First quarter earnings up 33%

Viacom profits zoomed higher last quarter on rollicking sales of music vidgame “Rock Band,” strong cable nets and slimmer losses at Paramount.

CEO Philippe Dauman expects studio results to fire up as the year progresses and said all pics are on track to be completed by June 30, ahead of a possible strike by the Screen Actors’ Guild.

Viacom’s overall profit jumped 33% to $270 million for the first three months of the year. Revenue rose 15% to $3.1 billion.

Wall Street applauded the upbeat numbers, released Friday. This week, the showbiz conglom will be basking in the glow of “Iron Man,” the Marvel-produced, Viacom-distributed pic that trounced the box office over the weekend.

Dauman touted the rest of the summer slate with Steven Spielberg’s “Indiana Jones and the Kingdom of the Crystal Skull” out later this month. During a conference call Friday he called Spielberg “the master.” The chief exec had created a furor last fall when he used the word “immaterial” to describe the potential loss of the famed director from Paramount’s fold.

In March, Dauman said he believes Par will be in business with Spielberg “for a very, very long time to come.” But most industryites expect a parting of ways when Spielberg’s contract is up later this year.

Viacom also disclosed that it would invest no more than $100 million over the life of a premium movie channel it’s creating with MGM and Lionsgate. Viacom will emerge as a significant owner, but not the majority owner, with distribution partners likely to come on board.

Dauman and finance chief Tom Dooley predicted steady growth for the media and entertainment company through 2010, and no dip in ad sales this quarter from last, despite economic woes that have many pundits anticipating a recession.

“Each unit has taken steps to prepare for whatever the economy will bring,” Dauman said.

The current slowdown, he added, doesn’t seem to have hit Viacom’s major advertisers, including motion pictures, quick-service restaurants and games. “All of those categories seem to be, whether you want to call it recession-resistant, slowdown-resistant.”

On the film side, losses narrowed to $63 million from $108 million in red ink in the year-earlier quarter. Revenue rose 12% to $1.15 billion.

“After much hard work, Paramount’s development slate is in a strong position. In addition, we now have new processes in place to shape our slate consistent with our long-term strategy of focusing more on franchises and our MTV, Nickelodeon and BET labels,” Dauman said.

Studio costs were higher with 10 films in production during the quarter, accounting for $200 million in spending, vs. only four pics in production in the year-earlier period.

Execs expect an additional $175 million in incremental worldwide P&A expenses in the current quarter associated with the release of “Iron Man,” “Indiana Jones” and other summer fare including “Kung Fu Panda” from DreamWorks Animation and “Love Guru,” starring Mike Myers.

Theatrical revenues declined 7% to $247 million. That was offset in part by a 22% bump in home entertainment revenue on one-time items including a $29 million payout from Toshiba for Par’s exclusive backing of the HD-DVD. The format lost the DVD war last year to Sony’s Blu-ray. Viacom said homevid revenue would have been down slightly if the payout wasn’t included due to lower catalog sales.

Television license fees grew 10% to $340 million as more titles became available for international pay TV and syndication.

At Media Networks, which includes MTV, VH1, Nickelodeon, Comedy Central, BET and Spike, operating profit grew 15% to $694 million.

Revenue was up 16% to just over $2 billion.

Worldwide ancillary revenues surged 72% in the quarter, driven by wildly successful vidgame “Rock Band.” Viacom has shipped 3 million copies of the game and the toy instruments that go with it, and sold 10 million song downloads since “Rock Band’s” launch last fall.

“This is a major new brand and long-term franchise for Viacom, and we intend to nurture it and grow it in the same way we maximize our television brands,” Dauman said. Viacom is rolling out the game in Europe this month and will launch “Rock Band” for Nintendo’s Wii videogame system in June.

Worldwide ad sales grew 8%, with domestic advertising up 7% in the first quarter. Execs cited a strong scatter market, which increased by double digits over the upfront. Affiliate fees rose 13% on a combination of rate and subscriber increases.

First-quarter ratings were up 5% in total day, with four nets posting double-digit growth. VH1 and Comedy Central — home of multimedia juggernaut “South Park” — had their highest-rated quarters ever and Comedy Central was the top-ranked cable network for young men 18 to 24.

Spike TV’s primetime audience was up 14% vs. last year.

Dauman also noted higher ratings in international territories, including the U.K., Germany and Benelux. The company launched VH1 and Nickelodeon in Denmark and has plans for Nick Arabia and Nick Poland this summer.

As the digital front continues to advance, he said Viacom — like most of its peers — is focused on developing original programming that “migrates, moving comfortably into this online world through dedicated program sites, virtual worlds and casual games.” He cited Nick’s “iCarly,” MTV’s “The Hills” and Comedy Central’s “South Park” as examples of shows that have successfully extended their reach through various media.

Viacom’s net debt stood at $8.6 billion at the end of March. The company also said it had repurchased 10.4 million shares during the quarter for $414 million. It has $2 billion remaining on its current $4 billion share buyback program. Many media companies are engaged in aggressive buybacks to help boost the stock and to take advantage of the low valuations.

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