Thursday, February 08, 2018

Viacom Reports 1Q18 Results

Company Accelerates Transformation, with Further Progress against Key Strategic Initiatives

International Media Networks Deliver Seven Consecutive Quarters of Year-over-Year Revenue Growth

Completed Tender Offer for $1 Billion in Debt, Further Strengthening Balance Sheet

NEW YORK -- Viacom Inc. (NASDAQ: VIAB, VIA), the parent company of the Nickelodeon brand, today reported financial results for the first quarter of fiscal 2018 ended Sunday, December 31, 2017.

Bob Bakish, President and Chief Executive Officer, said, “In the quarter, Viacom aggressively drove progress on our strategic plan, delivering improvements in our business and positioning the Company for the future. Viacom’s most-watched portfolio of domestic cable brands grew viewership share in the quarter, led by our powerful flagship networks, which now includes Paramount Network – the biggest and most ambitious network rebrand in our history. Internationally, we continue to deliver double-digit top-line and bottom-line Media Networks gains while launching innovative new partnerships in growth territories around the world.

Viacom First Quarter 2018 Highlights from Viacom on Vimeo.

“Viacom has also made considerable progress in its push to accelerate consumption and monetization on next-generation platforms, achieving substantial growth in worldwide digital advertising revenues, expanding distribution on fast-growing virtual MVPD and mobile services, and ramping up resources and talent at Viacom Digital Studios. Additionally, since the end of the quarter, we continued to expand our digital capabilities with the acquisition of influence marketer WHOSAY and the world's premier online video event, VidCon. In addition, our strategy to further diversify our core properties off-screen through live events, hospitality and consumer products continues to progress, with the much anticipated Broadway premiere of the SpongeBob SquarePants musical in the quarter, along with new initiatives across our portfolio.

“We remain deeply committed to maintaining strong financial discipline and delivering returns for our shareholders. In the quarter, Viacom continued to improve its leverage profile and we are on track to achieve $100 million in new cost savings in the current fiscal year, and hundreds of millions more in 2019.”

Revenues in the first fiscal quarter decreased 8%, or $251 million, to $3.07 billion, reflecting declines in Filmed Entertainment and Media Networks segments. Operating income increased 2% to $717 million, primarily reflecting lower total expenses including the impact of a $42 million restructuring charge recognized in the prior year quarter. Adjusted operating income decreased 4% to $717 million in the quarter. Net earnings from continuing operations attributable to Viacom grew 35%, or $139 million, to $535 million, principally due to the enactment of tax reform. Adjusted net earnings from continuing operations attributable to Viacom remained flat at $413 million in the quarter. Diluted earnings per share for the quarter increased $0.33 to $1.33, and adjusted diluted earnings per share decreased $0.01 to $1.03.


Media Networks revenues decreased 1% to $2.56 billion in the quarter, as a 1% increase in advertising revenues to $1.31 billion was more than offset by a 4% decrease in affiliate revenues to $1.09 billion. Domestic revenues declined 6% to $1.93 billion while international revenues grew 18% to $631 million. Excluding a 5-percentage point favorable impact from foreign exchange, international revenues increased 13% in the quarter, primarily driven by a 6-percentage point favorable impact from the acquisition of Telefe, as well as growth in Europe.

Domestic advertising revenues decreased 5% to $937 million, reflecting lower linear impressions partially offset by higher pricing, as well as growth in digital advertising revenue. International advertising revenues increased 22% to $371 million. Excluding a 5-percentage point favorable impact from foreign exchange, international advertising revenues increased 17%, principally due to a 10-percentage point favorable impact from the acquisition of Telefe, as well as growth in Europe.

Domestic affiliate revenues decreased 8% to $907 million, primarily due to subscriber declines and lower SVOD revenues, partially offset by rate increases. International affiliate revenues grew 18% to $187 million in the quarter. Excluding a 5-percentage point favorable impact from foreign exchange, international affiliate revenues grew 13%, driven by organic growth, as well as a 2-percentage point favorable impact from the acquisition of Telefe.

Ancillary revenues grew 5% to $158 million in the quarter, including a 2-percentage point favorable impact from foreign exchange. Domestic ancillary revenues increased 8% to $85 million and international ancillary revenues increased 1% to $73 million.

Adjusted operating income for Media Networks decreased 7% to $913 million in the quarter, principally due to an increase in segment expenses and lower revenues.

Viacom Global Digital Growth (Graphic: Viacom)

Performance highlights:

- Carriage of Viacom programming returned to Suddenlink. Charter agreement signed in the quarter and full re-penetration on Charter's Select (most highly penetrated) tier achieved as of February 2018.

- Viacom Digital Studios launched in November 2017 to accelerate production of digital-native content with a goal of doubling digital consumption across Viacom flagship brands by fiscal year end.

- Viacom International Media Networks continued its strong performance, delivering double-digit revenue and profit gains. VIMN also expanded and diversified its footprint, with the launch of the Paramount+ service in the Nordics, mobile deals in Asia and Latin America and the launch of Spike (free-to-air) in Italy.

- Viacom continues to hold the #1 share of basic cable viewing in all key demos, including Adults 18-49 and Kids 2-11, among others. Worldwide video consumption on Viacom sites, mobile apps and connected devices grew 38% year-over-year.

- In January 2018, Paramount Network launched in the U.S. to solid early results. Its dynamic 2018 slate features cinematic original series, including Waco, Heathers, American Woman and Yellowstone; fan-favorites Lip Sync Battle, Ink Master and Bar Rescue; all-new Bellator events and a broad portfolio of films.

- MTV grew primetime ratings by 14% and primetime share by 25% year-over-year, becoming the 2nd fastest growing entertainment network in primetime among the 40 largest cable channels. Video consumption across MTV’s digital properties increased 101% year-over-year as social video views grew 105%.

- BET achieved a second consecutive quarter of double-digit ratings growth, up 16% year-over-year. The network, which has remained #1 with African Americans 18-49 for 16 straight years, finished the quarter with the two highest rated awards shows on cable: the Hip Hop Awards and the Soul Train Awards.

