Viacom dinged by weak DVD sales

TV channel profits boosted by pop fare

Despite strong advertising sales, Viacom said Thursday that weak DVD performance in the quarter ending Dec. 31 hurt its profits.

Adjusted net profits fell 11% in the quarter to $620 million on revenue declines of 5% to $3.8 billion.

DVD sales in the quarter faced tough comparisons to the same year-ago period when DVDs of “Star Trek,” “Transformers: Revenge of The Fallen” and “G.I. Joe: The Rise of the Cobra” were released. Even though Paramount had strong box office performances in the quarter from “The Fighter,” “True Grit” and DreamWorks Animation’s “Megamind,” operating profits for the film unit fell 77% in the quarter to $68 million.

The bright spot for Viacom was the performance of its cablers. Revenues were up 6% to $2.4 billion and operating profits rose 7% to $1 billion. CEO Philippe Dauman boasted that MTV had three of the top five rated original cable series in the quarter, with “Jersey Shore,” “Teen Mom” and “16 and Pregnant.” Viacom’s shows “are driving the cultural conversation,” he said.What’s more, he added that BET broke new records with the number one ad-supported sitcom telecast in cable TV history with 7.7 million viewers tuning into the debut of “The Game.”

Much of the success across all the TV properties, Dauman said, can be attributed to robust efforts in researching the demos watching TV. Spending on research has increased 15% in recent years and “informs everything we do,” Dauman said.

Domestic ad revenues were up 10% in the quarter and affiliate fees rose 11%, nearly 80% of that gain attributed to higher prices. The rest came from adding on more subs.

Commenting on Wednesday’s announcement that Viacom had renewed a deal to distribute its shows on Hulu and its subscription service, Hulu Plus, Dauman said the new sub model at Hulu interested him “because it replicated the dual revenue streams” of cable. Viacom had yanked its shows from the service in March when negotiations over a deal broke down.

The latest deal extends “into 2012,” he said. Key to the deal, Dauman added, was being able to have a 21-day window for some of its more popular shows, like “Jersey Shore,” on Hulu Plus.

Dauman also said Viacom was talking to Netflix about providing more shows for streaming on its site.

When asked if the Hulu and Netflix deals were a defensive move in case cord-cutting becomes a real issue, Dauman said he viewed those deals as complementary for viewers of their shows on TV.

Surprisingly, the hot topic of MTV’s racy new show “Skins” did not come up during the Q&A portion of the earnings call.

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