You will be redirected back to your article in seconds

Viacom Posts Earnings Gains Despite Paramount Loss, Affiliate Revenue Drop

Viacom delivered an improved financial performance for its fiscal fourth quarter despite a drop in cable affiliate revenue and a $59 million hit on the Paramount side from the collapse of its film financing deal with China’s Huahua.

Viacom topped analysts expectations in deliver revenue of $3.3 billion for the quarter ended Sept. 30, up 3% from the year-ago quarter. Adjusted earnings per share of 77 cents, up 12%, was lower than the consensus forecast of 86 cents, which Viacom chalked up to the impact of the slate financing loss. Without that $59 million write off, EPS would have come in at 88 cents per share, Viacom said.

In reporting earnings for the company’s fiscal fourth quarter and full year, Viacom CEO Bob Bakish emphasized the improvements to the balance sheet compared to this time last year, just before he took the reins as CEO. The company’s debt load has been chopped by 15%, or $2 billion, since February and now stands at $10.5 billion. Revenue is up 6% and free cash flow is up 26% on a full-year basis.

For the quarter, revenue at the media networks wing was up 3% to $2.55 billion, driven by a 6% gain in advertising revenue ($1.22 billion). Adjusted operating income for the unit was down 8% to $693 million, a drop attributed to higher programming expenses.

Domestic affiliate revenue — a key measure of health for Hollywood’s largest conglomerates — was down 3% to $948 million. Affiliate revenue on the international side grew 12% to $200 million. The drop in domestic affiliate revenue coming on the heels of several big carriage renewal pacts in the past year is a sign of changing times and lower carriage fees for Viacom’s cablers. Under Bakish, the company has shifted its focus to strengthening its six flagship cablers — including MTV, Comedy Central and Nickelodeon — rather than spreading resources across its entire 25-channel domestic portfolio.

At Paramount, revenue for the quarter inched up 2% to $789 million, driven by growth in licensing revenues even as theatrical revenue plunged 43% to $115 million. Domestic revenues fell 11% to $317 million in the quarter, while international coin grew 13% to $472 million.

The film unit posted an operating loss of $43 million for the quarter and a loss of $280 million for the full year. Both of those marked double-digit improvements over the nearly $500 million in red ink posted in 2016.

For the fiscal year, Viacom took a pre-tax charge of $381 million that incorporated $237 million of restructuring charges and$144 million of programming charges as it scrapped various film and TV projects amid a broader strategy shift at the film studio and across its cable networks. It recognized a gain of $285 million on net proceeds of $593 million from the sale of its 49.8% stake in Epix to MGM earlier this year.

During a conference call with analysts on Thursday, Bakish touted the company’s progress in emerging from the turmoil of 2016, when former CEO Philippe Dauman waged a legal battle with controlling shareholders Sumner Redstone and Viacom vice chairman Shari Redstone. After making a host of management changes across the company and implementing broad shifts in its strategic and operational focus, the embattled half of the Redstone empire is looking to fiscal 2019 for meaningful growth for the cable division and Paramount Pictures.

“If 2017 was about stabilization at Viacom, 2018 is all about acceleration,” Bakish said.

Bakish and Viacom CFO Wade Davis acknowledged that some of Viacom’s key metrics, including affiliate revenue, will decline further in the first half of 2018 — by high single digits in the first half of the year and by a lesser degree in the second half of the fiscal year. But the two vowed that affiliate revenue would return to growth in 2019, after the company has lapped a full year of the rate resets for the cablers and escalators built into he new deals begin to kick in.

Davis also said they are expecting “hundreds of millions of dollars of improvement” in Paramount’s operating income for fiscal 2018. The Paramount Television division saw its revenue triple during fiscal 2017, thanks to the success and renewals for series including USA Network’s “Shooter,” Netflix’s “13 Reasons Why” and Epix’s “Berlin Station.”

Bakish emphasized that Viacom has proactively set new deals or extensions with MVPDs covering more than 50% of the total subscriber base for its domestic channels.

“This was a real accomplishment at a critical time for Viacom,” he said, adding that the company had to “address some friction in our (distributor) relationships that had been built up over time.”

Viacom’s new deals with distributors such as Charter Communications and Altice USA call for the sides to work together on data and advanced advertising initiatives that have the promise to pay off big down the line, Bakish said.

The guidance about continued weakness in Viacom’s domestic affiliate revenue prospects for fiscal 2018 sent shares tumbling 9% at the start of trading Thursday, although they recovered more than half of that loss by midday. Shares were down 3.7% at closing to $23.69.

More Biz

  • Ventana Sur Rocks with Sales, Mass

    Ventana Sur Rocks with Sales, Mass Attendance, Structural Growth

    BUENOS AIRES — Celebrating its 10th anniversary with a huge hike in attendance to over 4,000 accredited delegates, the 2018 Ventana Sur will go down in history on multiple counts: Sales and pick-ups on movies which combined social comment and entertainment value, increasingly the new foreign-language movie standard; new sections, led by a Proyecta co-production [...]

  • Jennifer Lawrence Harvey Weinstein

    Harvey Weinstein Bragged of Sex With Jennifer Lawrence, Lawsuit Claims

    Harvey Weinstein was hit with a lawsuit Friday from an actress who claims he forcibly performed oral sex on her, repeatedly masturbated in front of her, and threatened to harm her career if she objected. According to the suit, Weinstein pushed her to the ground during a meeting in his office in 2013. He then [...]

  • Times Up Hollywood

    Time's Up Entertainment Announces New Industry Mentoring Initiative

    Time’s Up Entertainment, an affiliate of the Time’s Up coalition of women across industries working to improve workplace safety, has announced the “Who’s in the Room” industry mentoring initiative. The program’s goal is to increase the presence of people of color from diverse backgrounds in the entertainment industry’s executive ranks. Funded by a $500,000 grant from [...]

  • Tom Cruise as Ethan Hunt in

    Paramount Inks Deal for Theme Park in South Korea

    Paramount Pictures has announced a deal to install a studio-branded theme park in an entertainment resort being developed in South Korea. The agreement was struck between Paramount and Mohegan Gaming & Entertainment, which owns the Inspire Integrated Entertainment Resort in the South Korean city of Incheon. Mohegan has invested KRW 2.8 trillion ($2.4 billion) in [...]

  • Davan Maharaj Mel Gibson

    L.A. Times Publisher's Lawyer Was Accused of Extorting Mel Gibson

    The attorney who negotiated a $2.5 million exit package for L.A. Times publisher Davan Maharaj was previously accused of using secret recordings to extort actor Mel Gibson. Surreptitious recordings also figure in the Maharaj case. NPR reported on Wednesday that Maharaj taped Tronc chairman Michael Ferro. According to the report, Ferro was heard on the [...]

  • 'Blurred Lines' Suit Ends With $5

    'Blurred Lines' Suit Ends With $5 Million Judgement Against Robin Thicke, Pharrell Williams

    After five years, the legal battle over the copyright of the Robin Thicke’s 2013 hit “Blurred Lines” has ended, with Marvin Gaye’s family being awarded a final judgment of nearly $5 million against the song’s primary writers, Robin Thicke and Pharrell Williams, according to CNN and other reports. The pair were accused of copyright infringement [...]

More From Our Brands

Access exclusive content