- Nickelodeon remained at #1 with Kids 2-11 and 2-5 for the 10th straight quarter, and continued to expand its off-screen initiatives through SpongeBob SquarePants: The Broadway Musical; strong sales of Paw Patrol toys and other consumer products; and new offerings such as the SlimeZone VR experience.

- Comedy Central delivered a year-over-year increase in audience share for the third straight quarter, with South Park maintaining its lead as the #1 primetime original comedy on cable for the fifth year in a row. Finishing January as the #1 entertainment cable network among millennial men, TV's top brand in comedy also announced the June return of Clusterfest to San Francisco after a strong 2017 debut.

- VH1, TV Land and CMT each closed out the quarter with growth in ratings and share. VH1 achieved its 10th straight quarter of year-over-year ratings improvement, while TV Land and CMT recorded their highest-performing first quarters in three years.

Viacom's Continued International Strength (Graphic: Viacom)


Filmed Entertainment revenues decreased 28% to $544 million in the quarter, with domestic revenues down 42% to $270 million, and international revenues down 6% to $274 million. Theatrical revenues declined 48% to $100 million due to the number and mix of current quarter releases. Domestic and international theatrical revenues decreased 49% and 46%, respectively. Licensing revenues decreased 13% to $213 million in the quarter. Domestic licensing revenues decreased 36% while international licensing revenues grew 8%, primarily driven by the mix of titles available in each market. Home entertainment revenues were down 25% to $183 million, principally due to the comparison against the release of Star Trek Beyond in the prior year quarter. Domestic home entertainment revenues decreased 38% while international revenues increased 1%. Ancillary revenues decreased 38% to $48 million, with domestic ancillary revenues down 49% and international ancillary revenues up 27%.

Filmed Entertainment reported an adjusted operating loss of $130 million in the quarter compared to $180 million in the prior year quarter, an improvement of $50 million that primarily reflects lower operating expenses.

Performance highlights:

- Studio leadership continued to execute on its turnaround strategy to stabilize costs and strengthen its bottom line, improving year-over-year adjusted operating income by 28% in the quarter.

- In November 2017, Paramount Pictures concluded two key production agreements with Hasbro and Skydance Media. The studio also signed a production pact with The Fast and the Furious producer Neal H. Moritz.

- Paramount Pictures continues to ramp up its production slate with upcoming tentpoles (e.g., Mission: Impossible, Top Gun: Maverick, World War Z 2), branded films from Paramount Players (e.g., What Men Want, Dora the Explorer) and Paramount Animation (e.g., SpongeBob The Movie), and SEGA's Sonic the Hedgehog.

- Paramount Television continued its success, recently announcing a limited series adaptation of Catch-22 for Hulu, co-directed, produced by and starring George Clooney, as well as a revival of Mark Burnett's boxing series The Contender for EPIX. In January 2018, The Alienist premiered as cable's #1 new drama series this season in Live +3, reaching over 13 million viewers on TNT. This year will also feature the third seasons of Shooter on USA Network and Berlin Station on EPIX, as well as the return of Netflix's 13 Reasons Why and the premiere of Tom Clancy's Jack Ryan on Amazon.


In the quarter, the Company continued to execute on its plan to strengthen its balance sheet, reduce leverage and enhance liquidity, redeeming over $1.0 billion of senior notes and debentures. At December 31, 2017, total debt outstanding was $10.19 billion, compared with $11.12 billion at September 30, 2017, a reduction of $930 million.

The Company’s cash balance was $394 million at December 31, 2017, a decrease from $1.39 billion at September 30, 2017. In the quarter, net cash provided by operating activities decreased $147 million to $12 million.

About Viacom

Viacom is home to premier global media brands that create compelling entertainment content - including television programs, motion pictures, short-form content, games, consumer products, podcasts, live events and social media experiences - for audiences in 183 countries. Viacom's media networks, including Nickelodeon, Nick Jr., MTV, BET, Comedy Central, Paramount Network, VH1, TV Land, CMT, Logo, Channel 5 (UK), Telefe (Argentina), Colors (India) and Paramount Channel, reach approximately 4.3 billion cumulative television subscribers worldwide. Paramount Pictures is a major global producer and distributor of filmed entertainment. Paramount Television develops, finances and produces original programming for television and digital platforms.

For more information about Viacom and its businesses, visit Viacom may also use social media channels to communicate with its investors and the public about the company, its brands and other matters, and those communications could be deemed to be material information. Investors and others are encouraged to review posts on Viacom’s company blog (, Twitter feed ( and Facebook page (

Cautionary Statement Concerning Forward-Looking Statements

This news release contains both historical and forward-looking statements. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements reflect our current expectations concerning future results, objectives, plans and goals, and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause future results, performance or achievements to differ. These risks, uncertainties and other factors include, among others: the public acceptance of our brands, programs, motion pictures and other entertainment content on the various platforms on which they are distributed; technological developments, alternative content offerings and their effects in our markets and on consumer behavior; the potential for loss of carriage or other reduction in the distribution of our content; significant changes in our senior leadership and the ability of our strategic initiatives to achieve their operating objectives; various uncertainties and risks related to a potential combination with CBS Corporation, including that an agreement may or may not be reached or may take an uncertain amount of time, and that the effect of any potential transaction on Viacom and our business cannot be ascertained at this time; economic fluctuations in advertising and retail markets, and economic conditions generally; evolving cybersecurity and similar risks; the impact of piracy; increased costs for programming, motion pictures and other rights; the loss of key talent; competition for content, audiences, advertising and distribution; fluctuations in our results due to the timing, mix, number and availability of our motion pictures and other programming; other domestic and global economic, political, business, competitive and/or regulatory factors affecting our businesses generally; changes in the Federal communications or other laws and regulations; and other factors described in our news releases and filings with the Securities and Exchange Commission, including but not limited to our 2017 Annual Report on Form 10-K and reports on Form 10-Q and Form 8-K. The forward-looking statements included in this document are made only as of the date of this document, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. If applicable, reconciliations for any non-GAAP financial information contained in this news release are included in this news release or available on our website at

You can read Viacom's press release featuring the company's 1st Quarter 2018 report in full, including tables of Viacom's statements and balance sheets, here on

Viacom's Q1 2018 Earnings Conference Call can be listened to on the company's official Investor Relations website. Additionally, a transcript of the conference call is available to read on Seeking Alpha.
From Viacom's corporate blog:

Viacom Announces First Quarter 2018 Results, Accelerates Transformation Efforts

Viacom released its financial results for the first quarter of fiscal 2018 this morning, underscoring the significant progress being made to transform its business amid rapid industry change.

