"We're not prepared to gamble huge sums of money before we realize a good return on a new business," said Viacom Exec VP and general counsel Philippe Dauman. "But when we are dealing with proven franchises and known rollout costs and formulas, we are minimizing our risk."
The opportunity to more aggressively market Paramount's film libraries abroad-available after Viacom acquired the company earlier this summer-through the launch of new cable movie services will vastly increase the company's foreign revenue stream. Even Showtime and The Movie Channel may be given new life abroad as premium services, executives said.
Viacom expects international markets will be its largest source of revenue by the end of the decade. Much of that will be generated by its MTV Networks, which will continue to build a network of solo and partnered operations reaching more than 280 million viewers in homes from Europe to Japan and Latin America.
Viacom expects to launch an MTV service in India this fall and a Mandarin service in China early in 1995.
Although Viacom will spend an estimated $15 million to launch and initially operate MTV in Latin America, the operation could become cash flow positive by 1995, growing at least 20 percent annually, said David Londoner, an analyst at Wertheim Schroder.
"Viacom historically has realized only about 8% of its overall revenues from overseas. For the combined company, that number is more than 20%," said Frank Biondi, Viacom president-CEO.
"My guess is that will about double to more than 40% in less than four years. We expect at least 25% to 30% growth rates in our foreign revenues," Mr. Biondi added.
Meanwhile, Viacom's leap into the complicated and uncertain world of new multimedia has been cautious but promising.
Viacom will spend $17 million to develop 17 cartridges and CD-ROM game pieces next year compared with $9 million this year.
"I think this kind of new tech application could be a $100 million business for us next year," said Edward Horowitz, senior VP-technology and chairman-CEO of new media and interactive TV.
Perhaps the most valuable ongoing investment is a $6 million cable system upgrade in Castro Valley, Calif., that has become the trial site for interactive cable and telecommunication services with such partners as AT&T, Nynex Corp. and Microsoft Corp.
Ironically, one of the company's most significant new allies on the new multimedia front promises to be Simon & Schuster, the $2 billion publishing arm of Paramount that already has taken its first giant steps into electronic publishing.
Among the most promising applications are the interactive CD-ROM of its "Star Trek" starship manual and interactive "Beavis and Butt-head" games due out at the end of the year.
Ms. Mermigas is financial editor with Electronic Media.