Lower Ad Sales Lead to Losses for Viacom, USA Networks

Viacom Inc. had a third-quarter loss because of costs at Blockbuster Inc. and lower TV and radio advertising sales after the terrorist attacks.

The third-largest media company, which owns the CBS television network, had a loss of $190 million, or 11 cents a share, compared with net income of $33.4 million, or 2 cents, a year ago. Revenue fell 1.7% to $5.71 billion, New York-based Viacom said.

Lost ad sales from TV and radio coverage of the Sept. 11 terrorist attacks hurt revenue, and the fourth quarter also will be affected, President Mel Karmazin has said. As Viacom, which gets half its revenue from advertising, faces possible declines again next year, the company will cut costs to increase cash flow 10% or more, Karmazin said.

Karmazin said managers have been directed to identify expenses that can be reduced or eliminated. Businesses such as the radio stations might be consolidated, he said. Karmazin declined to rule out a reduction in the work force.

“We know we can control costs and we can’t always control ad sales revenue,” Karmazin said on a conference call.

Third-quarter cash flow, or earnings before interest, taxes, depreciation and amortization, fell to $1.33 billion from $1.43 billion, the company said.

Many investors use cash flow to measure results of indebted, acquisitive media companies because it excludes interest payments and noncash charges such as amortization of goodwill.

Viacom, owner of the biggest U.S. billboard company and the Paramount movie and TV production studio, repeated a forecast that 2001 cash flow will be “slightly” higher than last year’s $5 billion, based on current economic trends continuing.

Meanwhile, USA Networks Inc., the media and electronic-commerce company run by Barry Diller, had a wider third-quarter loss compared with a year ago and said an advertising slowdown will crimp sales in the current period.

The loss widened to $40.4 million, or 11 cents a share, from $13.9 million, or 4 cents, in the year-ago period, the New York-based company said. Sales rose 13% to $1.26 billion.