Viacom net profits down 65%

Revenue rises 3% to $3.95 billion

Paramount’s boffo year at the box office couldn’t save it from red ink or offset a sharp 65% drop in net profit at parent Viacom resulting from a scuffle over videogame “Rock Band.”

Par’s theatrical revenue surged 37% to $570 million for the December quarter.

Advertising revenue dipped 3% at Viacom’s giant cable biz, but CEO Philippe Dauman said ads appear to be perking up in the current quarter. “I am encouraged by the tone out there in the market,” he told shareholders on a conference call. Wall Streeters had expected a mixed quarter, and Viacom’s stock was off about 17¢ at $52.78 in midday trading.

Net profit fell to $212 million on hefty one-time charge to cover an arbitration award won by the original shareholders of “Rock Band” creator Harmonix Music Systems.

Without that $379 million hit, income from continuing operations was down 5% at $591 million.

Revenue nosed up 3% to $3.95 billion for the company’s fiscal first quarter ended in December.

Paramount, which is celebrating its 100th year in the biz, swung to a $31 million loss from a $68 million profit the year before. Losses stemmed mostly from a tough comparison: The year-ago period got a bump from the sale of distribution rights to two upcoming Marvel pics, “The Avengers” and “Iron Man 3.”

Par’s ancillary revenue fell 46% to $92 million.

Studio was also squeezed in the quarter from the timing of P&A spending on “Mission Impossible – Ghost Protocol,” which opened in mid-December.

Total film revenue rose 4% to 1.6 billion.

Worldwide home entertainment revenue fell 6% to $600 million.

The studio started 2012 on a high note with low-cost horror pic “The Devil Inside.”

With Fox, Paramount is re-releasing “Titanic” in 3D in April, followed by “The Dictator,” with Sacha Baron Cohen, in May. There’s “Paranormal Activity,” “G.I. Joe” and “Star Trek” sequels and potential new franchise “World War Z,” with Brad Pitt, later on this year.

Viacom’s cable networks led by MTV grew profits by 7% to $1.13 billion.

Revenue rose 3% to about $2.5 billion as a soft advertising market — down 3% to $3.95 billion — was offset in part by strong growth in affiliate fees.

Domestic and worldwide affiliate fees each increased 16%, reflecting higher revenues from digital distribution arrangements and rates hikes.

Advertising revenue decreased 3% on both a domestic and worldwide basis on lower ratings and softness in the U.S. ad market in the second half of the quarter.

Dauman said softness in the scatter market and ratings that started after Thanksgiving seem to be letting up. “Scatter pricing is holding up well, in the mid-single digits (with) healthy double-digit over upfront pricing,” he said, “and a number of buyers are returning to the market.”

He’s standing firm that a surprising dip in Nickelodeon ratings last fall was caused in large part by some discrepancy in Nielsen measurements. It has nothing to do with reruns being available on Netflix, Dauman said. But he noted other factors like “some of our competitors laid in a lot more new shows.”