MTV posts highest-rated quarter in almost two years

It seemed unlikely when it first bowed, but MTV’s raunchy “Jersey Shore” may have been the medicine that Viacom was waiting for.

The cable network, the focus of an aggressive revamp after slipping in ratings and relevance in recent years, has posted its highest-rated quarter in almost two years after tinkering with older shows and scaring up some new ones like “Jersey Shore.”

Along with less red ink and lower costs at Paramount, robust ratings at MTV boosted Viacom’s profit by 38% last quarter to $245 million.

One of the biggest reasons for optimism at Viacom is an improving advertising climate. Domestic ad revenue nosed up 1%. Worldwide it grew 3% to $963 million.

Viacom CEO Philippe Dauman was clearly upbeat on the state of advertising heading into next month’s upfront season after a bruising ad downturn that dragged on for the better part of two years.

“The economic climate is growing stronger each day,” he said during a conference call Thursday. “As we prepare for the upfront marketplace, the mood of our clients is increasingly optimistic and marketing budgets are beginning to open up.”

At MTV, ratings grew 10% for the first quarter ended in March and have continued to post double-digit gains in the first four weeks of the quarter, Dauman said.

Back in 2006-07, MTV was doing gangbusters in the 12-34 demo as reality skein “The Hills” was at the apex of pop culture. But the cabler saw that momen tum fade with the exit of the show’s star, Lauren Conrad. Last December, MTV premiered “Jersey Shore” and took an immediate PR hit over the materialism and vapidity of its characters.

But the show turned into a ratings hit, and a second season in production in Miami. MTV is now ranked No. 1 in women 18-34. “Jersey Shore” and two other of its shows, “Teen Mom” and “16 and Pregnant,” are ranked as the top three in the demo.

Overall, Viacom’s revenue dipped 4% to $2.79 billion in the last quarter.

Growth in affiliate and advertising sales was more than offset by lower feature film revenue. This resulted partly from fewer releases as Paramount pared down its sked.

The Media Networks unit, including MTV, VH1, Nickelodeon, Nick at Nite, CMT, Logo, Comedy Central, Spike TV and BET, saw revenue rise 4% to $1.94 billion for the quarter. Operating income grew 9% to $684 million.

Worldwide affiliate revenue jumped 9% to $783 million.

Softer sales of “Rock Band” music vidgames overseas drove worldwide ancillary revenue down by 7% to $195 million. This was offset somewhat by strong U.S. consumer product sales.

Filmed Entertainment led by Paramount saw operating losses narrow to $86 million from $123 million. Revenue fell 18% to $886 million, due in large part to fewer releases.

The company cited six “significant” pictures in the first quarter of 2009 versus three this year. As a result, film expenses fell to $946 million from nearly $1.2 billion.

Theatrical revenue fell 6% to $267 million. Television license fees were down 16% to $259 million.

Home entertainment sales dropped 34% due largely to strong sales in the previous year’s quarter of “Madagascar: Escape 2 Africa.” There was no comparable seller this year, although the current quarter did benefit from sales of “Up in the Air,” “Star Trek,” “Transformers: Revenge of the Fallen” and “G.I. Joe: The Rise of Cobra.”

Paramount opens the summer movie season next weekend with “Iron Man 2,” followed by DreamWorks Animation’s “Shrek Forever After” in 3D and Nickelodeon’s “The Last Airbender.”

Dauman said he did “not see any major acquisitions in our future,” despite Viacom’s steadily improving balance sheet.

The company’s size and the advancing age of its chairman and majority owner Sumner Redstone have also prompted periodic speculation on Wall Street that Viacom itself could become a takeover target. Dauman recently extended his contract with Viacom for five years through December of 2016.

Asked about Viacom’s Epix pay-TV venture with Lionsgate and MGM, Dauman said it “will reach break-even and beyond” in 2011. A recent carriage deal with satcaster Dish Network will expand Epix’s avaibility to about 30 million homes, he noted.

MGM has been up for sale and may restructure. Viacom’s chief financial officer Tom Dooley declined to comment on the Lion’s situation, but said that Viacom and Lionsgate are certainly able to satisfy Epix’s cash needs.

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