Viacom's Domestic Ad Revenue Declines -- 2nd Update
August 03 2017 - 7:20PM
Dow Jones News
By Austen Hufford and Joe Flint
Viacom Inc. beat revenue and profit forecasts in its latest
quarter, but saw a decline in domestic advertising revenue.
In recent weeks, Viacom had entered talks to acquire Scripps
Networks Interactive Inc., but eventually left the process, paving
the way for Discovery Communications Inc. to strike a $11.9 billion
deal for the cable TV programmer.
On a call with analysts to discuss its results, Viacom Chief
Executive Robert Bakish declined to discuss the Scripps talks but
said the company will "look broadly at potential partnerships and
M&A opportunities." Asked about the possibility of reuniting
with CBS Corp., which like Viacom is controlled by National
Amusements Inc., Mr. Bakish said, "that's really the decision of
the board not by myself as the CEO. Late last year National
Amusements abandoned its plans to explore recombining CBS and
Viacom.
In its third quarter, domestic advertising revenues declined 2%
to $955 million from a year earlier, as higher pricing was offset
by a reduction in the amount of commercials on Viacom networks.
International advertising grew 14% to $280 million as the company
bought one of Argentina's main free-to-air channels for $345
million last year.
Viacom Chief Financial Officer Wade Davis said if the company's
networks had maintained the previous level of commercials in its
content domestic advertising would have been up 1%. The number of
commercials on Viacom networks however had become a sore point with
viewers and Mr. Bakish said on the call that, "our ad loads, in my
opinion, were unhealthily high."
In its media networks unit, revenue grew 2% to $2.56 billion,
with affiliate revenue increasing 4% and total advertising revenue
up 2%. In June, the company's MTV channel saw year-over-year
ratings growth for the first time since 2011.
MTV, Mr. Bakish said, "is really starting to gain traction."
On the distribution front, Mr. Bakish again reiterated that he
thinks Viacom is well-positioned to offer its channels to
subscribers as part of a smaller package of entertainment networks
for consumers tired of paying for channels they don't watch. "The
ship has sailed on everyone having a $100 bundle," he said.
Viacom's most immediate distribution challenge is a contractual
dispute it is in with Charter Communications Inc., which recently
moved Viacom networks including MTV, Nickelodeon and Comedy Central
off its most popular offering of channels to a more expensive
package with fewer subscribers. Charter's move last May caused
Viacom stock to tumble.
Mr. Bakish played down the possibility of filing suit against
Charter, saying he would rather not take customers to court. Mr.
Davis though interjected that the company "will reserve the right
to enforce" what it believes its distribution deal with Charter
allows.
Revenue at its filmed entertainment unit rose 36% to $847
million, driven by the latest "Transformers" movie. The company
also sought to soften speculation that one of the studio's
financial partners -- Chinese film company Huahua -- is on shaky
ground. "We've been in business with Huahua for a long time,
everything's fine," Mr. Davis said.
The media giant has been working to reduce its hefty debt load.
At the end of June, total debt outstanding was $11.17 billion,
compared with $11.91 billion at the end of last September.
In all for the quarter, Viacom's profit rose to $683 million, or
$1.70 a share, compared with $432 million, or $1.09 a share, in the
prior-year quarter. Excluding certain items, Viacom earned $1.17 a
share.
Revenue increased 8.3% to $3.36 billion. Analysts polled by
Thomson Reuters had expected $3.29 billion in revenue and adjusted
earnings per share of $1.05.
Viacom shares rose 0.3% to $41.30 in after-hours trading.
Write to Austen Hufford at austen.hufford@wsj.com and Joe Flint
at joe.flint@wsj.com
(END) Dow Jones Newswires
August 03, 2017 19:05 ET (23:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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