Viacom Earnings Fall on Advertising Drop, Weaker Film Slate

Philippe Dauman Big Data Summit Variety
Chelsea Lauren/Variety/REX Shutterstock

Viacom was stung by the lack of a “Transformers: Age of Extinction”-sized hit and weighed down by falling ad revenue at its cable channels, as earnings at the media conglomerate dropped during the fiscal fourth quarter.

Revenues declined 5% to $3.79 billion over the three-month period ending in September, while adjusted earnings per share fell from $1.71 to $1.54. Net income did improve, spiking 21% to $884 million.

Those results missed Wall Street’s projections. Analysts had expected the company to post adjusted earnings of $1.55 per share on revenue of $3.88 billion.

Viacom’s stock has been dragged down in recent months by lower advertising results and softening ratings at its suite of cable channels. To that end, the quarterly results were disappointing. Domestic advertising revenues declined 7% while worldwide advertising revenues decreased 1%. Overall revenues in the unit grew 5% to $2.79 billion, which the company attributed to a 15% increase in domestic affiliate fees and a 10% rise internationally in rates.

Viacom’s film studio, Paramount, was a source of weakness. Although “Mission: Impossible — Rogue Nation” was successful, it could not match the results of the “Transformers” sequel released during the prior year period. The company also released “Terminator Genisys,” which flopped domestically, but did strong business overseas. Revenues for the division declined 24% to $1.03 billion. Theatrical revenues fell 20%, while home entertainment revenues plummeted 54%.

The company has drastically reduced the number of films it releases annually, but has said it plans to release 15 films in 2016 — a four film increase. The studio is in “active development” on a fifth “Transformers” movie and has lined up projects such as a World War II thriller from director Robert Zemeckis and Brad Pitt, as well as “Downsizing” from Matt Damon and director Alexander Payne.

“We had too few movies,” Dauman said on a call with analysts after earnings were announced. “We’re very optimistic about where Paramount can go. … We believe Paramount will come back and come back strongly in the years to come.”

In a statement accompanying the results, Viacom CEO Philippe Dauman continued to press his case that the audience for the company’s cable channels, which include MTV and Comedy Central, aren’t being properly measured. Companies such as Nielsen fail to track viewership on streaming and on-demand services, he argues.

“We are making great progress in tackling industry-wide inefficiencies in audience measurement, while expanding our audience reach with landmark distribution agreements,” Dauman said in a statement.

In recent months, Viacom properties such as Nickelodeon and VH1 have been clawing back in the ratings, but there are concerns about the future of other channels, such as MTV.

The company has also unveiled Vantage, a data-driven program that combs through consumer information to help advertisers reach specific niches. On the earnings call, Dauman said Viacom has 11 advertisers using Vantage and expects that number will triple by 2016’s television upfront.

Viacom reports its earnings at a time of greater scrutiny for the media sector. Entertainment companies were battered earlier this year, bruised by investor fears that viewers were fleeing cable television for cheaper streaming alternatives. Dauman pushed back against the pessimism about the longterm health of the sector.

“Those with a more long term view than is currently en vogue will be richly rewarded,” he said at one point, adding that “technology is our friend and it is good to be on the content side of the business.”

Shares of Viacom were up 1.96% at $49.35 as markets closed on Wednesday. It lost those gains in pre-market trading, falling 1.93% to $48.40.

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  1. Derek Wright says:

    This article discusses the recent issues that the advertising giant Viacom has been struggling this fiscal year. This stock prices and overall earnings have fallen dramatically. This company heavily relies on the cable industry and marketing movies. One source of their downfall is the lack of success for one of their largest clients, Paramount Pictures. A regularly blockbuster producing firm has not had their huge blockbuster film this year that Viacom could truly market on their cable networks and produce ad revenue. Paramounts movies this year of Mission Impossible: Rogue Nation and Terminator Genesis did not perform of market as well as projected. These movies did not live up to the standard that Paramount normally produces like they did last year with the Transformer sequel. This shows how in the advertising industry these ad companies rely heavily on the success of the firms that they are marketing for. Some has to be said that the ad company has some control over the success of the products through their marketing, which the article also mentioned that the overall success of the ads that Viacom has been producing have performed poorly this year. Clearly this company needs to make a change if they want to maintain the current market share they control.

  2. EYES ON THE MOUNTAINTOP says:

    They’ll turn things around, but wow, what a painful year 2015 must have been for them. There was one bad business decision after another. Terminator Genisys being released on the wrong holiday weekend, Paranormal Activity 6 being released in so few theaters, a minimalist film production schedule, etc. all led to a weak company with falling profits. Getting back to where they were means big expectations from Paramount’s animation division, strong numbers from its franchises, a stronger slate of films in release instead of going three to four months at a time without anything in theaters, and a commitment to working with the biggest and brightest and best stars, writers, producers, directors, and entertainment marketing people in the industry.

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