Viacom Suffers 32% Decline in Q2 Profit

NEW YORK Viacom today reported a 32 percent decline in second-quarter profit, as an unstable advertising market continued to a erode performance at the conglomerate’s media networks division.

For the three-month period ended June 30, Viacom posted net income of $277 million (or 46 cents a share), down from $406 million (or 64 cents a share) in the second quarter of 2008. Total revenue decreased 14 percent to $3.3 billion.

The media networks unit, which includes the cable networks MTV, VH1, Comedy Central, Spike TV and Nickelodeon, saw revenue decline 8 percent to $1.97 million, on a 6 percent drop in domestic advertising dollars. Worldwide ad sales fell 8 percent.

In the lead-up to Viacom’s Q2 earnings announcement, analysts were expecting some stabilization on the ad sales front. In Q1 ’09, Viacom’s domestic ad sales haul declined by 9 percent, and most analysts were looking for slight improvement on that score, anticipating a decline of 8 percent. By that measure, Viacom’s sequential improvement of 3 percent suggested that a turning point in the ad sales marketplace might have been reached.

As the ad business showed faint signs of life, the second part of the dual-revenue stream helped contain some of the damage, as global affiliate revenue grew 9 percent.

By way of announcing Viacom’s Q2 performance, president and CEO Philippe Dauman (shown above) said the company would “continue to manage costs aggressively and make changes in the business that will better position Viacom for growth.” He also cited the improving advertising climate and improvement on the ratings front.

In terms of viewership trends, the MTV Networks group was actually a mixed bag in Q2. Flagship net MTV fell 14 percent in prime time, averaging 778,000 total viewers, while its share of viewers 18-34 fell 13 percent to 406,000. Comedy Central declined 9 percent to 973,000 viewers, of which 355,000 were members of the 18-34 demo, representing a year-over-year decline of 16 percent, while Spike TV dropped precipitously, averaging 1.01 million viewers, down 27 percent from Q2 ’08.

Meanwhile, VH1 showed further signs of growth, gaining 11 percent in prime with an average delivery of 774,000 viewers. The network boosted its standing among the 18-34 crowd by 10 percent during the quarter, drawing 326,000 members of the demo in the period. As was the case in the previous quarter, BET continued to skyrocket, averaging 859,000 viewers in prime, an increase of 44 percent, per Nielsen ratings data. Significantly, the quarter marked the first time that BET out-delivered its sibling music nets in prime.

In total-day, Nickelodeon retained the crown, averaging 2.15 million viewers in the quarter, off just 2 percent versus the year-ago period.

Viacom indicated that it had not paid off any outstanding debt in the quarter, as that figure remained at the same level as it was at the close of the first three months of 2009 ($7.37 billion). At the same time, the company’s cash balance dropped to $250 million, from $259 million, a sequential drop of 4 percent.

In a statement included with the company’s financials, executive chairman Sumner Redstone indicated that he continued to have faith in Dauman, assuring investors that Viacom “has the right vision to manage through this challenging climate while we position ourselves for future growth.”