Viacom Inc., the embattled media conglomerate that controls Nickelodeon and MTV, said its third-quarter profit tumbled 26.9% due to heavier investment in programming and declines in ad revenue at the company’s cable networks, even as it beat Wall Street expectations for the period. The results are likely to fuel an ongoing dispute between the company’s management, led by Philippe Dauman, and its controlling shareholders, led by Sumner Redstone and his daughter, Shari, who have called for new leadership at the company.
Viacom said net income in its third fiscal quarter came to $432 million, or $1.09 a share, compared with $591 million, or $1.47 a share, in the year-earlier period. Revenue rose 2%, to more than $3.1 billion, compared with $3.06 billion in the year-earlier quarter. Adjusted for pretax gains, earnings came to $1.05 per share. The company’s filmed-entertainment unit showed better operating results, while its TV networks suffered.
The company said revenue at its TV networks fell 3% as U.S. ad revenue fell 4% and ratings at some of its networks continued to soften. International ad revenue, however, rose 13%. Distribution revenue rose 10% in the U.S., and 9% overseas. Revenue from film operations rose 30%, owing to box office for “Turtles” and licensing monies from subscription-video-on-demand.
The results “show the impact of a breakdown in key revenue drivers,” said Michael Nathanson, an independent media-industry analyst, in a Thursday research note.
Viacom warned investors in June that the difficult performance by its TV operations and the latest “Teenage Mutant Ninja Turtles” movie release would result in adjusted diluted earnings per share of between $1.00 to $1.05.
Viacom has been mired in a bruising legal conflict with National Amusements Inc., the movie-exhibition company controlled by the Redstone family. Sumner and Shari Redstone have expressed a a desire to remove Philippe Dauman, the company’s executive chairman and CEO, as a trustee to the elder Redstone and as leader of Viacom, and the executive has fought back in court. Dauman has charged that the elder Redstone is in frail health and not able to make competent decisions about the corporation. During a conference call with investors and analysts, Dauman said the legal wrangling is “somewhat of a distraction,” particularly to its efforts to sell a stake in the company’s Paramount film unit to an investor. Viacom had hoped to complete such a deal last month, he said, but continues to hold talks with potential suitors.
The ongoing wrangling has created an “overhang” on Viacom shares, Dauman acknowledged.
In a statement Thursday, National Amusements said the company’s performance demonstrated the need for new leadership. “ In recent years, the company’s senior management has overseen a steep erosion of revenue growth, earnings, operating performance, financial capacity and shareholder returns—with Viacom ranking at or near the very bottom of industry peers across many of these critical metrics. At the same time, there has been a significant exodus of creative and business talent,” the statement said. ” Viacom’s third quarter performance does little if anything to change these adverse trends.”
Viacom is “looking to the future and executing on the significant growth opportunities we see around the world,” the company said in a statement later in the day. “It is unfortunate that one of our directors feels the need to try to damage the company in response to losses in the courtroom.”
Dauman said the company was counting on ratings improvements at networks like VH1, Nickelodeon and Nick Jr. as well as healthy sales in the recently completed TV-upfront market to help spark momentum. Dauman said the company was completing more sales based on data initiatives with advertisers and had notched volume increases in the mid-to-high-single digit percentage range. “Our brands are what drive our business,” he said.