Viacom Suffers Soft Ad Market, Partly Blames Flaws in Audience Ratings

Company Experimenting With Streaming TV Services

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Viacom said its ad sales declined in the United States during the most recent quarter, compared with the period a year earlier, squaring with a generally soft TV market that slowed the summer's upfront negotiations and has even undermined demand for the upcoming Super Bowl on NBC.

Viacom's profit still beat analysts' estimates, buoyed by the latest "Transformers" film and higher fees from cable and satellite companies to carry for networks like MTV and Comedy Central.

Profit excluding some items rose to $1.71 a share, Viacom said Thursday, topping the $1.68 average of estimates compiled by Bloomberg. Revenue grew 9.3% to $3.99 billion in the period ended Sept. 30, topping projections for $3.9 billion.

'Transitional moment'
Viacom CEO Philippe Dauman said on an earnings call that ad sales fell partly because traditional ratings are failing to account for the new ways viewers consume content.

"We are in a transitional moment and existing measurements have not caught up to the marketplace," he said, noting that the company's internet viewership is growing at double-digit rates.

Viacom, which generated 74% of its annual revenue from TV, is also experimenting with delivering programming through planned internet-delivered services. It will provide its channels for Sony Corp.'s planned streaming-video service and has held talks with Dish Network Corp. as well.

Ad sales
Domestic advertising sales fell 5% at Viacom's cable networks, which include BET and Nickelodeon.

Investors sold off major media stocks last week amid signs of weakening advertising revenue. Discovery Communications, another cable programmer, reported 1% growth in U.S. ad sales in the latest quarter, its smallest gain on record, according to Bloomberg Intelligence.

Overall revenue at Viacom's media networks grew 8%, as domestic and worldwide affiliate fees paid by cable operators that carry its channels increased more than 20%.

International ad sales grew 33% following the May purchase of British broadcaster Channel 5. The addition of Channel 5 will increase worldwide ad sales by about ten percent next year, Tom Dooley, the company's chief operating officer, said on the call.

Filmed-entertainment revenue increased 12%.

~ Bloomberg News ~

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