Viacom Plans Direct-to-Consumer Service for Its Cable Channels -- 2nd Update

By Keach Hagey and Austen Hufford 

Viacom Inc. said Thursday it plans to launch an ad-supported direct-to-consumer product by September that will offer content from across its portfolio, including cable channels such as MTV and Comedy Central.

Viacom executives, who had only hinted vaguely at such plans, provided details about the service, still in development, during a conference call to discuss earnings for the December quarter.

The content on the new service will include thousands of hours of programming Viacom has purposefully chosen not to license to online-video services.

"It's going to be significant, and it's going to also be differentiated from what's in the marketplace today," said Viacom Chief Financial Officer Wade Davis, adding that it was only possible because "we kind of built and husbanded [our] library to be able to use for our own strategic purposes."

The quarterly earnings report reflected a company still very much in the midst of a difficult turnaround. Viacom reported a deeper-than-expected revenue decline as its television networks in the U.S., hurt by customers dropping cable TV, saw less advertising and subscription revenue. Cost cuts and growth in international markets helped partially offset those declines.

Despite the challenges, Mr. Davis hit some bright notes in the earnings outlook, saying that subscription revenue would decline "at the low end of mid-single digits" in percentage terms for the fiscal year ending in September, instead of the earlier projection of simply a mid-single-digit decline. That is partly because of better cable TV-carriage contracts.

The company said it expected advertising revenue to return to growth in the fourth quarter, and overall revenue growth to resume in the next fiscal year.

Shares in Viacom were up 9% in early afternoon trading.

Investors are watching for a potential merger between Viacom and CBS Corp, a deal that would reunite the two big pieces of Sumner Redstone's media empire. Last week the companies disclosed that their boards had formed a special committee to evaluate a deal.

Viacom said profit in the December quarter was boosted by the enactment of the new tax law. For its first quarter, Viacom reported a profit of $537 million, or $1.33 a share, up from $396 million, or $1 a share, a year earlier. Excluding the tax benefit and other charges, Viacom posted an adjusted profit of $1.03 a share, beating analysts' estimate of 94 cents a share.

Revenue fell 7.6% to $3.07 billion, below analysts' estimates of $3.14 billion.

Revenue at the media networks unit that houses Viacom's cable TV channels fell 1% overall to $2.56 billion. U.S. advertising revenue decreased 5% to $937 million, due to lower TV ratings, partially offset by higher pricing and digital ad growth. Domestic subscription revenue decreased 8% to $907 million.A bright spot was a 13% increase in international revenue, excluding a favorable impact from foreign exchange.

Write to Keach Hagey at [e-mail] and Austen Hufford at [e-mail]

(END) Dow Jones Newswires

February 08, 2018 13:38 ET (18:38 GMT)

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