Company Town

Viacom shares rise despite earnings declines magnified by cable TV cord cutting

Emily Blunt plays Evelyn Abbott in “A QUIET PLACE,” from Paramount Pictures. Credit: Jonny Cournoyer
Emily Blunt in Paramount Pictures’ “A Quiet Place.”
(Jonny Cournoyer / Paramount Pictures)

Viacom Inc. touted its turnaround story Thursday but delivered fiscal third-quarter earnings that exposed the challenges of consumer cord-cutting — and just how much work the company must do to right the ship.

For the quarter that ended June 30, revenue declined nearly 4% to $3.2 billion for the media company, which owns the Paramount Pictures film studio in Los Angeles and cable channels Nickelodeon, MTV, Comedy Central, TV Land and BET.

Viacom’s critically important pay-TV fee revenue declined because the New York-based company has struggled to persuade major pay-TV operators, including Charter Communications, to pay substantially higher fees for its channels. Affiliate fee revenue from those operators fell 3% worldwide to $1.15 billion, which was short of analyst estimates of $1.16 billion.

“Affiliate growth remains challenged,” Cowen & Co. media analyst Doug Creutz wrote in a Thursday morning research note.


Viacom has not been selling as much of its television programming to streaming services Amazon Prime, Hulu and Netflix. Because Viacom lumps content licensing deals into its affiliate-fee revenue category, the reduction in sales contributed to the lower revenue in the April-through-June quarter.

Among the cable TV networks, revenue declined 2% to $2.5 billion. Advertising revenue was down 4% worldwide to $1.2 billion as ratings for several of the TV networks remain challenged. Adjusted operating income for the TV channels declined 8% to $799 million in the quarter.

Overall, Viacom’s net income dropped to $522 million, or $1.29 per share, in the fiscal third quarter, from $683 million, or $1.70 per share, in the year-earlier period. The year-earlier period included a gain from the sale of Viacom’s interest in premium movie channel Epix.

Nonetheless, its earnings topped consensus estimates of $1.07 a share, according to FactSet. Viacom shares jumped 6%, to $30.34.


Investors might have been pleasantly surprised because Viacom managers said affiliate fee revenue would show growth during the July-through-September quarter.

“There are a lot of positives going on here,” Viacom Chief Executive Bob Bakish said in a call with analysts. “The Viacom turnaround is delivering demonstrable and measurable results. We are quickly evolving into much more than a U.S.-based pay-TV company.”

Bakish, who previously served as Viacom’s international chief, took the helm in December 2016. He inherited a company facing financial strain following years of under-investment in its programming. The previous management was more focused on stock buybacks and investor dividends. Viacom suspended its share buyback program to pay down debt and improve its balance sheet.

Paramount Pictures’ cupboards were bare and there is now a new management team in place. During the fiscal third quarter, filmed entertainment revenue declined 9% to $772 million, due to lower international revenues because its films had less global appeal.

Paramount’s releases in the quarter were “A Quiet Place” and “Book Club.” The prior-year period benefited from strong ticket sales internationally for “Transformers: The Last Knight” and “Ghost in the Shell.”

The studio reported adjusted operating income of $44 million in the quarter, compared with $9 million in the year-earlier period, due to lower operating expenses and higher domestic revenues, including from television production.

“The resurgence of Paramount is evident,” Bakish said. “We are very excited about the pipeline.”

Viacom is controlled by the 95-year-old billionaire Sumner Redstone and his family.


Twitter: @MegJamesLAT


8:35 a.m.: This article was updated with more details about Viacom’s affiliate revenue, movie comparisons and market reaction.

This article was originally published at 7:25 a.m.

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