Thursday, February 02, 2012

Viacom's Net Profit Stays Flat

From C21Media:
Viacom net profit stays flat

US media conglomerate Viacom recorded a 7% rise in fiscal first-quarter profit at its networks division, which houses Nickelodeon and MTV, although company-wide earnings slipped.

Operating profit for the media networks division was US$1.13bn for the three months ended December 31, 2011. This compares with US$1.05bn for the same period 12 months ago. Revenues were also up 3% at US$2.45bn.

Overall company revenues grew 3% to US$3.95bn but net earnings from continued operations slipped 5% to US$591m from US$620m a year ago. Operating profit was down 2% to US$1.02bn.

“Despite short-term softness in the overall ad markets, Viacom's quarterly results benefited from strong affiliate fee revenue growth, as our industry-leading portfolio of TV brands continued to attract traditional distributors as well as emerging digital services,” said Viacom CEO Philippe Dauman.

Jesse Whittock
Also, from Seeking Alpha:
Viacom's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Viacom (VIAB) Q1 2012 Earnings Call February 2, 2012 8:30 AM ET


Good day, ladies and gentlemen. Welcome to the Viacom Fiscal First Quarter 2012 Earnings Release Teleconference. Today's call is being recorded. And at this time, I would like to turn the call over to Senior Vice President of Investor Relations, Mr. Jim Bombassei. Please go ahead, sir.

James Bombassei

Good morning, everyone, and thank you for taking the time to join us for our earnings call for the quarter ended December 31. Joining me for today's discussion are Sumner Redstone, our Chairman; Philippe Dauman, our President and CEO; Tom Dooley, our Chief Operating Officer; and Jimmy Barge, our Chief Financial Officer.

Please note that in addition to our press release, we have slides and trending schedules containing supplemental information available on our website. I want to refer you to Page #2 in the Web presentation and remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release or on our website. And now, I'll turn the call over to Sumner.

Sumner M. Redstone

Thank you, Jim. Good morning to all. I am pleased to once again also join Philippe, Tom, Jimmy to discuss Viacom's quarterly results. Despite a choppy overall economy, it was in fact another successful period on both the top and bottom line for Viacom as we continue to use our creative resources, our financial discipline to deliver for shareholders. Our Media Networks are highly in demand all over the world. The creative minds behind our brands are constantly evolving our private property to ensure genuine connections in our industry [ph], new opportunities for our business partners. Paramount Pictures continued to prove they have an unparalleled ability to market and distribute a great slate of motion pictures and ended the calendar year ranked #1 of all the United States box office, the #1 studio. We are indeed in a strong position [indiscernible]. Then, of course, is this possible with our outstanding leadership. Our experienced management team skillfully execute our plans to provide valuable creative content to audiences across the globe for the long-term benefit of our shareholders. Now I'd like to turn this call over to the leader of that team, a man who I appropriately call the wisest man I have ever met, my friend and colleague, Philippe Dauman.

Philippe P. Dauman

Thank you very much, Sumner. And good morning, everyone. I'm glad you could join us today. Despite headwinds in ad sales, Viacom ended the first quarter of our fiscal year with significant strength. Across the company, we have real momentum. Creative and operational excellence are showing through in every corner of our business and at this early stage, we are seeing ad sales improvement in the second quarter. We're continuing to invest in more and more original programming to strengthen our brands and their deep audience connections. It was true in 2011 and it will be true again in 2012. In fact, in our 2012 fiscal year, Viacom will invest about $3 billion in our Media Networks programming. As a result, our Media Networks attract the most desirable audiences, making Viacom a first-choice partner for marketers and distributors alike. This investment and those relationships will drive our success quarter-after-quarter and year-after-year.

We continue to see strong affiliate growth as both existing and emerging distributors turn to our brand to fuel their products and services. We expect our affiliate revenue to grow on an annualized basis in the high-single to low-double digit for the foreseeable future. As we unlock value for our content across platform, we're unlocking growth potential across global markets as well, expanding our footprint and margins internationally with our Media Networks and Paramount's rich film library. Creative success and operational discipline are hand in glove at Paramount Pictures, and the studio remains focused on its strategy of releasing a streamlined slate of franchise tentpoles and reasonably priced films with box office potential, supported by one of the industry's finest distribution and marketing organizations. And that strategy is clearly working as evidenced by Paramount's outstanding performance as the #1 studio at the worldwide box office in 2011.

Finally, by operating efficiently, managing costs and seizing every opportunity to monetize our content, we continue to generate significant free cash flow and to make good on our commitment to return substantial capital to our shareholder both in the form of stock buybacks and dividends.

This morning, I will briefly review our financial results for the first quarter and share highlights from our divisions. Tom and Jimmy will provide more detail, and then we'll gladly take your questions. Let's begin with the numbers.

