Viacom Stresses New Hits, Web Views as U.S. Ad Sales Slump

'Saying Hello to New, More Engaging, More Live

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Anna Kendrick on 'Lip Sync Battle,' a new hit on Viacom's Spike
Anna Kendrick on 'Lip Sync Battle,' a new hit on Viacom's Spike

U.S. ad sales at Viacom declined 5% in the first quarter because of ratings declines, the media company controlled by billionaire Sumner Redstone said Thursday. Overall second-quarter earnings beat analysts' estimates.

Total revenue shrank 3% to $3.08 billion in the period ended March 31, missing the $3.25 billion average of 27 analysts' estimates compiled by Bloomberg. Profit excluding items rose to $1.16 a share, Viacom said Wednesday in a statement, topping the average estimate of $1.06. Global ad revenue grew 4%, aided by the acquisition last fall of the U.K.'s Channel 5.

Viacom, which owns networks such as Comedy Central and MTV, recorded $784 million in costs to write down shows such as "CSI" and "30 Rock" and pay for staff reductions. The writedown of programming was an acknowledgment that Viacom's loss of domestic viewers extended beyond shortfalls in audience measurement, a subject of frequent griping by TV programmers who see viewers going mobile.

The company has restructured its leadership and is investing in more expensive scripted programming to boost audience ratings that have declined this year.

"We're becoming less reliant on old, not-so-relevant programming we acquired years ago," CEO Philippe Dauman said on a conference call. "We said goodbye to that, and we're saying hello to new, more engaging, more live."

On the conference call, Mr. Dauman called out the growing popularity of selected new TV shows on all platforms. Viewership of Comedy Central's "Broad City," for example, grew 10-fold on digital sites and 55% on cable video-on- demand.

'Lip Sync'
"Lip Sync Battle," a new hit on Spike, will play a central role in the repositioning of that network as a place for high-quality programming with big stars and great productions values, Mr. Dauman said.

"Our programming thrives on digital and video-on-demand platforms," Dauman said. Viacom's programming accounts for 26% of all on-demand viewing via pay-TV providers, he said.

The company is counting on such shows to reverse falling ratings and declining domestic ad sales, which shrank for the third straight quarter.

"The 5 percent decline in domestic advertising is a concern for investors," said Paul Sweeney, an analyst at Bloomberg Intelligence. "Viacom is battling ratings weakness across several of its networks. Until it fixes its ratings, advertising will be under pressure."

International sales
International continues to be an area of growth for New York-based Viacom. The 80 percent growth in international ad sales, attributable in large part to the acquisition of British broadcaster Channel 5, countered shrinking domestic revenue.

Paramount Pictures, the company's filmed entertainment unit, suffered a decline in revenue and operating income.

Including the charge for programming writeoffs, Viacom reported a net loss of $53 million, or 13 cents a share, for the second quarter, compared with profit of $502 million, or $1.13 a share, a year earlier.

~ Bloomberg News ~

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