By Keach Hagey and Michael Calia
Viacom Inc. said Thursday its Nickelodeon group will launch a
subscription video service that will be available to people who
aren't pay-TV customers, making it the latest major media company
to venture outside the cable bundle in search of growth.
Viacom Chief Executive Philippe Dauman announced the effort on
an earnings call with analysts, promising more details at the
company's presentation to advertisers this spring. The service will
launch in March.
"We believe this innovative service, which will have a distinct
brand and will target the fast-growing mobile market, will be very
attractive for parents and children," Mr. Dauman said.
Viacom's move comes on the heels of announcements of similar
subscription services in recent months from Time Warner Inc.'s HBO
and CBS Corp. There are roughly 10 million broadband-only homes
that don't subscribe to pay television, according to some industry
estimates. The challenge for traditional media companies will be to
attract those customers without cannibalizing their lucrative
existing businesses from cable and satellite TV subscriptions.
The pay-TV bundle has begun to fray at the edges in recent years
as cord cutting and so-called cord shaving--slimming down to
smaller, cheaper pay-TV packages--shrinks the reach of the biggest
channels.
Viacom said its media networks and filmed entertainment
divisions propelled revenue growth in its most recent quarter. The
media conglomerate's top line fell below analysts' expectations,
but its profit narrowly beat them.
The company's cable properties, which include MTV, Comedy
Central and Nickelodeon, have struggled with declining ratings, so
Viacom is seeking to boost the percentage of advertising sales that
don't depend on traditional ratings from Nielsen.
The media networks division's revenue rose about 4% to $2.65
billion due to growth in affiliate fees and advertising revenue.
Domestic advertising revenue fell 6% due to the ratings declines,
while world-wide advertising revenues grew 3%.
The company's filmed entertainment division reported revenue
growth of 6% to $720 million as "Teenage Mutant Ninja Turtles"
continued to perform well, while "Interstellar" also benefited
Viacom's results.
Overall, the company reported earnings of $500 million, down
from $547 million a year earlier. Per-share earnings were flat at
$1.20, reflecting fewer shares outstanding in the period. Excluding
certain items, earnings were $1.29 a share.
Revenue improved 4.6% to $3.34 billion.
Analysts had projected per-share earnings of $1.28 and $3.41
billion in revenue.
Viacom has also sought to expand more overseas to mitigate the
effects of a crowded U.S. market. The company is in the process of
completing a deal with Reliance Industries Ltd. of India that will
give it 50% ownership of five entertainment channels in the
country.
The company earlier this month extended Dauman's contract
through 2018. The CEO, who has held the role since 2006, was paid
$44.3 million in the company's fiscal year ended Sept. 30, a 19%
raise over the prior year's figure.
Write to Keach Hagey at keach.hagey@wsj.com and Michael Calia at
michael.calia@wsj.com
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