Viacom's consolidated revenues grew 3% to $3.95 billion in the first quarter, driven by growth in both our Media Networks and Filmed Entertainment segments. Media Networks delivered 3% growth in revenues and a 7% increase in operating income on strong increases in affiliate revenues. Filmed Entertainment grew revenues by 4%, driven by higher theatrical revenues, but solid bottom line decline due largely to the comparison with the sale of Marvel Studios' distribution rights in the first fiscal quarter of 2011. Our net earnings from continuing operations decreased 5% to $591 million in the December quarter and diluted earnings per share increased to $1.06, up 4% over the first quarter of fiscal 2011. During the first quarter of fiscal 2012, we repurchased $700 million in stock and in the current quarter, we are on track to buy back another $700 million.

Let's turn now to our Media Networks. Our portfolio of cable networks is the strongest in the industry, accounting for a far greater share of all basic cable viewing in the U.S. than any other programming group. We built equity with our audiences by knowing and understanding them better than anyone. We have a proven ability to translate consumer insights into compelling original programming, innovative multi-platform content and valuable connections through social media. We will continue to invest judiciously in original programming, research and marketing to keep our Media Networks thriving regardless of changes in the media landscape and economic environment.

As I indicated in December, we did see softness in the overall ad market during our fiscal first quarter. For the quarter, our advertising revenues decreased 3% domestically and 4% internationally. Domestic declines were driven by significant softness in volume in the scatter market, especially after Thanksgiving and previously discussed rating softness. We are seeing signs of recovery in the current quarter scatter with a number of buyers returning to the market. As they do, we are confident that our brands will capture their share of dollars.

Shifting gears to distribution. Worldwide affiliate revenues increased by 16%, driven by significant rate increases and the benefits of digital distribution. During the quarter, we successfully closed a number of affiliate deals and expanded existing agreements, including growing our HD footprint with several cable and telco providers. We also locked up additional distribution deals, including our launch with the debut of Netflix in the U.K. And next week, a new online partner will announce a deal we just signed that involves a wide selection of our library content. Partnerships like these are high-margin opportunities to monetize our content library. We see a significant opportunity for continued growth here.

We are also stressing our relationships with traditional distributors by fueling the expansion of their products and services, including increased offerings across VOD, authenticated websites and apps and ITV. As we continue to innovate and expand our partnerships with our existing distributors, we are constantly evaluating new distribution opportunities for our content, both long and short form.

International growth is a key priority for Viacom. Over the last several years, we have made it a strategic priority to streamline and strengthen our international organization, pursue strategic initiatives and partnerships and launch more channels and more original programming to drive ratings and revenue. We're seeing real progress. As we said on the last call, we are well on our way to achieving our goal of 20-percent plus margins internationally in our next fiscal year.

The first quarter of fiscal 2012 was a very strong quarter for Viacom International Media Networks, driven by affiliate growth and expanded efficiencies. We see our affiliate growth continuing and ad sales growth returning as we move forward.

Our priority channels for global expansion showed strong ratings growth. Internationally, ratings at Nickelodeon and Comedy were up substantially. The EMAs, MTV's signature international tentpole, saw ratings up 37% across global markets. We successfully launched new comedy channels in Holland, India and Africa and yesterday, in Latin America. We'll be announcing more comedy launches soon.

We have also begun a number of consumer products initiatives. Consumer products is another area with significant upside over the next several years. Our pipeline is rich with character-driven content in Nickelodeon and our new Paramount Animation label that will help drive consumer products growth in the long-term.

Moving to ratings highlights at our domestic Media Networks. The first quarter of fiscal 2012 was MTV's highest-rated December quarter in 4 years and the network's eighth consecutive quarter of year-over-year growth overall. MTV continues to assert itself as the cultural home of the millennial generation with a smart mix of original reality and scripted programming. Jersey Shore was the #1 show in MTV's target 12-34 demo every week it aired and returned this quarter with a premiere episode that attracted 7.6 million viewers. Teen Mom 2 was the #3 original cable series in the 12-34 demo for the quarter and new shows, Ridiculousness, Beavis and Butthead and breakout scripted-hit, Awkward, all placed among the top 25.

MTV also built on a social media dominance, finishing the first quarter as the #1 media network on Facebook, the #1 brand on Foursquare and Tumblr and the most social cable network of 2011 according to SocialGuide. In the current quarter, MTV will see the premieres of a new scripted series, I Just Want My Pants Back, which debuts tonight; the launch of a Jersey Shore spinoff with Pauly D; the return of pop-culture phenomenon, Punk'd and a new season of 16 & Pregnant.

Comedy Central continues to draw its core male audience with great original programming anchored by its dominant late-night block, which is stronger than ever with election 2012 gaining steam. The Daily Show with Jon Stewart turned in a historic performance in the 2011 calendar year, surpassing NBC's The Tonight Show as the #1 late-night show with viewers 18-49 for the first time ever.

For the quarter, The Daily Show and The Colbert Report were the highest-rated and most-watched late-night shows on all of television with male and total viewers aged 18-34. Newcomer, Workaholics, continued to build its fan base, finishing the calendar year as the #1 new comedy on all television with men 18-24. And finally, we renewed South Park through 2016, ensuring a milestone 20 seasons in a landmark animated series.

