 3% decline in
subscribers.
Viacom's class B shares were up 1.3% in early afternoon
trading.
Mr. Bakish pointed to his record at the international division,
which he said just had its best year ever, as an example of how he
would approach running the broader company.
Key to that success, he said, has been what he called "focus" on
a core group of six channels: MTV, Nickelodeon, Nick Jr., Comedy
Central, Paramount Channel and Spike. "We are investing to grow
these brands while maintaining a lean, powerful portfolio that will
be attractive to both pay-TV and emerging distributors," he said of
the international division.
In the U.S., Viacom owns about two dozen channels. When asked
what he thought about shutting down some of the smaller ones, he
responded that the top six networks get between 80% and 85% of all
the revenues from pay-TV distributors. "So even if you were to look
at a scenario where you were to thin the portfolio a bit, the vast,
vast majority of economics would be maintained," he said.
On Tuesday, Sony Corp. said its PlayStation Vue streaming TV
service will stop carrying all of Viacom's channels to "continue to
offer the most compelling value to our fans." Mr. Dooley, asked
about it on the call, said Viacom was in an "ongoing negotiation"
with Sony, adding "we are highly confident and comfortable that
Viacom's channels will be on the successful [pay-TV] platforms in
the future."
Write to Keach Hagey at keach.hagey@wsj.com and Joshua Jamerson
at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
November 10, 2016 02:48 ET (07:48 GMT)
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