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February 2, 2012 5:22 pm
Viacom suffered a drop in fourth-quarter profit as higher fees from distributors failed to offset weak advertising sales at the media group behind MTV and Paramount Pictures.
Net income fell 65 per cent from $610m to $212m in the three months ended December, though revenues for the quarter rose 3 per cent to $3.95bn. Results were impacted by a $379m charge awarded to Harmonix, the creators of the Rock Band video game. Viacom is fighting the judgment.
Philippe Dauman, Viacom chief executive, blamed the weak advertising on soft last-minute, or “scatter” sales, which meant the company could not command the advertising prices they were anticipating and a decline in ratings at some of Viacom’s networks.
The 3 per cent drop in advertising sales was a disappointment for Credit Suisse analyst, Spencer Wang, who had forecast growth of 2.6 per cent growth. Shares rose 2.07 per cent to $47.94 in early trading.
Mr Dauman retained an optimistic tone in the face of the weakness in advertising. “Despite headwinds in ad sales, Viacom ended the first quarter of our fiscal year with significant strength,” he said. “We are seeing ad sales improvement in this second quarter.”
Viacom was able to charge cable operators and digital distributors more to carry its networks, which include Comedy Central and Nickelodeon, driving so-called “affiliate fees” up 16 per cent.
“We expect our affiliate growth to remain in high single to low double digits for the foreseeable future,” said Mr Dauman.
Viacom also benefited from digital distribution, including the launch of Netflix in the UK, and said a new distribution deal would be announced next week. It was also able to get higher fees from current distributors by offering high-definition and on-demand services.
US ratings at several of Viacom’s networks were strong. MTV was the number one network for its target demographic, thanks to shows such as ‘Jersey Shore’ and ‘Teen Mom’.
Mr Dauman said Viacom would invest $3bn in programming for its cable networks this year and continue to work closely with its creative talent and advertisers. “This investment and those relationships will drive our success quarter after quarter and year after year,” he said.
Paramount Pictures, Viacom’s film studio, won the US box office battle last year with nearly $2bn in ticket sales thanks to films such as ‘Transformers: Dark Side of the Moon’ and ‘Mission Impossible: Ghost Protocol’, the highest-grossing film in the Tom Cruise franchise. Paramount also had hits with smaller films such as ‘Hugo’, which is nominated for several academy awards.
Viacom said it planned to expand internationally through new distribution deals for its films and cable networks, and new local market programming. “International is a key priority for Viacom,” Mr Dauman said.
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