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Viacom management today joined other sector giants in highlighting improving advertising market trends while remaining more cautious than some peers.
The company reported a higher fourth-quarter profit thanks to an improved bottom line at its film unit and TV ad declines that were less severe than some had feared.
“The tone is clearly more positive” in the ad market, Viacom president and CEO Philippe Dauman said on a conference call. But he also emphasized: “We are not out of the economic woods yet,” especially given high U.S. unemployment and weaker economic trends overseas.
First-quarter ad trends should be up over the fourth quarter, Dauman said without mentioning the likely comparison with the year-ago quarter. He also said scatter ad market prices for Viacom have been up in the double-digit percentage range.
“There’s a steady drumbeat,” added chairman and controlling shareholder Sumner Redstone in discussing signs of continuing economic and ad improvements.
The owner of the Paramount film studio and cable networks such as MTV, VH-1, BET and Nickelodeon posted an adjusted profit from continuing operations of $663 million, up 43 percent from the year-ago period.
Adjusted operating income rose 24 percent to $1.2 billion.
Revenue declined 3 percent to $4.1 billion.
In the latest quarter, Viacom took a $60 million non-cash impairment charge related to the value of broadcast licenses held by an unnamed broadcaster, in which Hispanic-oriented cable network MTV Tr3s holds a 32 percent stake. It acquired the stake to expand its reach to Hispanic audiences in Los Angeles and other Southwest markets.
Revenue for the full-year 2009 decreased 7 percent to $13.6 billion as growth in affiliate revenues was offset by declines in feature film, ancillary and advertising revenue.
Adjusted operating income rose 1 percent for the year to $3 billion driven by the filmed segment. Adjusted earnings from continuing operations grew 5 percent to $1.6 billion in 2009.
Redstone lauded Viacom’s 2009 results as “extraordinary” and said the firm performed “extremely well” despite the global recession.
“Our disciplined and content-focused strategy helped Viacom close out the year with a stronger balance sheet, a streamlined cost structure and a reinvigorated creative mandate across the company,” said Dauman. “Despite a global recession that impacted all aspects of our business, the multiple revenue streams of our cable networks helped temper the impact of an industry-wide downturn in advertising and retail, and also allowed us to continue to invest in new programming to build our brands.”
He lauded the improved profitability at Paramount and recent ratings momentum at MTV and other networks.
Viacom’s media networks unit, which saw lower ad momentum last year, had revenue fall 6 percent in the latest quarter to $2.3 billion and 5 percent for the full year to $8.3 billion. Operating profit rose 3 percent in the quarter to $921 million, but fell 3 percent for the year to $3 billion.
Film unit revenue fell 1 percent in the fourth quarter and 9 percent for the year to $1.8 billion and $5.5 billion, respectively. Film operating profit jumped from $84 million to $298 million in the fourth quarter and from $88 million to $236 million for the full year.
The unit had difficult year-ago theatrical comparisons in the final quarter of 2009, but home entertainment revenue rose 12 percent thanks to Transformers 2: Revenge of the Fallen, Star Trek and G.I. Joe: The Rise of Cobra. TV license fees were also up.
Other highlights from Thursday’s earnings call:
• Redstone lauded the turnaround at Paramount, saying, “We are making hits and making money.” Dauman said his team “far exceeded my expectations” with Thursday’s set of financials.
Asked by an analyst why he thinks Paramount will maintain its momentum, Dauman said Viacom now has “a structurally sounder studio.” He highlighted its focus on fewer releases with an emphasis on tent poles and branded films.
• CFO Tom Dooley said Viacom has closed a deal to take full control of and consolidate the DreamWorks live-action library in a $400 million deal, which closed Monday, with its previous financial partners.
• Dooley predicted a first-quarter loss in the film unit due to a lack of major DVD releases and costs related to the upcoming release of DW Animation’s How to Train Your Dragon, which Paramount distributes.
• Dooley said Viacom has invested $82 million in premium TV service Epix since its launch and received $110 million in payments from it for its films. Dauman said the company still expects Epix to be operating cash flow positive for next year.
• Dauman said that after a recent U.S. distribution deal for Hindi-language network Colors, Viacom will look to bring more of its international channels to the U.S.
• Dauman said Viacom is looking to cut costs at the Rock Band gaming business, including possible help from music labels on the cost of license fees. The firm is also evaluating future distribution for Rock Band at a time when partner Electronic Arts has been looking to reduce its number of distribution deals.
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