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Viacom to launch video streaming service for children, plans cost cuts

Viacom to roll out subscription video service this spring with kids programming

Viacom's Nickelodeon plans to launch a video subscription service this spring, joining the chase for younger viewers who increasingly are watching programming on digital devices.

Viacom Chief Executive Philippe Dauman announced the move Thursday during Viacom's earnings call with Wall Street analysts. The New York media company, which owns MTV, Comedy Central, Nickelodeon and Paramount Pictures, largely met expectations although domestic advertising revenue declined 6%.

The company has been grappling with slumping ratings.

"It was a mixed quarter -- there's no way to sugarcoat that," S&P Capital IQ media analyst Tuna Amobi said in an interview.

Viacom warned that it would be cutting costs, which could include job eliminations.

The restructuring plan is in the early stages, executives said, adding that they would be identifying cost savings and efficiencies in the next few months.

"Viacom is dealing head-on with industry challenges and we are positioning our operations for success," Dauman told analysts on the call. "We are always focused on maintaining our margins and we are taking a number of steps, and, at the same time, investing for the future."

Dauman provided few details about the upcoming digital video service, which will include Nickelodeon children's programming but will not be marketed under the Nickelodeon brand name. Instead, the service will have a separate moniker.

The company is following a growing trend among TV programming companies, including HBO and CBS, to offer a stand-alone product directly to consumers.

Programmers have recognized that the landscape is changing and that consumers are demanding the ability to pay for only the TV channels that they want.

HBO, part of Time Warner, announced its stand-alone streaming service in October but has not announced a launch date. The service is being fashioned to appeal to the more than 10 million households in the U.S. that have high-speed Internet subscriptions and don't get a traditional bundle of TV channels.

Viacom's new subscription service, Dauman said, "will be geared to young viewers, quite young viewers, and their parents will very much welcome the availability of this premium subscription service."

Viacom's earnings for its fourth quarter, which ended Dec. 31, were in line with Wall Street analysts' expectations. Profit fell about 8% to $500 million, but revenue increased 5% to $3.34 billion.

Earnings excluding certain items came in at $1.29 a share, just beating analyst estimates of $1.28 a share.

Viacom's results were helped by share buybacks and higher fees from pay-TV operators.

The foreign exchange rate, due to the stronger dollar, was a drag on earnings. Viacom has a strong presence in Europe, and distributes programming in 165 territories.

Paramount Pictures in Los Angeles was helped by the continued strength of the brawny "Teenage Mutant Ninja Turtles" franchise that performed well in theaters and home video sales. Paramount revenue was up 6% to $720 million.

The film "Interstellar" also performed well. Paramount has high hopes for the February release of the animated "The SpongeBob Movie: A Sponge Out of Water." The Melrose Avenue film studio recorded a $60 million operating loss.

Managing Viacom's TV channels, including MTV and Nickelodeon, has become tricky for the company.

The networks are geared to young audiences -- a particularly fickle crowd -- that are increasingly getting their entertainment on tablets, YouTube and other options where measuring viewership is difficult.

"This quarter showed that there are a lot of potential hurdles ahead," Amobi said. "Viacom could be particularly vulnerable, and they have to be proactive and take the lead in capturing this very elusive audience."

"I don't know if it is an easy task," he said.

Viacom's stock was down early Thursday, before rebounding into positive territory. In midday trading, the shares were changing hands at $67.10, up 60 cents, or 0.9%.

The company's stock has declined more than 15% in the last year.

Twitter: @MegJamesLAT

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