By Austen Hufford 

Viacom Inc. said Friday its profit for the current quarter could fall well short of expectations, a gloomy outlook that comes as the media company is in the throes of a messy legal battle over its corporate governance.

Viacom blamed the shortcoming on weak results for the latest "Teenage Mutant Ninja Turtles" movie and a delay in a video-on-demand licensing deal, caused in part by the company's turmoil.

The owner of Paramount Pictures and cable channels like MTV and Comedy Central now expects per-share earnings between $1 and $1.05 for the quarter ending June 30, compared with an average analyst estimate of $1.38, according to Thomson Reuters.

Viacom's future hangs in the balance as a battle plays out between the company's board and its controlling shareholder, 93-year-old Sumner Redstone.

National Amusements Inc., the holding company through which Mr. Redstone controls Viacom, is seeking to oust five board members, including Chairman and CEO Philippe Dauman. A Delaware court will decide whether that overhaul will be allowed.

Investors can only hope that an end to the power struggle will yield a clearer plan for reversing Viacom's weak performance in a media industry nagged by cable TV woes and an uncertain ad market. Regardless of who winds up in control, they will have their hands full trying to increase ratings at Viacom's major networks, turn around the studio and attract top talent.

Soft network viewership cuts into ad sales, which Viacom expects to fall about 4% domestically in the current quarter compared to the same period last year.

The latest "Teenage Mutant Ninja Turtles" movie underperformed domestically, Viacom said. The movie garnered an estimated $35.3 million in its debut in the U.S. and Canada, while the first movie in the franchise opened to $65.6 million.

Viacom has been looking to sell a minority stake in Paramount, but Mr. Redstone has signaled in statements through his spokesman that he isn't in favor of such a transaction. And National Amusements recently overhauled Viacom's bylaws to require unanimous board approval of any such deal.

Viacom said it had expected to sign a "significant" video-on-demand agreement in the quarter, but the "public governance controversy" interfered and as a result no deal was struck in the quarter. Further details about the pact weren't available.

Viacom's Class B shares, down 33% over the past year, fell 1.4% to $44.42 on Friday.

Separately, Viacom on Friday said it would pay legal expenses of Mr. Dauman and board member George Abrams. They have filed a suit -- apart from the one over the ouster of board members -- in a Massachusetts court contesting their removal from the trust that will oversee Mr. Redstone's holdings in Viacom and CBS Corp. after he dies or is incapacitated.

They have claimed Mr. Redstone doesn't have the mental capacity to make big changes to his empire, and have alleged that his daughter Shari Redstone is pulling the strings. She denies the charge.

Viacom said it will cover the attorney's fees, witness fees and public relations costs for Messrs. Dauman and Abrams. Under the agreements, they would have to repay Viacom if either is found to have acted in breach of his fiduciary duties or in a manner not in the best interest of the company.

In a statement, National Amusements said "there is no justification for Viacom to use company dollars to fund Dauman's and George Abrams' unfounded attack on Redstone's lawful decision to remove them as trustees from Redstone's trust, especially in light of Viacom's announcement that its fiscal third-quarter earnings will fall short of estimates."

Viacom said the agreements were approved by a committee of independent members of the board.

Write to Austen Hufford at austen.hufford@wsj.com

 

(END) Dow Jones Newswires

June 17, 2016 19:16 ET (23:16 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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