Comedy Central has great momentum in the current quarter as well. Just this week, we saw the strong season premiere of Tosh.0, which drew 3.1 million viewers as well as the series premiere of new sketch comedy show, Key & Peele, which drew 2.1 million total viewers, making it the biggest series launch on Comedy in more than 2 years.

Despite the measurement issues we mentioned on last quarter's call, Nickelodeon finished the fiscal quarter as the #1 cable network with both kids and total viewers for the 67th consecutive quarter, highlighted by the launch of Kung Fu Panda and the second installment in the Fred TV movie franchise, which averaged 7 million total viewers. On Nick at Nite, our third annual HALO Awards, honoring teens for their commitment to service, delivered the tentpoles' highest ratings ever with teens and tweens.

This fiscal year, Nickelodeon will premiere more than 500 episodes of original programming, more than ever before, and we will keep layering on new shows to rebuild our rating. The current quarter has been full of live-action premieres, including iCarly, which has attracted more than 4 million viewers in each of its 3 episodes this quarter and grown ratings in key kids 6-11 demo with each episode. House of Anubis ratings are also climbing steadily with ratings improving 10% in the week following its January premiere. Last Saturday, the premier of Victorious was the #1 program on cable, attracting 3.9 million viewers.

This Saturday, we premiere How to Rock, staring Cymphonique Miller and in March, we'll debut a new TV movie from Big Time Rush, who along with Fresh Beat Band, were 1 of 2 Nickelodeon kids music act to sell out a nationwide concert tour last quarter. Additionally, Nickelodeon and Nick Jr. will have new episodes of their gold standard preschool educational programming such as Dora the Explorer and the Bubble Guppies and will launch new series, Mike the Knight and a new CG version of Franklin and friends. Nickelodeon will conclude the quarter with the Kid's Choice Award, hosted this year by Will Smith on March 31.
You can read Viacom's Q1 2012 Results Earnings Call Transcript in full here on the official Seeking Alpha website. Also, from The Associated Press via The Kansas City Star:
Viacom 1Q earnings shredded by 'Rock Band'

NEW YORK -- Viacom Inc., the owner of Paramount Pictures, MTV and Comedy Central, on Thursday posted a 65 percent drop in net income for the latest quarter, as it took a charge related to the "Rock Band" series of video games.

Revenue was below analyst estimates, sending its stock down.

Viacom earned $212 million, or 38 cents per share, in the October-December quarter, down from $610 million, or $1 per share, a year ago.

The New York-based company took a charge of $379 million to cover an arbitration award won by the original shareholders of Harmonix Music Systems Inc., which created "Rock Band."

The game let players take "Guitar Hero" one step further by connecting a drum-kit and a microphone to a game console, along with a guitar, and play and sing along to songs. It was hit when it came out in 2007, but its popularity faded quickly, along with that of "Guitar Hero."

Viacom had acquired Harmonix in 2006, but sold it back to its founders in 2010. The founders then sued, claiming that they were owed extra payments for the performance of "Rock Band" during its spell of popularity. They won an arbitration award of $383 million in December. Viacom is contesting it, but has set aside the money to cover the award, reflected in the charge to earnings.

Excluding the "Rock Band" charge, earnings were $1.06 per share in its fiscal first quarter, a penny above the average analyst estimate as polled by FactSet.

Operating income fell 2 percent as expenses outpaced revenue, which rose 3 percent to $3.95 billion from $3.83 billion. Analysts expected $3.99 billion, mainly because they were expecting advertising to hold up better.

After falling as much as 4.4 percent in morning trading, Viacom's Class B shares had mostly recovered by the afternoon, trading down 21cents at $46.76.

Paramount posted a small operating loss, reversing a small profit a year ago, mainly because it booked a one-time gain then from the sale of some movie distribution rights to Marvel Studios, part of The Walt Disney Co. Revenue rose slightly on strong box-office results from "Paranormal Activity 3" and "Mission Impossible - Ghost Protocol."

At the TV networks, Viacom's larger and more profitable division, results were buoyed by an increase in fees from cable companies and online streaming services like Netflix. Advertising, the largest single source of revenue, declined 3 percent.
CEO Phillippe Dauman said ad sales would have grown except for a ratings dip at Nickelodeon, as measured by Nielsen Co. The apparent loss of viewers showed up in mid-September. Viacom said in November that it thought the dip was due to some sort of measurement error, and Dauman stuck to that explanation on Thursday.

For its part, Nielsen is sticking to its data, saying in a statement Thursday that it had found no problems with its methodology.

One explanation that has been floated by analysts is that the availability of older Nickelodeon shows on Netflix is digging into viewership. Dauman said he didn't think that was the case. The company gets viewer data from Netflix and didn't see a sudden spike in September, he told analysts on conference call after the release of the results.

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