Media Decoder Blog: Viacom Profit Increases, but Movie Division Hurts Revenues

Viacom’s net income for its fiscal fourth quarter increased by 12 percent, while its revenue fell 17 percent as a result of a decline in domestic advertising revenue and a corporate strategy to release a diminished slate of movies through its Paramount Pictures studio.

The media company, whose cable channels include Nickelodeon, MTV and Comedy Central, said Thursday its net income in the three-month period that ended Sept. 30 was $643 million, or $1.26 a share, compared to $576 million, or $1 a share, in the same period a year earlier. Adjusted operating income was $1.05 billion, essentially flat compared to last year, largely because of cost cutting. Overall revenue fell $690 million to $3.36 billion.

Viacom has made efforts to infuse its struggling Nickelodeon network with new shows, including a “Teenage Mutant Ninja Turtles” reboot. These have helped improve sluggish ratings, but advertising revenue remained soft. Domestic advertising revenue fell by 6 percent. The investment in a fresh slate of programming at Nickelodeon and MTV, which will soon lose its hit reality series “Jersey Shore,” contributed to a 3 percent drop in operating income at Viacom’s media networks division.

“The softness in Nickelodeon ratings in quarter hit us pretty hard,” said Philippe Dauman, Viacom’s chief executive.

But the biggest blow to Viacom’s revenue came from tough quarter-to-quarter comparisons at its Paramount movie studio, where revenue fell 39 percent to $1.09 billion. Paramount released only one movie, the documentary “Katy Perry: Part of Me,” in the three-month period. Its $32 million in global ticket sales made for a difficult comparison with the same quarter last year, when the studio’s “Transformers: Dark of the Moon” grossed $1.1 billion.

Viacom has put in place a strategy at Paramount to release no more than 15 movies a year. Those films are a mix of big-budget franchises like the “Transformers” movies and much smaller budget brands like “Paranormal Activity.” The approach has improved the studio’s margins, if not its revenues.

Mr. Dauman said that Paramount had “an exciting pipeline in place with eight films in the first quarter.” He ticked off titles including “Jack Reacher,” an action movie starring Tom Cruise, and the recently released Denzel Washington drama “Flight.”

Viacom said it would continue its aggressive stock repurchasing program. After buying back $2.8 billion in shares last year, the company said it planned to buy back at least $2.5 billion in shares in the current fiscal year.

The company also reported its full fiscal year results on Thursday, which included a 9 percent increase in net income, to $2.35 billion, and a 7 percent drop in revenue, to $13.89 billion. Operating income at Viacom’s media networks division was up 1 percent in the fiscal year to $3.89 billion, while its filmed entertainment unit reported $325 million in operating income, a 5 percent drop from 2011.

Article source: http://mediadecoder.blogs.nytimes.com/2012/11/15/viacom-profit-increases-but-movie-division-hurts-revenues/?partner=rss&emc=rss