Aggressive moves to expand next-generation platforms and solutions, initiatives to grow beyond TV and film, the launch of a premium content network, strengthened relationships with distribution partners, and the demonstrable success of its Flagship Six strategy all position Viacom for potential growth in the second half of 2018.

“In the quarter, Viacom aggressively drove progress on our strategic plan, delivering improvements in our business and positioning the company for the future,” said Viacom President and CEO Bob Bakish. “Viacom’s most-watched portfolio of domestic cable brands grew viewership share in the quarter, led by our powerful flagship networks, which now includes Paramount Network – the biggest and most ambitious network rebrand in our history. Internationally, we continue to deliver double-digit top-line and bottom-line Media Networks gains while launching innovative new partnerships in growth territories around the world.

“Viacom has also made considerable progress in its push to accelerate consumption and monetization on next-generation platforms, achieving substantial growth in worldwide digital advertising revenues, expanding distribution on fast-growing virtual MVPD and mobile services, and ramping up resources and talent at Viacom Digital Studios. Additionally, since the end of the quarter, we continued to expand our digital capabilities with the acquisition of influence marketer WHOSAY and the world’s premier online video event, VidCon. In addition, our strategy to further diversify our core properties off-screen through live events, hospitality and consumer products continues to progress, with the much anticipated Broadway premiere of the SpongeBob SquarePants musical in the quarter, along with new initiatives across our portfolio.

“We remain deeply committed to maintaining strong financial discipline and delivering returns for our shareholders. In the quarter, Viacom continued to improve its leverage profile and we are on track to achieve $100 million in new cost savings in the current fiscal year, and hundreds of millions more in 2019.”

Here’s a closer look at what Viacom is doing to advance its strategic plan and transform the company in the year ahead:

Viacom’s spot atop the basic cable universe

Led by its Flagship Six of MTV, BET, Comedy Central, Nickelodeon, Nick Jr. and Paramount Network (which launched after the quarter ended, replacing Spike in the U.S.), Viacom continued to stand at the top of the basic cable universe, holding the largest share of viewers in all key demos:

Viacom is #1 in Key Demos (Graphic: Viacom)

And the portfolio continued to grow: MTV primetime ratings (+14 percent) and share (+25 percent) both surged, BET recorded a second consecutive quarter of double-digit year-over-year ratings growth (+16 percent), Nick hit its 10th consecutive quarter as the top network among kids, and Comedy Central documented its third straight quarter of increased year-over-year audience share.

Viacom’s other core brands – VH1, TV Land and CMT – recorded year-over-year quarterly ratings and share growth. For VH1, this marked its 10th consecutive quarter of ratings growth, making it the only entertainment net across both cable and broadcast that can make this claim.

Complementing these growing ratings are strengthened affiliate relationships with Suddenlink and Charter, which should help further boost viewership and the advertising revenue that goes along with it.

Paramount Network launches Viacom Media Networks into the premium content space

Paramount Network rumbled to life last month, propelling Viacom Media Networks into the premium content realm and capitalizing on the deep storytelling tradition of Viacom’s iconic Paramount brand. Strong ratings immediately followed, first for Lip Sync Battle: Live Michael Jackson Celebration and then for the premiere of Waco starring Taylor Kitsch. Several more high-profile shows land over the coming months, including a Heathers reboot, American Woman with Alicia Silverstone, and Yellowstone starring Kevin Costner.

Viacom had already been invested in the creation of premium television content, however, under the umbrella of Paramount Television, a production studio seated under Paramount Pictures that tripled revenues in 2017. The studio’s robust content pipeline includes Hulu’s Catch-22, EPIX’s The Contender, TNT’s The Alienist (cable’s number one new drama series), Amazon’s Jack Ryan, and new seasons of USA Network’s Shooter, EPIX’s Berlin Station, and Netflix’s 13 Reasons Why.

The turnaround of Paramount Pictures continues

Paramount Pictures Chairman and CEO Jim Gianopulos has assembled a new leadership team dedicated to igniting growth. The July release of the next Mission: Impossible film will act as the springboard for a 2019 slate that will include eight films co-branded with Viacom’s media networks. Major production deals with Hasbro, Skydance, and The Fast and the Furious producer Neal Moritz should further bolster a lineup that already includes Bumblebee, Gemini Man, and sequels to Top Gun and World War Z.

Viacom’s push into next-generation platforms accelerates

Yesterday, Viacom announced the acquisition of VidCon, turbocharging a next-generation digital platform strategy that also includes Viacom Digital Studios and recently acquired influence marketer WHOSAY.

This digital pivot has already yielded results, with global video consumption on Viacom’s sites, mobile apps and connected devices surging 38 percent year-over-year during the quarter. As Viacom Digital Studios ramps up to scale and begins distributing unique content across the company’s massive social footprint, Viacom anticipates a doubling of video views and significantly increased watch time on YouTube and Facebook this year.

Viacom will continue to move toward the center of consumers’ digital lives, both internationally – where the company secured a major mobile distribution deal with Telefónica in Latin America– and domestically, where a significant direct-to-consumer experience could be announced later this year.

Viacom’s live events business is growing rapidly

VidCon, which draws more than 30,000 attendees to its flagship Anaheim event and is in the beginning stages of international expansion, adds a powerful arrow to Viacom’s live-events quiver. Every flagship brand will host at least one major live event in the U.S. this year, including Comedy Central’s ClusterFest, which drew 40,000 fans in its inaugural run last year; SpongeBob the Musical, which opened to soaring reviews on Broadway; and The BET Experience, which will continue to attract tens of thousands of fans around the BET Awards in June.

