Viacom Reports Third-Quarter Earnings Down 37%

Ad Revenue Also Down, Primarily at Cable Networks

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NEW YORK ( -- As CEO Philippe Dauman preemptively alerted his investors several weeks ago, a sluggish ad economy stunted Viacom's third-quarter earnings.
Viacom CEO Philippe Dauman
Viacom CEO Philippe Dauman

The media giant today reported net earnings of $401 million, a 37% drop from the year-ago period, when it reported earnings of $641 million. The company said revenue rose 4% to $3.4 billion, from $3.2 billion a year ago.

But softness in the ad market caused a 2% decrease in worldwide ad revenue for the company, particularly at cable networks such as MTV, VH1 and BET, all of which posted ratings declines for the third quarter. Operating income for the media networks division declined 4% due to the ad softness and higher production costs of original programming. Viacom's future ad growth is also uncertain with the departure of ad sales chief Hank Close at the end of the year.

"The economic environment and ongoing uncertainty have posed new challenges for the media industry, and Viacom has not been immune to the impact of these forces," Mr. Dauman told investors. "Over the past two years, however, we have been judiciously managing our finances and operations. Thanks to these efforts, we believe that we will be well positioned both in the near term and as the global economy regains its footing over time."

Filmed entertainment, which includes Paramount Pictures, declined 15% for the quarter, reflecting the lack of a tentpole summer blockbuster, unlike last year when the studio released "Transformers."

The fate of Viacom as a company has also been the subject of rampant speculation of late, with Executive Chairman Sumner Redstone recently forced to sell $233 million of Viacom and CBS stock from his firm, National Amusements, to cover $1.6 billion in loans he has taken out to finance National Amusements and its declining investments in flagging video game company Midway Games, the 85-year-old was nothing but bullish in his comments to investors.

"Let me assure you Viacom as a pure-play content company is not only well-positioned but also extremely well prepared in these uncertain times. Philippe and his team have really done an outstanding job of pursuing a smart and disciplined path," he said. "While no one could've foreseen the current situation I assure no other management team has done a better job in positioning their company ... to weather the storm."
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