Viacom Inc., the entertainment conglomerate that has come under investor scrutiny in recent months, said net income in its first fiscal quarter fell 10.2% as the company faced a dip in ad revenue at its U.S. cable networks and in revenue from its movie operations.
The New York owner of MTV, Comedy Central and the Paramount movie studio said net income in the period fell to $470 million, or $1.13 a share, compared with $538 million, or $1.20 a share, in the year-earlier period. Excluding certain items, earnings per share fell to $1.18, compared with $1.29.
The company’s top executive, Philippe Dauman, said performance reflected Viacom’s recent operational struggles, which had continued from last year: “2015 was a challenging year operationally as we redesigned ourselves and adapted to significant industry disruption. Our first fiscal quarter of 2016 reflected these challenges,” Dauman said in a statement. “However, our revitalized organization and our investments in content, technology and strategic innovation are now beginning to bear fruit. Although our industry continues to face headwinds, we expect our positive momentum to continue and build throughout the year.”
Dauman was named executive chairman of Viacom last week, replacing controlling shareholder Sumner Redstone in that role. The company has grappled in recent months with ratings declines at several of its flagship cable networks, though it has seen improvements at one of its linchpins, kids-outlet Nickelodeon, as well as BET and VH1, and has had to deal with lackluster results from Paramount.
As Dauman has pursued new content and advertising deals tied to digital media, he has faced investor disapproval as well as boardroom drama. Sumner Redstone’s daughter, Shari Redstone, recently stated that she did not think Dauman should have been named chairman, citing his involvement with her father’s estate and a trust that would govern Redstone holdings upon the 92-year-old founder’s demise. The elder Redstone is 92 years old and his involvement with both Viacom and a sibling media concern, CBS Corp., has lessened in recent months.
Sumner Redstone controls 80% of both CBS and Viacom through holdings in National Amusements Inc., a private movie-exhibition company. The media mogul has been in the news recently owing to court proceedings related to a former girlfriend with whom he has cut relations. During that time, however, his health has been questioned, and investors have sought more transparency from both Viacom and CBS. CBS Corp. CEO Leslie Moonves was named chairman of that company last week, replacing the elder Redstone.
During a presentation to investors Tuesday, Dauman said he was fully committed to raising Viacom’s stock price. “No one should doubt my resolve or the resolve of our management team,” he said, expressing his concern that the company’s outlook had been “distorted and obscured by naysayers, self-interested critics and publicity seekers.” The executive said he was working on behalf of all Viacom shareholders, not just Shari Redstone.
Viacom said revenue in its first fiscal quarter fell 6% to $3.15 billion. Revenue from its cable networks fell 3%, to $2.57 billion as U.S. domestic advertising revenues fell 4%, as pricing due to ratings declines. Worldwide advertising revenues decreased 3%, due to impact related to foreign exchange rates.
Revenue from filmed entertainment fell 15% to $612 million, due to declines in revenue form both theatrical and home releases. Viacom said it faced challenging comparisons with the year-earlier period, when “Teenage Mutant Ninja Turtles” was in release in theaters and “Transformers: Age of Extinction” was made available for consumption in homes.
Todd Juenger, an analyst for Bernstein Research, suggested in a note Tuesday that the results underscored the challenges Viacom has ahead of it, as it seeks to take its youth-skewing cable networks into a new era. “Longer term, we continue to hold the view that the old business of serving kids/teens with linear TV networks is doomed,” he said, “and the new business of serving kids/teens with on-demand, digitally delivered entertainment is unlikely to be won by Viacom.”