Viacom's Revenue Rises but Disappoints -- Update

By Michael Calia and Keach Hagey 

Viacom Inc. said its media networks and filmed entertainment divisions propelled revenue growth in its most recent quarter.

The media conglomerate's top line fell below analysts' expectations, but its profit narrowly beat them.

Viacom, whose cable properties include MTV and Nickelodeon, has struggled with declining ratings, so it is seeking to boost the percentage of advertising sales that don't depend on traditional ratings from Nielsen.

Viacom's Nickelodeon group is planning to launch a direct-to-consumer subscription service in March, Viacom CEO Philippe Dauman announced during a call with analysts, promising more details at the company's upfront presentation to advertisers this spring.

"We believe this innovative service, which will have a distinct brand and will target the fast-growing mobile market, will be very attractive for parents and children," Mr. Dauman said.

The announcement comes on the heels of announcements of direct-to-consumer subscription services from HBO and CBS in recent months, aimed at the roughly 10 million broadband-only homes that don't subscribe to pay television. The pay-TV bundle has begun to fray at the edges in recent years as cord cutting and so-called cord shaving--or slimming down to smaller, cheaper pay-TV packages--has begun to shrink the reach of the biggest channels.

The media networks division's revenue rose about 4% to $2.65 billion due to growth in affiliate fees and advertising revenue. Domestic advertising revenue fell 6% as ratings fell, while world-wide advertising revenues grew 3%.

The company's filmed entertainment division reported revenue growth of 6% to $720 million as "Teenage Mutant Ninja Turtles" continued to perform well, while "Interstellar" also benefited Viacom's results.

Overall, the company reported earnings of $500 million, down from $547 million a year earlier. Per-share earnings were flat at $1.20, reflecting fewer shares outstanding in the period. Excluding certain items, earnings were $1.29 a share.

Revenue improved 4.6% to $3.34 billion.

Analysts had projected per-share earnings of $1.28 and $3.41 billion in revenue.

Viacom has also sought to expand more overseas to mitigate the effects of a crowded U.S. market. The company is in the process of completing a deal with Reliance Industries Ltd. of India that will give it 50% ownership of five entertainment channels in the country.

The company earlier this month extended Dauman's contract through 2018. The CEO, who has held the role since 2006, was paid $44.3 million in the company's fiscal year ended Sept. 30, a 19% raise over the prior year's figure.

Write to Michael Calia at [e-mail] and Keach Hagey at [e-mail]

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