PHILADELPHIA — Viacom/CBS’ earnings plunged in the latest quarter due to hefty one-time charges, with the newly merged company posting otherwise stellar numbers as its TV, radio and outdoor businesses powered ahead. CEO Mel Karmazin depicted a renewed and red-hot CBS whose stodgy demos are trending younger and younger thanks to “Survivor.”
Karmazin said the integration of the two media giants, which formally tied the knot in May, is just about complete. “People you run into in the halls don’t know whether they came from CBS or Viacom. It’s one company.”
As for “Survivor,” “Saying ’18-34 demographic’ is something we’ve never said before” at CBS, Karmazin told investors and reporters during a conference call Thursday. The island athletics placed a halo over the net’s other programming, he added, noting that the average age of “Everybody Loves Raymond” is now three years younger than it was. David Letterman and Craig Kilborn are getting a lift, and CBS can promote the heck out of its fall lineup.
CBS chief “Leslie Moonves is a happy camper,” Karmazin said.
The final three-hour “Survivor” special Aug. 23 is pulling in more than $600,000 for available commercial spots, “and that’s not something you’ve ever heard from CBS in the summer,” he said. But the network hasn’t been able to fully capitalize adwise on the series’ smash success this season since much of the inventory was pre-sold during last year’s upfront.
That will all change when “Survivor” moves to the Australian Outback and starts up again in January, right after the Super Bowl. The net will also seek to maximize revenue from the Internet, which has helped fuel the “Survivor” craze.
TV revs up
Television pro forma revenue rose 7% to $1.8 billion for the second quarter from the year before, and EBITDA (earnings before interest, taxes, depreciation and amortization) jumped 48% to $347 million. The unit includes UPN (to be renamed Paramount Network), the CBS and Par TV stations, TV production and syndication.
Pro forma figures assume that the merger and other acquisitions occurred at the beginning of both periods.
On a reported (not pro forma) basis, Viacom’s total revenue rose 64% to $4.9 billion with a net loss of $495 million. That includes nearly $700 million in pretax charges related to the CBS merger. It also includes part of a $754 million pretax hit for new accounting changes in film and TV spread out over the first half of the year. The new rules, which lowered cash flow by $15 million in film and by $10 million in TV, according to chief financial officer Fred Reynolds, have pushed a number of big entertainment companies into the red for the latest quarter.
Without the charges, Viacom earned $77 million.
Entertainment, including Paramount Pictures, Famous Players movie theaters, Famous Music Publishing and Paramount Parks, still had an up quarter, with revenues rising 15% to $758 million and cash flow up 16% to $114 million. Viacom cited theatrical and exhibition revenues from Par’s “Rules of Engagement,” “Shaft” and “Mission: Impossible 2.”
Cable nets perform
At cable networks, including MTV, VH1, Nickelodeon, Nick at Nite, TV Land, TNN, CMT and Showtime, pro forma revenues rose 16% to $995 million and cash flow increased 22% to $353 million. Viacom chairman Sumner Redstone said the addition of World Wrestling Federation programming this fall will “catapult TNN into the ranks of the top-rated cable networks.”
Viacom wrested the WWF away from USA Networks after a court battle earlier this year. USA is appealing.
Infinity Broadcasting, Viacom’s powerhouse radio and outdoor advertising division, saw pro forma revenues rise 22% to $975 million and cash flow grow 24% to $458 million. During the second quarter of 2000, Infinity completed the acquisition of two radio stations in San Antonio and of French outdoor company Giraudy. Infinity also bought Societa Manifesti & Affissioni, an Italian outdoor media sales company.
Redstone lauded Infinity, calling it Viacom’s biggest contributor to earnings and its fastest-growing business. Viacom owns approximately 64% of Infinity, which is publicly traded.
Karmazin called the shares too cheap and said he’d certainly consider taking the company private if the market refuses to value it properly.
Blockbuster revs up
He said Viacom won’t sell off the rest of another publicly traded division, Blockbuster, as planned, unless that company’s shares perk up as well.
Blockbuster revenue rose 17% to $1.2 billion and cash flow grew 8% to $113 million. Blockbuster Video ended the quarter with 7,376 stores — up by 718 from the year before. Viacom owns about 82% of the company.
As video-on-demand rolls out, Blockbuster chairman John Antioco “has his work cut out for him to come up with a business model that will work with all of the studios,” said Karmazin, who recently joined Blockbuster’s board.
Publishing was a sore spot due to the timing of major releases in the Pocket Books and trade divisions, the company said. Revenue fell 9% to $133 million and cash flow plunged 50% to $9 million.
Revenue surged and losses mounted at online businesses, including the MTVi Group, CBS.com and iWon.com, due to continued investment. Revenue rose to $24 million from $5.2 million and losses widened to $67 million from $6 million. That unit won’t be spun off, as planned, until the market turns a friendlier eye on Internet companies, Karmazin said.