New Blockbuster Strategy Results in Viacom Loss

Viacom Inc.’s second-quarter loss widened 44%, due to costs related to new revenue-sharing deals its Blockbuster video chain made with Hollywood studios.

The new strategy has revived Blockbuster’s sagging rentals, but the related charges of $437 million offset the box-office success of “Titanic,” “Deep Impact” and “The Truman Show,” plus stronger profits from cable networks such as MTV and Showtime.

Viacom on Wednesday reported a loss of $280.7 million, or 83 cents per share on a diluted basis, for the April-June quarter. The company lost $195 million, or 60 cents, in the same period last year.

Revenue rose 10%, to $3.32 billion from $3.03 billion.

Blockbuster’s revenue increased 13% worldwide. Its selection has vastly improved through deals to share rental revenue with movie studios in exchange for getting videos at a much lower price.

Blockbuster-related charges also caused last year’s second-quarter loss, as Viacom incurred charges of $323 million to reduce the value of excess videotape inventory.

Excluding those charges in both quarters, and excluding the Simon & Schuster publishing unit, operating profit rose 43% to $200.4 million in the 1998 period. Viacom is selling most of Simon & Schuster to Britain’s Pearson to focus on its better-performing businesses.

Viacom’s Class B shares rose $1.31 to close at a record $69.19 on the American Stock Exchange.

Operating profit from its entertainment division jumped 21% to $75.4 million, continuing to benefit from Paramount Pictures’ record-breaking “Titanic” and the NBC hit “Frasier.” “Deep Impact” and “The Truman Show” were strong second-quarter movie releases.

Operating profit from networks and broadcasting rose 5% to $178.3 million, aided by stronger advertising at MTV, VH-1, Showtime and company-owned television stations.

Publishing lost $7.8 million, reversing a $16.6-million profit, as international sales slumped. The video and theme parks division, which includes Blockbuster and Paramount Parks, recorded a 33% wider loss of $444.4 million.

For the first six months of the year, Viacom lost $279.3 million, or 87 cents a share, compared with a loss of $213.7 million, or 69 cents, last year. Revenue rose to $6.41 billion from $5.95 billion.