International ad, affiliate and general revenue surge

Viacom International Media Networks continues to crank out steady growth: a 13 percent overall revenue jump, a 17 surge in advertising revenue, and 13 percent growth in affiliate revenues.*

Strong growth in Europe and the integration of Argentinian broadcaster Telefe contributed to these impressive numbers. The launch of Paramount+ in the Nordics, the debut of a free-to-air Spike network in Italy, and a restructuring of our jointly owned Viacom18 property in India should all contribute to further gains.

*All international revenue numbers are adjusted for a five percent favorable impact from foreign exchange

To see what Viacom will debut in the months ahead, scroll through the timeline below, or click here to view the full-screen version.


Below is Viacom's Q1 2018 Results Earnings Call Transcript, in which Viacom Management discusses the company's Q1 2018 Results, featuring the bits about Nickelodeon, from Seeking Alpha:

Viacom's (VIAB) CEO Robert Bakish on Q1 2018 Results - Earnings Call Transcript

Robert Bakish

[...] good morning, everyone. Thanks for joining us today.

Three months ago, we told you that if 2017 was about stabilizing and revitalizing Viacom then 2018 is all about transforming our company for the future. We said, we would fast-track our evolution into next-generation platforms and solutions that we'd further expand our business beyond TV and film, all grow in share and margins in our existing core business.

I'm happy to say that we accelerated these transformation efforts in the first quarter making important strategic progress. On the numbers, let me remind you that on the last call, we talked about Q1 and the first half of 2018 as being transitional quarters, which would not fully reflect the value of our strategy. At the same time, I want you to note that we are on track for growth in the second half of the year and in fact, now see upside to our prior guidance.

So, let's start with our progress growing share and margins in our core business. The first headline here, our flagship focus continues to work. Overall flagship share growth continued in the quarter, bright spots include MTV and BET, which are now in their third consecutive quarter of ratings growth.

In fact, MTV was the second fastest growing major cable network in Primetime. And beyond the flagships, VH1, CMT, and TV Land also grew ratings in the quarter.

And of course, Viacom's flagship strategy is what led to our most ambitious rebrand yet, with the launch of Paramount Network last month. Kicking off with a live Lip Sync Battle at Adobe Theater, Paramount Network quickly followed-up with the first episodes of Waco, a high-quality cinematic mini-series, it's on a clear message to talent and business partners that we're playing to win in the premium content space.

While it's early days at Paramount Network, the results so far are encouraging. In its launch week, the Network reached 12.1 million viewers in the highly coveted 18 to 49 demographic, an increase of nearly 20% versus the prior week.

Up next, Heathers, a modern-day re-imagining of the 80's classic film, then American Woman, which stars Alicia Silverstone and Mena Suvari amid the rise of feminism in the 1970s, followed by Yellowstone, an epic and cinematic, dramatic series created by Taylor Sheridan and starring Kevin Costner.

The second headline in our core business, we're continuing efforts to strengthen traditional revenue streams and we see an improving picture relative to three months ago. In the quarter, domestic affiliate revenue was in line with previous guidance and we now anticipate better than expected results throughout the remainder of the fiscal year, as we benefit from our partner first approached with distributors.

I'm happy to tell you that our return to carriage with Suddenlink was effectuated in the first quarter, and as of February, our largest networks are back to their previous fully penetrated positions across Charter's most widely distributed tier. Something that has happened faster than we initially anticipated. That combined with stronger than expected VMVPD performance has resulted in our subscriber trends improving to the mid-2% decline range from the mid-3% range, we had previously discussed.

In fact, we now believe full-year domestic affiliate revenue will decline on the low-end of mid-single-digits, a 200-basis point improvement versus the guidance we gave you in the prior quarter.

Moving to ad sales, in the first quarter, worldwide advertising revenue gains were driven by the continued strong performance of Viacom International Media Networks partially offset by universe [ph] declines and rating challenges at certain networks domestically.

However, we believe we have reached a turning point in our domestic advertising story. As digital revenues continue to grow strongly, audience share improves and Charter and Suddenlink subs are back in our distribution.

We now expect domestic ad revenue to improve sequentially, over the balance of the year with positive growth in the fourth quarter. At the same time, we expect continued strong growth across our international networks.

The third headline in our core business. The turnaround of Paramount Pictures is well within sight. With Q1 behind us, we now have just a few films left on our legacy slate. And we are particularly excited about our Summer Tentpole, which has Tom Cruise as Ethan Hunt returning for the sixth installment of the incredibly successful Mission Impossible series.

Very importantly, we have now finished building out our best-in-class leadership team at Paramount, including the recent additions of Wick Godfrey, President of Motion Picture Group, and David Sameth, the new Head of Worldwide Marketing who joins from Disney Pixar.

With his team in place, Jim Gianopulos is laser-focused on returning the studio to growth. And we're very excited about how the 29 team slate is coming together, including the fact that we anticipate half the slate will be co-branded productions through our Paramount Players division, which focuses on driving attractive economics on a fast production cycle. With eight branded films planned for 2019, Paramount Pictures is bringing Viacom's flagship brands to the big screen in a big way, which Viacom is uniquely positioned to do.

And with three new major production deals signed with Hasbro, Skydance and the Fast and Furious producer Neal Moritz, plus Wick Godfrey's immense film experience at the helm, we'll be able to further feed the studio's pipeline in the years ahead, including bringing to life exciting tent pole films like a Transformer spin-off Bumblebee, Gemini Man, a Top Gun sequel and more.

Building on the successes of 2017, Paramount Television continues to expand TV production relationships with top talent, including George Clooney, who will direct and star in Catch-22, a limited series for Hulu, and John Krasinski as the new Jack Ryan in the series picked up by Amazon.

Additionally, the Alienist, a limited series for TMT just premiered as Cable's number one new drama series this season in live-plus-three. With win after win, Paramount continues to gain credibility in the space and it's doing so, in an environment where demand has never been stronger.

Before I move on from the core business, I also like to note that we are on track with our cost transformation initiatives and efforts to improve margins. This quarter saw Viacom make meaningful progress, including through an organizational realignment that reunites all support functions across Viacom Media Networks, new sourcing and procurement policies, real estate consolidation and more. All told, we anticipate these initiatives will deliver $100 million in cost savings this year and generate hundreds of millions of savings on an annual run rate basis.

