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Viacom profit drops 65% on weak ad sales, Harmonix-related charge

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Even Tom Cruise wasn’t enough for media company Viacom Inc. to pull off a nearly impossible mission: turning in crowd-pleasing first-quarter earnings.

The New York media company’s profit plummeted 65% amid lower advertising sales at its cable television networks for the quarter ended Dec. 31. Advertising woes were particularly nettlesome at children’s channel Nickelodeon, which has experienced a precipitous drop in ratings.

But the biggest dent in Viacom’s earnings came from a $383-million charge for payments to former shareholders of the company behind the Rock Band video game franchise, part of Viacom’s long-running legal dispute over payments to former owners of Harmonix Music Systems. The payout was the latest sour note in Viacom’s failed attempt to get into the video game business.

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Net income dropped to $212 million, or 38 cents a share, compared with $610 million, or $1, during the same period a year earlier. The earnings, reported Thursday, slightly beat analysts’ forecasts. Viacom’s revenue increased 3% to $3.95 billion. Analysts, however, had expected slightly higher revenue.

Hollywood movie studio Paramount Pictures delivered an admirable box-office performance, boosted by the late-December release of “Mission: Impossible — Ghost Protocol,” starring Cruise and directed by Brad Bird. (The film has taken in $575 million worldwide, Viacom said.) “Paranormal Activity 3” and “Puss in Boots” also buoyed the century-old Melrose Avenue film studio. Its much-anticipated “The Adventures of Tintin,” however, underperformed.

Paramount generated $1.6 billion in revenue, an increase of 4%. Theatrical revenue was up 37% to $570 million. Home entertainment sales slid 6% to $598 million. Overall, the expense-laden studio reported a $31-million deficit for the quarter.

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Viacom — which is controlled by 88-year-old billionaire Sumner Redstone — depends almost entirely on its cable channels, including MTV, Nickelodeon, BET, VH1 and Comedy Central, for its income. Most alarming to analysts was Viacom’s admission that advertising revenue was off 3% to $1.35 billion for the quarter.

The company’s Media Networks unit — its cable channel division — took in $2.44 billion, a 3% increase over the same quarter in 2010. Operating income for the media networks increased 7% to $1.1 billion.

“Despite some early head winds, Viacom is off to a strong start in 2012,” Chief Executive Philippe Dauman said during a conference call with analysts.

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Dauman said the company would produce nearly 30% more hours of original TV programming this fiscal year to try to gain back lost ratings and boost advertising sales. The company expects to spend $3 billion on programming this fiscal year.

meg.james@latimes.com

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