Viacom quarterly profit plummets; Paramount loses $137 million
Closing the books on a bruising year beset by weak ratings, lower ad sales and box office duds, Viacom Inc. reported a fiscal fourth-quarter profit that plummeted 71% compared with a year ago.
The prospect of a union with CBS Corp. looms large over Viacom as the two entities mull whether a marriage makes sense. Both companies are controlled by 93-year-old billionaire Sumner Redstone and his family.
Viacom managers, however, suggested Wednesday that a merger with CBS was not a foregone conclusion. Instead, they sought to assure Wall Street that they were on top of the problems that plague the company that owns cable channels Nickelodeon, MTV, Comedy Central and TV Land and the Paramount Pictures film studio.
“While we have our challenges, we also have an incredibly strong foundation on which to build,” Viacom’s soon-to-be acting chief executive, Robert Bakish, told analysts on a conference call. “We have a very strong footing.”
For the quarter that ended Sept. 30, Viacom’s revenue declined 15% from a year ago to $3.23 billion, missing analysts’ estimates. Viacom in September dramatically scaled back expectations, so analysts had been anticipating a tough quarter.
Net income fell to $254 million, or 64 cents a share, compared with $884 million, or $2.22 a share, in the fiscal fourth quarter of 2015. However, profit surpassed the lower forecasts.
Revenue at Viacom’s cable TV unit dropped 11% to nearly $2.5 billion, primarily due to lower ad sales and smaller programming fees. Domestic ad revenue was down 8%. The year-earlier period was boosted by a content deal with a streaming service.
Paramount’s struggles continued, with the film studio’s fiscal fourth-quarter revenue falling 24% to $774 million. The studio posted a $137-million operating loss.
During the quarter, Paramount released “Star Trek Beyond” and “Ben-Hur,” a costly flop with Metro-Goldwyn-Mayer. Paramount also took a $115 million write down in anticipation that an upcoming film, “Monster Trucks,” will be wreck when it arrives in theaters in January.
Paramount lost $445 million in fiscal 2016.
The studio also faced a tough comparison to the fourth-quarter of 2015 when it was propelled by the solid performance of “Mission: Impossible, Rogue Nation.” Analysts seemed perplexed over Viacom management’s upbeat assessment for Paramount, given the studio’s sustained slump.
The Melrose Avenue movie studio has the material it needs to mount a turn-around, with the upcoming release, “Arrival” with Amy Adams and “Allied” with Brad Pitt, said outgoing Chief Executive Thomas Dooley.
The studio also has high hopes for another installment of “Transformers.”
“That’s the beginning of the turn-around,” Dooley predicted, adding that Paramount suffered this year because its films -- specifically “Zoolander 2,” and “Teenage Mutant Ninja Turtles: Out of the Shadows” — were bombs.
“They under-performed dramatically,” Dooley said. “Those films had losses that were outsized and really created the hole in the bucket that we’ve seen.”
Paramount should get back in the black by the end of fiscal 2017, Dooley said.
Viacom — which is emerging from a bitter boardroom battle between the Redstone family and former Chief Executive Philippe Dauman — is hoping that Wednesday’s earnings conclude a troubled period. The company’s stock is down about 45% from two years ago.
Next week, Bakish takes the helm of the company, replacing Dooley, the longtime chief operating officer, who leaves Tuesday. Dooley has been in charge of the company since late August, when Dauman was ousted.
Bakish will be the third CEO at Viacom in three months — and, on Wednesday, he didn’t sound like a man who was ready to hand over Viacom’s keys to CBS Chief Executive Leslie Moonves.
Instead, Viacom is making plans to operate as a stand-alone company — if need be.
“I’ve been chartered by the board to focus on running Viacom as an independent company, that’s very much my mandate,” Bakish told analysts. “We have got to bring the team together and unlock… a whole lot of great thinking throughout the organization.”
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