Feb. 23 (Bloomberg) -- Viacom Inc., the No. 3 U.S. media company, probably posted a fourth-quarter profit because of increased advertising revenue from its CBS broadcast network and cable-television channels.

New York-based Viacom, which also owns Showtime, MTV and the Paramount film studio, tomorrow may report earnings of 38 cents a share, according to the average estimate of 27 analysts surveyed by Thomson Financial. Viacom had a net loss of $385 million a year earlier, when it wrote down the value of Blockbuster Inc., the video-rental unit it spun off.

Shows including ``CSI'' have made CBS the most-watched U.S. network, according to ratings from New York-based Nielsen Media Research. Higher ratings for the Nickelodeon, MTV and Comedy Central channels enabled Viacom to raise fees and ad prices, said Kurt Funderburg, an analyst at Harris Associates LP.

``Viacom has a package of networks that no cable distributor can afford to be without,'' said Funderburg. That helps Viacom wring fee increases from cable broadcasters, he said. Chicago- based Harris owned 11.1 million shares as of December.

Chief Executive Officer Sumner Redstone may have increased Viacom's revenue 7.7 percent last quarter to $6.36 billion, according to 16 analysts polled by Thomson.

Shares of Viacom fell 52 cents to $35.67 in New York Stock Exchange composite trading yesterday. They dropped 18 percent last year, compared with a 9 percent jump for the Standard & Poor's 500 Index. Shares of Walt Disney Co., the No. 2 U.S. media company, rose 19 percent, while Time Warner shares rose 8.1 percent.

Howard Stern

Viacom slumped last year as sales gains at its Infinity Broadcasting radio division lagged behind the television and cable units. Investors also were concerned about the loss of talk- show host Howard Stern to Sirius Satellite Radio Inc. when his contract expires at the end of this year.

Infinity's ``problems are largely fixable by what they are doing: paring down to their biggest markets with the best margins and either spinning off or swapping the rest,'' said Funderburg. ``They are formulating plans for what to put on the stations when Stern leaves. There's no denying it'll have a negative impact.''

Viacom shares are rated ``buy'' by 21 analysts and as a ``hold'' by six others, according to data compiled by Bloomberg.

Television Focus

Revenue from Viacom's cable channels, including MTV and Comedy Central, rose 12 percent to a record $1.86 billion, New York-based Prudential Equity Group analyst Katherine Styponias said in a Jan. 18 research note.

At Comedy Central, ratings for ``The Daily Show'' have increased 36 percent since 2003, letting Viacom raise prices for a 30-second commercial 25 percent to $3,286, according to Nielsen Monitor-Plus, which tracks broadcast ratings.

Sales from Viacom's broadcast division, which includes the CBS and UPN networks, rose 8 percent to $2.26 billion, Styponias said.

Redstone, 81, said he spun off Blockbuster in October to focus on Viacom's higher-growth TV businesses. He declined to be interviewed for this story, said spokeswoman Susan Duffy.

The company also boosted sales at the billboard advertising division last quarter, while revenue at radio and Viacom's Paramount film studio were little changed, Styponias said.

Viacom paid Redstone $3.99 million in salary and a $15 million bonus in 2003, according to a regulatory filing. Redstone has said he'll pick either co-President Tom Freston or co- President Les Moonves as a successor when he retires by the end of 2007.

`Lock on Kids'

Sales at Viacom's cable-TV division, its second biggest after CBS, contribute about 30 percent of Viacom's revenue.

``Their content has been very strong,'' said Randall Grace, an analyst with Houston-based Chilton Capital Management, which owns about 106,000 shares of Viacom. ``They have a lock on kids from the time they can speak, with Nickelodeon, through their teens, with MTV and VH1.''

Sales at CBS and UPN rose 8 percent to $2.26 billion, according to Styponias. The broadcast division contributed 36 percent of revenue.

Five of CBS's programs rank among the top 10 most-watched shows for the current TV season, more than any other network, according to Nielsen Media Research. That led CBS to win the November ``sweeps'' ratings period, which helps set ad rates.

Infinity

``They had a stellar showing in the November sweeps, in which, despite the turnaround at ABC, they easily finished first,'' said David Miller, an analyst in Los Angeles at Sanders Morris Harris, who has a ``hold'' rating on the shares and doesn't own any personally.

Crime-drama ``CSI: Crime Scene Investigation'' is the No. 2 program for the current season, behind Fox's singing competition ``American Idol,'' according to Nielsen. ``CSI'' has drawn an average audience of 26 million viewers since the season began on Sept. 22, Nielsen said.

Viacom's Infinity radio division, which contributes about 8 percent of revenue, likely posted a 1 percent decline in sales to $546 million, according to Styponias. Co-President Moonves, who oversees the unit, in September said the company is investing to improve ratings and sales.

The radio business may have difficulty maintaining revenue when Stern, host of the top-rated radio show for young men in New York and Los Angeles, leaves, said Harris Associates' Funderburg.

Paramount

Sales at the entertainment division, which includes the Paramount movie studio and Simon & Schuster book publisher, were unchanged at $1.29 billion, according to Styponias. The studio's films including ``Lemony Snicket's A Series of Unfortunate Events,'' starring Jim Carrey, failed to raise the studio's ranking above seventh among movie companies last year.

Redstone last month hired Hollywood talent manager and producer Brad Grey, 47, to run the movie studio.

Grey's background managing the careers of stars including Brad Pitt and producing TV shows such as ``The Sopranos'' may help Redstone's plan to increase box-office sales with more star- driven pictures, said Miller.

``He sees what Time Warner has done with `Lord of the Rings' and the `Harry Potter' franchises and he wants to copy it,'' he said.

To contact the reporters on this story: Aimee Picchi at apicchi@bloomberg.net

Last Updated: February 23, 2005 00:06 EST