Viacom Ad Sales Swing Back to Growth

Carriage Fees From Cable and Satellite Companies Rise Much Faster

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Viacom reported better earnings Thursday than analysts had expected, largely because of higher fees from the cable and satellite companies that carry its networks, which include MTV , Nickelodeon, Comedy Central and BET.

'Jersey Shore'
'Jersey Shore' Credit: MTV /Josh Kessler

First-quarter revenue totaled $3.3 billion, up 2% year-over-year. Operating income grew 23%, to $932 million, while net earnings from continuing operations rose 24%, to $535 million.

U.S. ad sales also swung back to growth, if modestly, rising 1% after falling 3% in the fourth quarter. Viacom see signs of a strengthening ad market, CEO Philippe Dauman said during a conference call to discuss the results.

But fees from pay-TV systems were vital for Viacom in the first quarter, given the thin growth in ad sales, said Brett Harriss, analyst with Gabelli & Co., in a telephone interview after the report. "Getting that dual source of revenue is key to their business," he said.

Viacom has chronically underperformed its peers in advertising, according to Paul Sweeney, senior analyst at Bloomberg Industries. "They've had a series of ratings problems, first at MTV and now at Nickelodeon," he said in an interview after the report.

Viacom's media-networks unit, which contributed 92% of operating profit in fiscal 2011, according to data compiled by Bloomberg, had a 15% rise in domestic fees for its cable networks and a 17% rise worldwide during the quarter.

Cost controls also seemed to play a role in the bottom line. Media Networks operating profit climbed 11%, to $893 million, on $2.2 billion in revenue, down 5% from a year earlier. MTV airs "Jersey Shore," while Comedy Central is home to "The Daily Show With Jon Stewart."

Operating profit at the entertainment division, which includes Paramount's film studio, almost tripled, to $115 million though revenue slipped nearly 5%, to roughly $1.2 billion as theatrical and TV license revenue declined. Worldwide theatrical revenue fell 19%, according to the company, which said its slate of releases was not as widely distributed as its movies a year earlier and didn't perform as well.

Releases in the first quarter included "The Devil Inside" and "Jeff , Who Lives at Home," compared with "Rango" and "Justin Bieber: Never Say Never" in first-quarter 2011.

-- Bloomberg News --

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