Viacom Profit Tumbles as TV Networks Lose Viewers and Adsby
Ad sales sink for networks like MTV and Comedy Central
Operating income dropped 29 percent from a year earlier
Viacom Inc.’s quarterly profit tumbled and its TV business lost viewers and ads, compounding the woes of Chief Executive Officer Philippe Dauman as he tries to save his job.
Operating income plunged 29 percent from a year earlier to $769 million, according to a statement Thursday, as lower ratings and higher costs to acquire new shows hurt Viacom’s TV networks like MTV, Comedy Central and Nickelodeon. Following the disappointing earnings report, National Amusements Inc., the family company that holds 80 percent of Viacom voting stock, reiterated its call for Dauman to step down.
“Viacom’s overall performance continues to highlight the need for changes to leadership at the company,” National Amusements said in the statement.
Dauman is locked in a bitter boardroom battle with controlling shareholder Sumner Redstone as Viacom continues to struggle on multiple fronts. Its Paramount Pictures is ramping up production after falling into last place in box-office performance among the major movie studios. And its cable networks are contending with viewership declines as young audiences turn to their phone apps and web-streaming services like Netflix and Amazon for entertainment.
Redstone and his daughter Shari have cited Viacom’s flagging performance for their efforts to oust Dauman and other members of the board. Redstone, 93, is also trying to fire Dauman from the board of National Amusements, and from a trust that will one day oversee the businesses. Dauman, for his part, is alleging Redstone is mentally impaired and is being manipulated by his daughter.
The New York-based company telegraphed the lackluster quarterly results in June, warning investors about a drop in ad revenue and a delay in completing a streaming-video agreement. The media giant still beat Wall Street’s tempered expectations for the quarter, posting a sales increase at Paramount Pictures.
Yet National Amusements keyed in on Viacom’s sagging TV business, noting the poor performance in ratings, ad sales and subscriber additions compared with industry peers. In the third quarter, revenue for Viacom’s media networks sank 3 percent to $2.51 billion, while domestic ad sales decreased 4 percent, marking the eighth-straight quarterly drop. Meanwhile, fees charged to U.S. TV distributors slumped 10 percent.
The holding company also noted the recent loss of valuable employees, without naming them, and criticized Dauman’s decision to spend $15 billion on share buybacks since 2011 instead of reinvesting in the business.
“It is time for Viacom’s current directors to stop supporting failed management and start representing shareholders, by allowing the new board to take the reins,” National Amusements said.
Sumner and Shari Redstone were also Viacom board members when the share buybacks they criticized Thursday were authorized.
The shares were little changed at $44.06 at 12:14 p.m. in New York. The stock had fallen 22 percent in the past year through Wednesday’s close.
- Profit declined 29 percent to $1.05 a share, excluding some items. That beat analysts’ recently lowered projections of $1.01.
- Sales rose 2 percent to $3.11 billion in the quarter ended June 30, beating the $2.99 billion seen by analysts.
- International TV ad revenues increased 13 percent, spurred by growth in Europe. Factoring in a 6 percent impact of currency exchange, international advertising revenues increased 19 percent.
- On the film side, licensing fees grew 39 percent to $297 million on the strength of deals for subscription video-on-demand services and revenue from Paramount Television productions.
- While Paramount Pictures’ “Teenage Mutant Ninja Turtles: Out of the Shadows” bombed with critics and moviegoers, the film helped Viacom boost revenue over the same quarter last year, when it didn’t have a theatrical release. At the same time, Paramount posted an operating loss of $26 million in the quarter, as opposed to a profit of $48 million a year earlier. The film, which cost $135 million to produce, has brought in just $236.3 million in theaters worldwide, according to researcher Box Office Mojo. Studios split admission revenue with theaters.