Viacom Profit Rises 38% on Lower Operating Costs

Viacom Inc., owner of MTV Networks and the Paramount Pictures film studio, said first-quarter profit rose 38 percent as cable-TV ratings improved and fewer movie releases helped reduce operating expenses.

Net income increased to $245 million, or 40 cents a share, in the quarter ended March 31, from $177 million, or 29 cents, a year earlier, the New York-based company said today in a statement. Analysts anticipated 37 cents, the average of 23 estimates compiled by Bloomberg.

New programming boosted viewership at Viacom’s flagship MTV network, the Nickelodeon kids channel and BET. Worldwide advertising across all of the cable channels advanced 3 percent amid improving economic conditions, and Viacom Chief Executive Officer Philippe Dauman said those gains are continuing.

“The advertising environment is definitely on an upswing,” Dauman said on a conference call. “The overall mood of our clients is increasingly optimistic and marketing budgets are beginning to loosen up.”

Viacom rose 51 cents, or 1.4 percent, to $36 at 4:03 p.m. in New York Stock Exchange composite trading. The shares have gained 21 percent this year.

During the next three months, Viacom’s board will evaluate all options to return cash to shareholders, including share buybacks or initiating a dividend, Dauman said on the call.

Photographer: Andrew Harrer/Bloomberg

The Viacom Inc. logo is displayed outside the headquarters in New York. Close

The Viacom Inc. logo is displayed outside the headquarters in New York.

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Photographer: Andrew Harrer/Bloomberg

The Viacom Inc. logo is displayed outside the headquarters in New York.

Film Declines

Revenue declined 4.1 percent to $2.79 billion, trailing analysts’ projections, as lower DVD and box-office sales offset growing cable advertising and affiliate fees. The company lowered operating costs by $227 million in the quarter, in part because of fewer theatrical releases.

“The media segment outperformed, which tempered somewhat weaker-than-expected film results,” Joel Levington, managing director of corporate credit for Brookfield Investment Management Inc. in New York, said in an e-mail.

Ad revenue in the U.S. climbed 1 percent for cable channels including Nickelodeon and VH1, matching the estimate from Anthony DiClemente, an analyst with Barclays Capital.

Cable-TV revenue rose 3.9 percent to $1.94 billion. The division’s operating income gained to $684 million from $629 million a year ago.

Film revenue dropped 18 percent to $886 million, driven by a 34 percent decrease in home-entertainment sales from a year ago when “Madagascar: Escape 2 Africa” was released on DVD. The unit reported an $86 million operating loss, compared with a loss of $123 million a year earlier.

Box-office revenue declined 6 percent as the studio focuses on making fewer films. Paramount Pictures released three films, including “Shutter Island” and “How to Train Your Dragon,” during the quarter, compared with six releases a year ago.

Viacom also said the Rock Band music video game may become profitable this calendar year, and the Epix premium movie channel is on track to reach breakeven in 2011.

Viacom plans to switch to a fiscal year that ends Sept. 30. The change will be effective beginning Sept. 30, 2010.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

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