Viacom Reports 34% Dip in Q1 Profit

Viacom on Thursday reported a 34 percent decline in first-quarter profit, as a moribund advertising market took a bite out of the conglomerate’s media networks division.
For the three-month period ended March 31, Viacom posted $177 million (or 29 cents a share in net earnings), down from $270 million (or 42 cents a share), in the first quarter of 2008. Total revenue decreased 6.8 percent to $2.91 billion.
The media networks unit, which includes the cable networks MTV, VH1, Comedy Central, Spike TV and Nickelodeon, saw revenue decline 7.5 percent on a 9 percent drop in domestic advertising dollars. Worldwide ad sales fell 10.7 percent to $936 million, down from $1.05 billion a year ago.
In a Q&A session with analysts during the latter half of the company’s Q1 earnings call, Viacom president and CEO Philippe Dauman said he has seen encouraging signs in the second-quarter advertising market, which he characterized as “stabilizing.”
“Our customers are starting to feel more confident about a recovery emerging later in the year and into next year,” Dauman said. “We’re seeing strong commitments from advertisers, and we believe that will continue to go forward in the coming months. …We’re feeling considerably better than we felt two or three months ago.”
Dauman added that clients that had reduced ad spend in Q1 were coming back in scatter as they look to regain market share. “We are seeing people returning into the market,” Dauman said. “We’re getting good, stable pricing…and volume, which had been soft, is starting to come back in.”
Affiliate revenue grew 13 percent to $720 million.
In terms of viewership trends, the MTV Networks group was a mixed bag in Q1. Flagship net MTV fell 17 percent in prime time, averaging 859,000 total viewers, while its share of viewers 18-34 fell 17 percent to 431,000. Comedy Central slipped 6 percent to 1.06 million viewers, of which 393,000 were members of the 18-34 demo, representing a year-over-year decline of 20 percent. VH1 was stable, dipping just 2 percent to 856,000 viewers.
Meanwhile, Viacom’s BET showed encouraging momentum in prime, growing its total viewership 20 percent to 755,000. In total-day, Nickelodeon retained the crown, averaging 2.25 million viewers in the quarter, per Nielsen ratings data.
Viacom indicated that its outstanding debt was reduced to $7.37 billion as of the end of the quarter, down from $8 billion as of Dec. 31. At the same time, the company’s cash balance plummeted to $259 million from $792 million, a sequential drop of 67.3 percent.
In an 8-K filing with the Securities Exchange Commission, Viacom executive chairman Sumner Redstone noted that the global economy “continues to present significant challenges for all businesses, including those in the entertainment industry,” before adding that “Viacom is successfully navigating these uncertain waters by taking full advantage of our financial strength to invest in great content and to build on our enduring global brands.”