Moving beyond the core business to our second area of strategic focus, accelerating our efforts in next-generation platforms and solutions, this has been a huge area of focus for our company and we're thrilled with our progress in dramatically ramping up our digital efforts. One of the most important developments on this front in the quarter was the launch of Viacom Digital Studios, the digital studio is now executing against the clear vision to produce unique video content at scale to build loyalty and engagement for our flagship brands, to become the first choice home for a wide range of young talent, to develop an ecosystem where our massive social footprint supports a wide range of partnerships and distribution models, and to create a diversified, profitable digital business.

Our goals for this division are ambitious. We are going to increase video views to 2x in 2018, we are also going to increase watch time on YouTube and Facebook by 3.5 times by the end of the year. And VDS isn't just focused on short-form content production, they are working closely with our ad sales and distribution teams to evolve our offerings to mobile and OTT platforms and creatively connect partners to our brands and talent, which is one of the reasons why we recently acquired WHOSAY, an early mover and influence marketing with a strong track record of executing campaigns for major brands.

WHOSAY will work with Viacom digital studios and our ad sales team to produce premium original content, innovative advertising solutions and truly multi-platform distribution for our brand partners.

In addition to ad supported social video, VDS is also partnering with our distribution team to power our products for digital and mobile platforms. Here, we are already in a range of discussions with carriers in U.S. who see the combination of our existing news and entertainment brands, tent pole events and new digital native series and talent as a potentially compelling new source of value in a very competitive marketplace.

And outside the U.S., we're already bringing product to mobile. Earlier this week, we announced a major step forwarded in the mobile entertainments space working with Telefonica in Latin America.

In a first for Telefonica and its mobile and broadband subscribers, their mobile platform Movistar Play will carry live feeds of MTV, Nickelodeon, Nick Junior, Comedy Central and the Paramount channel across Latin America, beginning in the first half of fiscal 2018.

In addition, Telefonica will have on-demand content available via our mobile streaming apps and its important note that economically this looks like a traditional Pay-TV deal with monthly affiliate revenue per subscriber.

This first of a kind deal for Viacom is a critical first step in what we talked about on our last call, bringing a new product to new distributors on a global basis. As we've said before, we believe mobile is a big opportunity globally and we're focused on quickly unlocking it.

Finally, as we discussed on our last call, we continue to expect to launch a significant and differentiated direct to consumer experience by the end of this fiscal year.

Moving to our third strategic priority, diversifying beyond our core business, as we said on the last call, we believe there is a lot of opportunity to expand and grow our live events and consumers product businesses in particular, and we made some important progress in Q1.

Building on the success of our International events business, every flagship brand now will have a live event in U.S. including Comedy Central's recently renewed Clusterfest, BET's BET Experience, and Nickelodeon's upcoming SLIMEFEST.

And even Viacom Digital Studios will have its own tent pole event. We just announced our acquisition of VidCon, the largest and most popular multi-day conference celebrating online video. This partnership will feed our next-gen and live events businesses placing Viacom at the center of the important conversations, innovations, and talent driving the future of content.

Think about this as VDS's VMAs. Here on Broadway, the SpongeBob Musical is also off to a very strong start, following its highly acclaimed debut. We're also making meaningful strides to grow our consumer products business.

Last call, we said we wanted to start putting our global CP infrastructure and expertise to work for other brands beyond our own. And in Q1, we struck a deal with Mattel to be their exclusive U.S. agent for Thomas the Tank Engine across many key non-toy CP categories. A strategy you'll be hearing more about in the coming year.

Finally, before I turn the call over to Wade, I want to discuss our International business, which is firing on all cylinders.

In the quarter, International had double-digit growth in overall revenues, affiliate sales and ad sales, and very strong double-digit growth in earnings. And there is a bigger strategic story underlying those numbers.

International strong track record of creating new incremental value across a variety of markets and models, like in India, where through our joint venture Viacom18, we took a loss-making business and turn it into a fast-growing top three diversified media and entertainment company with revenues up over $500 million.

Last week, we announced a transaction with our partner where we would sell 1% of the business at a $2 billion valuation. We did this deal to set the company up for its next wave of growth by more closely aligning with our partner's affiliated Jio platform, one of the largest and fastest growing mobile, broadband and video distribution platforms in India, having grown to 160 million subs in just over a year since launch.

This is fantastic for Viacom18 and for Viacom since we retain a 49% stake. We're very excited about the road ahead.

The latest success story for international is in Latin America. One year ago, we bought Telefe, a dominant local broadcaster in Argentina. Today, it's serving as a platform for global growth.

Let me explain. We acquired Telefe because we knew we wanted more scale in Latin America across audience, advertising and distribution. We also knew we wanted to own more content and production capabilities to satisfy the huge and growing demand for quality Spanish language content to feed global platforms, both ours and others.

When we acquired Telefe, they were producing 3500 hours of high-quality content per year yet monetized little beyond their own network. As a standalone market specific broadcaster, they didn't play in larger markets beyond Argentina, including Latin America more broadly, Spain, U.S. Hispanic, the Middle East and Africa, all of which have high demand for Latin originated Telenovelas.

So, we spent the last year creating what we call our Latin orbit, combining Telefe's power and production capabilities with Viacom's global footprint to set Viacom up to be a true player in the global Spanish language content distribution business.

We started increasing IP ownership of Telefe content by retaining majority rights including International distribution. And we consolidated our content sales teams to capitalize on Telefe's volume.

While year one was really about laying the foundation for future growth, we expect to exceed the revenues generated by all but the largest well-established content studio players in 2018.

Output hours have increased by 12% and we project overall content sales to increase by 70% this year. All of our Telefe network maintained its position as the number one free-to-air channel in Argentina and we anticipate growing overall operating for Telefe by 40% this year and we are just getting started. Our goal is to quickly become, one of the top creators and distributors of Spanish and Latin content in the world and we are already on a path to get there.


