Sumner Redstone hinted Monday that he might sell his family’s movie theaters to fix his pressing debt problems.
In a conference call with analysts, the 85-year old media mogul said his privately held National Amusements Inc., which operates 1,500 theaters, owns “valuable real estate holdings throughout the country.” The company must come up with an $800-million debt payment next month as it negotiates with lenders to restructure $1.6 billion in loans.
Redstone, during the call for Viacom Inc.'s third-quarter results, repeated that he had “no intention” of selling additional shares in Viacom or CBS Corp., other key assets held by National Amusements. Last month he was forced to sell $233 million of stock in the two media companies to comply with National Amusement’s debt covenants.
Redstone called Viacom “the love of my life,” the theater circuit not so much. Redstone has said he is no longer bullish on the future of the cinema business.
Indeed, on Monday he sounded almost like a real estate agent with a hot listing, noting that National Amusements theaters were built “for the most part on land which we own, something I always insisted on.”
Redstone’s views about the theaters have put him in conflict with his daughter, Shari Redstone, who for more than a decade has run the chain headquartered outside Boston. Sumner Redstone owns 80% of the holding company National Amusements, and Shari owns the remainder.
Viacom, like many other companies, is being battered by the ailing economy. Tripped up by lower ratings, slower advertising sales and a stinging operating loss at its filmed entertainment unit, the company on Monday reported a 37% fall in third-quarter profit.
For the quarter ended Sept. 30, net income tumbled to $401 million, or 65 cents a share, from $641 million, or 96 cents, during the year-ago period. Revenue increased 4% to $3.4 billion.
“In the third quarter and beyond, Viacom like every company had to adjust to realities of a serious economic downturn,” Chief Executive Philippe Dauman said. “There was a general pullback in spending by marketers as they responded to lower consumer spending.”
New York-based Viacom owns cable channels MTV, VH1, Comedy Central, Spike, BET and Nickelodeon. It also owns the legendary Paramount Pictures studio, which contributed to the film unit’s $19-million loss for the quarter.
“Paramount had challenging year-over-year comparisons,” Dauman said.
He pointed out that profit was driven by the blockbuster movie “Transformers,” a co-production with DreamWorks SKG during the third quarter of 2007. However, in the just-concluded quarter, Paramount relied on lower-grossing films such as “Tropic Thunder” and “Eagle Eye.”
To save money on marketing costs, Paramount plans to cut back the number of movies it releases each year to no more than 20. And, Dauman said, the exit of DreamWorks would save the studio $50 million a year in overhead costs.
Still, analyst Laura Martin with Media Metrics said Viacom managers glossed over potential downsides from the parting of ways with Steven Spielberg’s DreamWorks. The filmmaker is launching a studio with backing from India’s Reliance ADA Group and a new distribution deal with rival Universal Pictures.
“That could hurt their talent acquisition ability, and it could potentially hurt them on the revenue side,” she said. “We continue to look for a turnaround at the Paramount film studio, but it does not materialize.”
Revenue for the studio division, which includes home entertainment and fees from premium cable channels for its movies, was essentially flat at $1.3 billion.
The bulk of Viacom’s operating income comes from its collection of TV cable channels. But with advertisers trimming spending and ratings down at marquee channels MTV, VH1 and BET, Viacom’s media networks also experienced a bumpy third quarter. Dauman said the company planned to spend more to develop original programming to increase ratings.
Revenue for the networks came in at $2.1 billion, an increase of 6% from the year-ago period. Operating income was $761 million, or 4% lower than in 2007.
Shares closed regular trading at $19.99. Viacom reported its earnings after the markets closed.