Viacom Rises as Profit Top Estimates on Higher Ad Revenue

Shares in Viacom Inc. (VIAB) rose after the owner of cable networks Nickelodeon and MTV reported fiscal second-quarter profit that exceeded analysts’ estimates on improved advertising sales.

Viacom gained 3 percent to $65.90 at the close in New York. The company, which is controlled by Chairman Sumner Redstone and also owns Paramount film studio, has gained 25 percent this year.

Viacom, which relies on its television business for more than 90 percent of annual operating income, had suffered ratings declines at its top-tier networks, including Nickelodeon. Ratings recently improved, and an uptick in the advertising scatter market -- where marketers buy commercial time closer to air date -- helped increase ad sales.

“Ratings are up at several networks, and advertising revenues have returned to year-over-year growth, up 2 percent,” Chief Executive Officer Philippe Dauman said in the statement.

Net income fell 18 percent to $478 million, or 96 cents a share, in the quarter ended March 31, compared with $585 million, or $1.07, a year earlier, the New York-based company said today in a statement. Excluding some items, profit totaled 96 cents a share. Analysts projected 95 cents, the average of 30 estimates compiled by Bloomberg.

Photographer: Scott Eells/Bloomberg

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Photographer: Scott Eells/Bloomberg

A security guard stands outside while a pedestrian passes in front of the Viacom Inc. headquarters in New York.

Affiliate Fees

Nickelodeon, whose ratings are up 9 percent this quarter, is looking to add advertising revenue with its new iPad application, which was made available in February. Viacom is using its own measurement system to help advertisers purchase media on the new app. Nielsen’s new online ratings software still “has a lot of issues,” Dauman said on a conference call with analysts after the report.

Affiliate fees from pay-TV operators are expected to rise 10 percent in the fiscal year ending in September, according to the company. The estimate also includes licensing dollars from online streaming providers such as Netflix Inc. (NFLX) whose CEO, Reed Hastings, recently told investors he’s looking for more exclusive rights in order to better compete against other providers such as Amazon.com Inc.

Dauman, who said he’s open to exclusive terms, is currently negotiating Viacom’s renewal agreement with Netflix, which ends this month.

“We continue to see digital distribution as a growing opportunity,” he said.

Sales declined 6 percent to $3.14 billion, short of the average analyst estimate of $3.18 billion. In the television-network unit, sales rose 2 percent in the quarter to $2.23 billion. Viacom’s cable channels also include VH1, CMT, BET and Comedy Central.

Film revenue dropped 20 percent to $941 million, hurt by lower home-video sales. Dauman said he’s optimistic about the company’s film prospects later this year.

“The year ahead remains strong, with audiences eagerly awaiting our upcoming tentpole releases -- ‘Star Trek Into Darkness’ and ‘World War Z,’” he said in the statement.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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