Question-and-Answer Session


Alexia Quadrani

Hi, thank you. Just a couple of questions first can you provide a bit more color on the recent management changes at the media network specifically Nickelodeon and then just staying on Nickelodeon, what can be done if anything to improve ratings there, it seems like your program is really strong, but it's more of an issue if you were spending less time on your TV. I guess how fast can digital ramp and are you forecasting ratings improvement at Nick in order to get back to the positive ad revenue growth you would achieve at the end of the year?

Robert Bakish

Sure. Thanks, Alexia. So, first of all there has been no change in leadership at Nickelodeon, but in light of media speculation and kind of confusion on this matter, I'd like to clarify a few points.

Sarah Levy has been promoted to a newly created position as COO of Viacom Media Networks. That means we're bringing all our media network shared services under one structure and to be clear, this is about the shared support structure, it is an extension of the responsibility Sarah has held for the last year and that extension is to BET and to Nickelodeon.

Sarah and each of the brand Presidents will continue to report to me and as with our other efforts. The intent here is to streamline our structure, break down silos and ensure we are as efficient and agile as we can be.

Now, on the Nickelodeon side, it's true we've had some rating softness at Nick and we're actively working to address it in two parallel paths one on television and one beyond television.

So, first the television point. Truth be told it's not the first time we've seen softness at Nick and we've turned it around and Seema and her team are very focused on this. We have a robust slate of about 400 premier episodes coming up and those 400 episodes are across 15 series that are across the board strong. And we will be supplementing that with some incremental stunting and marketing.

And just to give you an example, we debut a new series last week, Hunter Street, it's a serialized Novella and that show built each day. So, a lot of work going on the TV rating side and despite some of the headwinds with the parts, we feel good about our trajectory as the year plays out.

But we are also working aggressively to build to your point our non-TV impressions, this includes ramping up our social video strategy, particularly through VDS, where we see a significant opportunity to capture share and add dollars.

It also includes continuing to grow [Noggin], there we're going to add the [PAW Patrol] franchise, that's something that hasn't been available on [Noggin], and obviously is a worldwide hit as well as adding more educational content and supporting all of that with some increased marketing.

Finally, there is the live event side, we talked about it SpongeBob, the Musical and International property called SLIMEFEST which is coming to the U.S. this summer.

So, a lot of work going on at Nickelodeon and I am feeling very good about what the team is doing there. Also, worth touching on Nick at Night since that's the back half of Nickelodeon, there we had some ratings of softness in the quarter two.

However, we have recently made three programming moves there bringing Two and a Half Men and The Goldberg's, which are two very strong series to Nick at Night and then also doing some things with movies, a couple of night a week. And as we have done that we have seen demand [ph] ratings already start to move in the right direction.

So, lot of attention on this area, but again I feel good about everything we have underway.


John Janedis

Thank you. You guys touched on this a bit but as you know the market has been nervous about your domestic distribution and affiliate growth, so can you just talk a little more about your confidence level and the improvement and to what extent that hinges on either the entertainment path launch for some sort of new deal with a Virtual MVPD?

Robert Bakish

Sure. So, John look, we really have a multi-part strategy in the distribution side, which encompasses the MVPD universe, the VMVPD universe and unlocking the next wave of opportunity, particularly in mobile. So, let me touch on each.

As you know, 2017 was really a year of transforming and stabilizing our relationships in the MVPD space, there you saw us implement a new strategy which is more relationship driven and bring incremental value to the table, beyond licensing, linear fee, putting more in the on-demand space, dense advertising partnerships and in some cases, co-production relationships.

That strategy is clearly working for us. And as we said before through those efforts we renewed or extended half of our sub-base. And worth noting that we have no significant MVPD renewal on the near-term horizon.

So, feeling very good about that and I would also remark that all that was done at a time where our flagship strategy really wasn't effectuated yet and we hadn't begun to see the audience improvements that we're now seeing.

So, as we go into longer-term renewals, which again there is no renewals on the near-term horizon. We're also going to benefit from the stronger product line, which I think is key. Then there is a VMVPD space, there we represented on the two largest by far OTT platforms, those are DIRECTV Now and Sling, and as I remarked earlier, there we're seeing nice growth in fact it's turning out to be more of a driver for the overall category that we had initially contemplated, so we feel great about that.

We did launch with Philo, that's still in its shake-down [ph] phase, hasn't gone to its marketing phase. So that should yield more benefit in the future. And we continue to have conversations with other players in this space.

Finally, mobile that's really the next wave of opportunity. We are in conversations with multiple carriers literally as we speak in the U.S. and I think again I'd point to Telefonica as an example of the future because that is really a great deal for us and we'll have significant benefits.

So, a lot going on this space, but I feel very good about our trajectory far better than I felt this time last year.

Wade Davis

Just one thing I'd like to underscore to that John you said, you asked if the improved guidance that we laid out hinges on any incremental virtual MVPD launch, the answer is that it doesn't any incremental virtual MVPD progress that we make and any sort of domestic mobile product that we bring to market like the Telefonica product that we announced that would be incremental upside, beyond the upside that we already guided to.

John Janedis

Thanks Wade. That's helpful. And then one quick thing Bob, there has been a lot of noise around the health of the ad market, given the audience fragmentation, so when you speak to the return to growth how broad of ratings improvement do you need to get there and get there and does that assume that you can get to industry like growth because that's something you really haven't done in a while probably a few years? And I guess related to that what is the contribution from digital?

Wade Davis

Yeah. Look, the softness that we had in domestic ad sales this quarter was a function of linear impression decline, which in turn was some linear rating softness principally at Nick. But it was also driven by the gaps in distribution that we had in the quarter.

It's important to note that those gaps as Bob said in his remarks have now been filled with Suddenlink carriage fully penetrated in the achievement of full penetration on Charter's most likely distributed tier.

So, having accomplished that, that's going to add a couple points of domestic ad sales growth going forward, so that is obviously something that underscores our confidence.

With respect to your digital question that's the place where we're seeing great momentum as you know. We have some of the strongest advanced ad sales capabilities in the marketplace. We saw nearly 40% growth over the prior year's quarter in our advanced marketing and solutions business. So that's also a place that we see momentum ramping over the course of the year.

