Viacom earnings rise 33%

Times Staff Writer

Boosted by advertising growth at its cable TV networks and strong sales of its “Rock Band” video game, Viacom Inc. on Friday reported a 33% surge in first-quarter profit.

Chief Executive Philippe P. Dauman said that despite the faltering economy, he expected the company to match the 8% global advertising growth rate that it achieved in the first quarter. Leading ad categories for Viacom’s youthful audience -- including movies, fast food and video games -- tend to be “slowdown resistant,” he said.

Viacom, the parent of MTV, Paramount Pictures, Comedy Central, Nickelodeon and BET, posted net income of $270 million, or 42 cents a share, compared with $203 million, or 29 cents a share, in the year-earlier period. Profit was 44 cents a share after excluding a one-time charge of 2 cents a share to reflect the decline in value of a minority investment.

Revenue in the quarter ended March 31 rose 15% to $3.12 billion, led by the Media Networks division, up 16%, and Filmed Entertainment, up 12%.


The results were slightly better than the consensus of Wall Street analysts.

Viacom shares fell 49 cents to $39.25 on Friday. For the year, the stock is down 10.6%.

“I was pretty encouraged” by the quarter, Standard & Poor’s analyst Tuna Amobi said. Higher movie costs and other factors were likely to make for a weaker second quarter, he said. But he expected the second half of the year to be stronger than the first.

“Rock Band”, a video game that lets non-musicians rock out on undersized guitars and drum kits, has become a breakout hit with adults as well as kids, selling about 3 million units. Sales of the game drove worldwide ancillary revenue to a 72% gain in the first quarter and helped lift Media Networks’ revenue to $2.02 billion.


Also propelling Media Networks was a resurgence in ratings at its cable TV channels. Comedy Central and VH1 recorded their best-ever ratings quarters, and Spike TV had its best quarter in three years, Viacom’s Dauman said. Top long-running shows include Comedy Central’s “South Park,” MTV’s “The Hills” and Nickelodeon’s “SpongeBob SquarePants.”

“Hits matter,” Dauman said during a Friday morning conference call with analysts. “They drive every aspect of our business.”

He singled out “iCarly,” a Nickelodeon series that he said was “well on its way to megahit status” and has kept its young fans engaged by letting them e-mail suggestions for new characters or story twists. “The Hills” has lent itself to the creation of single-sponsor advertising “pods” that Dauman said have done a good job of holding viewers’ attention during breaks in the show.

Two weeks ago, Viacom announced a joint venture with Metro-Goldwyn-Mayer Inc. and Lions Gate Entertainment Corp. to create a premium TV channel to showcase original movies and TV shows from their studios as well as films from their extensive libraries. The unnamed channel -- dubbed “Channel X” by analysts -- is to launch in September 2009 and would compete with Time Warner Inc’s HBO and CBS Corp.'s Showtime.


One of the partners’ chief tasks is persuading major cable TV and satellite companies to carry the new channel. Dauman said that early signals from potential distributors have been “extremely encouraging.”

Viacom’s cash investment in the new venture would probably be less than $100 million, Chief Financial Officer Tom Dooley said during the conference call.

Viacom and CBS are both controlled by billionaire Sumner M. Redstone, who recently said competition between the siblings makes them sharper.

Analyst Laura Martin of Media Metrics revised her outlook for Viacom to reflect more risk because of the slowing economy and other factors. For example, she said in a note to clients, “We expect turmoil in the studio segment as DreamWorks leaves Paramount.”


Tension between Viacom’s top brass and the DreamWorks founders -- Steven Spielberg, Jeffrey Katzenberg and David Geffen -- has prompted speculation that the trio would cut their ties to Paramount at the end of this year. As of May 1, Spielberg was free to negotiate with other studios, but there has been no sign of a deal.

Dauman appeared to be trying to mend fences during Friday’s conference call. He said that Viacom’s movie slate for the current quarter would be bolstered by two “tent pole” features: Paramount’s “Iron Man,” which opened Friday, and DreamWorks’ “Indiana Jones and the Kingdom of the Crystal Skull,” which opens May 22.

The latest in the blockbuster Indiana Jones series, Dauman noted, is “directed by the master, Steven Spielberg.”