And we further bolstered the capabilities in advanced, our advanced marketing solutions business with the recent acquisition of WHOSAY which brings us substantial incremental capacity in our network branded entertainment and solutions.

And then we also announced VidCon, VidCon is another place where we grow out our capacity in experiential marketing there are big domestic event is in June so that brings great capacity online in that category to supplement the growth that we are seeing in things like the BET Experience, Clusterfest and now the SLIMEFEST coming online for our experiential business.

So, the return to growth is actually really driven by a pretty broad portfolio of initiatives all of which we have pretty strong visibility into and it starts on the head start that we get going into this quarter with the penetration that's kind of head of what we had initially expected, so that's why we are confident in the sequential and consistent growth over the course of the year and the return to growth in the fourth quarter.


Rich Greenfield

And maybe just give us a sense of how diversified in terms of who you're producing for I don't think everyone realizes how live that that array of partners is?

Robert Bakish

Yeah, great point Rich, thank you. Look, we're producing for in-house networks, things like School of Rock for Nickelodeon, we have a number of projects in development for the Paramount network including first Wide Club - in fact, one at Paramount we're also as part of this Telefe conversation looking at creating an English language show in parallel to what are the Novellas down there a very attractive economics.

In addition to in-house clients back to Paramount we're producing four call it traditional Cable Networks like the Turner Networks with Alienist as an example. We're producing for kind of new age networks, Catch-22 is for Hulu, Jack Ryan is for Amazon, so again and then Wade mentioned in the context of our Charter renewal we have a co-production relationship with them. So, this asset plays in a variety of configurations and is really part of the value creation that you began to see, and we'll continue to see ahead.


Benjamin Swinburne

Thanks. Good morning, guys. Two questions I want to ask you about the Telefonica deal in Latin America and also your direct-to-consumer plans. We were obviously familiar with the traditional distribution model can you put a little more sort of color on what a mobile agreement looks like how that might translate into other relationships in that region or globally, you mentioned it's per month per sub to those economics tend to look sort of similar to a television deal or anything you can help us to sort of size that or think about the opportunity to build off of that?

And then direct-to-consumer a lot of the media company is moving down this pass, when you think about launching something by the end of this fiscal year can you tell us a little bit about whether that would be a U.S. or global launch how much content you might be able to bring to there and also is there any impact at all in your existing NDP relationships where you would - theory start competing with them a little bit?

Robert Bakish

Sure. So, let me get the first part on your Telefonica question. Again, this is a Latin America deal, it is about Telefonica rolling out five of our brands MTV, Nickelodeon, Nick Junior, Comedy Central, what we call Paramount Channel XUS to be movie star play platform for their subscribers. It is Pan-Latin America, so it is not just one country, we build off an existing relationship we haven't with Telefonica in Latin America, there were also a Pay-TV distributor or MVPD, but this is a mobile complemented act. It is a sense, revenue per sub economics which are comparable to Pay-TV rates and it's really the first and what we believe will be a series as many, where we unlock that platform to drive incremental reach for our brands and of course incremental monetization.

It's worth noting that we're in numerous conversations similar to this all around the world and as I indicated we're in a set of conversation with multiple carriers in the U.S. And if you think about it this is the point that upends the whole argument with a client of Pay-TV. Because mobile is the most ubiquitous platform in the world and mobile subscribers outnumber Pay-TV subscribers by many, many, many multiples there are literally billions of them out there.

The business the mobile business highly commoditized and competitive and carriers are looking for differentiation and there is just enormous road ahead and therefore, I'm thrilled to be talking about Telefonica but it's really the tip of the iceberg.

Wade Davis

So, I mean in terms of B2C as we said in our remarks we are not yet prepared to fully announce the offering but we're very confident that we're going to be in a position to do so soon and then as we said launch it within the fiscal year. What I can say is that it's going to be significant and it's also going to be differentiated from what's in the marketplace today.

You asked about U.S. versus global initially it's going to be rolled out in the U.S., in terms of the amount of content that it's going to have, it's going to have tens of thousands of hours of content that cut across the library we have on a global basis. And it's important to note one of the reasons that we are able to do this is that we've chosen to curtail the amount of content that we license into third-party B2C experiences that the decision that we have made when Bob rolled out his strategic plan last year and although that had some short-term pain for us because unlike some of our competitors we've not been able to get the short-term revenue kick from licensing to third party SVOD.

It's really important that we've kind of built in that library to be able to use for our own strategic purposes and fuel offerings like this. In terms of the impact on our MVPD community, it's going to be a fundamentally different product and in fact at least one of our MVPD partners is looking at incorporating this into their broader product as an important complement to their offerings.

So, you should assume that we are really putting all of Viacom's assets against this so not only the content library that I talked about but we're also going to leverage the power of our brands and the audience in activating the audience that they already have leadership positions in and kind of the important categories of kids and family, you can music comedy African-American and urban and also the general entertainment presence that we have in our building with Paramount, Paramount TV and now the Paramount Network and then also we're going to leverage our ad sales force we broadly acknowledged to have the leading advanced ad sale capability in the television landscape.

We have relationships with the world's largest advertisers. So, those are some of the at that when you think about Viacom bringing it's kind of full power to bear on launching something really different in the marketplace.

Probably the last thing that, that's important to just to mention is that although we're able to leverage all of these assets and that's kind of an important tailwind and platform for us to build on. It is going to require some investment. But I do want to really underscore that any investment that we are going to make in this business is already embedded in our guidance.

Robert Bakish

I just want to add one thing to Wade's remarks which is you asked what MVPD, we do not view this as an MVPD substitute product there has been a recent example in the marketplace, where someone had a substitute product and an MVPD, therefore, chose not to carry them anymore we view this very much as MVPD complement product.

And I know that sounds cryptic and we are going to have to leave it at that until we announce it but MVPDs MVMVPDs for that matter are critically important for Viacom we've done a lot of work to build our relationships with them in the last 14 months we continue to do that work, they continue to be very important to us. And so, this is a product that we think works in that ecosystem.


Also, from Deadline:

Viacom CEO Bob Bakish On ‘Cloverfield Paradox’ Sale, OTT Plans And Nickelodeon Leadership

In a newsy earnings call, Viacom CEO Bob Bakish addressed the decision to sell Paramount’s The Cloverfield Paradox to Netflix, where it launched on Super Bowl Sunday, calling it “a bit of a one-off.”

Even so, the studio will “continue to look broadly at opportunities” for “creative thinking and ways to create more value,” he said.

Bakish, who has had the top job for a bit more than a year, covered several other hot topics, though a disclaimer at the top of the call said he would not address the recent news of formal discussions with CBS. The company reported earnings this morning that beat Wall Street estimates but reflected U.S. advertising weakness and an 8% revenue decline. Investors still seemed encouraged, boosting shares 6% to $32.45 within the first hour of trading.

The CEO asserted that there is “no leadership change at Nickelodeon,” despite recent rumblings that Sarah Levy’s expanded duties as COO of the global entertainment group augur a shuffle at the top of the network. Nick’s ratings softness was a notable rough patch in the quarterly results, though Bakish said Nick president Cyma Zarghami and her team are working on a rebound, something “we have done before,” he noted.

While some have viewed the Levy promotion as a sign that Zarghami may not continue after her contract expires in the coming months, Bakish maintained, “the intent is to streamline our structure and break down silos and make sure we are as agile as we can be.”

Like every traditional programmer doing battle with streaming services and mobile and social players of all stripes, Viacom is planning to roll out a direct-to-consumer OTT service. Execs said on the call that it is on track to launch by this fall in the U.S. and will include “tens of thousands of hours” of content, CFO Wade Davis said during the call.

In further articulating the strategy, Bakish made a thinly veiled reference to Starz, whose OTT service has inflamed tensions with distributors such as Altice, which continues a carriage impasse with Starz parent Lionsgate. Compared with such an offering, “We do not view this as a substitute product. We view this as a complement.”

Davis said one MVPD partner, which he did not name, is exploring an integration of the Viacom OTT into its the “This is a product that we think works in that ecosystem.”

While Paramount Pictures in general continues to struggle, Bakish and Davis painted a brighter picture for 2019.

Revenue from Paramount Television, which is producing shows like The Alienist for TNT and Tom Clancy’s Jack Ryan for Amazon will hit $400 million in annual revenue by 2019, Davis projected, with profit margins “at or above” 10%, with 14 shows in the pipeline.

On the film side, the studio has 16 films slated for 2019, half of them from the synergistic shingle Paramount Players, which is the in-house home for properties from across the Viacom fold with big-screen versions. Of the eight releases in 2019, Davis said, six will have budgets of $25 million or less.

While the call emphasized the bright spots for 2019, many analysts noted that it is only February of 2018 and some of them maintain skepticism about Viacom’s near-term prospects.

“The question of the day, for the stock, is whether anybody will care, given M&A expectations,” wrote Todd Juenger of Sanford Bernstein. “The market should care. Even in a re-merger scenario, the performance of the asset determines the relative price paid. And should heavily inform expectations about performance going forward (and the ability of CBS, or anybody else, to improve it).”

Doug Creutz of Cowen pointed to “steep declines in Viacom’s audience in recent years (at least according to current measurement techniques), the overall deteriorating value proposition of networks, and ongoing problems at Paramount.” While the companies recent focus on six core cable network brands is a positive step, he added, “execution on strategy remains very important, and the overall secular problems facing TV in general appear amplified in Viacom’s case due to the youth of their audience.”

Even if a deal is consummated to rejoin CBS, Creutz wrote, “we are not sure this implies a significant premium for Viacom shareholders due to the shared ownership of the two companies.”


Also, from Variety:

Viacom Q1 Revenue Falls, but CEO Projects Better Performance Ahead

Viacom said net income in its first fiscal quarter increased despite revenue shortfalls at both its film and TV operations, as the results of cost controls and the recent federal tax cut boosted its bottom line.

Viacom reported earnings from continuing operations of $535 million, or $1.33 a share, compared with $396 million, or $1 a share, in the year-earlier period.

The New York owner of MTV, Nickelodeon and the Paramount movie studio said revenue fell 7.6% to $3.07 billion, compared with $3.32 billion in the year-earlier period. The chief factor in the drop appears to be a reduction in the fees the company collects from U.S. cable and satellite distributors.

During a call with investors Thursday, Viacom executives projected narrowing losses in affiliate revenue and growth in advertising revenue later in the year. during the year. said Bob Bakish, Viacom’s CEO. “We do see a clear path” to organic growth, he said.

Viacom has charted a turnaround strategy, working to improve engagement with its many properties as digital media use erodes traditional TV viewership and moviegoing. Viacom said it expected advertising sales to continue to grow quarter over quarter, with a “return to growth” anticipated in its fourth quarter. The company also said better results at its film operations were “within sight” and that it was placing emphasis on its fiscal 2019 slate. Viacom’s board has formed a committee to explore a potential merger with CBS. During a call with investors on Thursday, Viacom said it would not comment further on that effort.

The company faced headwinds in its two chief lines of business, cable television and filmed entertainment.

Viacom’s cable-TV networks saw operating income fall 7%, to $913 million. Ad revenue rose 1% to $1.31 billion, but revenue from affiliate fees dipped 4%, to $1.09 billion. U.S. ad revenue fell 5%, owing to lower linear viewership. The company recently launched the Paramount Network, a cable-TV operation designed to feature high-end series and movies. MTV, Viacom’s flagship network, saw ratings increase.

Viacom’s filmed-entertainment operations saw its operating losses narrow to $130 million from $180 million. Overall revenue fell 28% to $544 million. Viacom has been working to turn around its Paramount operations under a new management team.

The company has also been working to diversity its holdings, acquiring the VidCon conference and the WhoSay influencer marketing agency.

Bakish declined to offer specifics on Cyma Zarghami’s status at Nickelodeon. The company recently gave Sarah Levy, an executive who oversees business development, research and several other functions across the company’s cable networks, oversight of those things at BET and Nickelodeon, prompting some speculation about longtime Nickelodeon leader Zarghani, whose contract is said to be nearing the end of its term. “There has been no change in leadership at Nickelodeon,” he said.

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