Cable Sees Ad Revenues up 17%; Scatter Market Strong for Broadcast

By Published on .

NEW YORK ( -- Viacom, set to split into two divisions before the end of the year, reported third-quarter profits of $708.5 million, with ad revenues up 17% in the cable networks unit and 7% in the TV unit.

Operating income for the quarter at the cable networks -- one of the units that will be run as part of a high-growth company led by Tom Freston, co-chief operating officer and co-president of Viacom -- was up 11% to $682 million compared with $613.4 million in the previous year’s quarter.

At the TV division, which includes broadcast networks CBS and UPN, the stations group and Paramount Television, ad revenues were up by 7% but overall operating income dropped 19% from $465.7 million to $376 million for the quarter, compared with the year-ago quarter. The tough comparisons were largely due to the strong initial TV syndication sales of CBS hit drama CSI.

Strong scatter market
Commenting on the scatter market as part of a conference call this morning with analysts, Leslie Moonves, co-chief operating officer and co-president of Viacom and chairman of CBS, noted the network was No. 1 in the 18- to 49-year-old demographic for the past three weeks in regularly scheduled programming, and over the course of the current season had been able to take advantage of having sold less inventory in the upfront than the previous year. “We’re taking the lion’s share of the scatter market,” he said, adding that CBS was also winning in every time period on Thursday nights, an important night for advertisers, especially Hollywood studios.

The upfront refers to the springtime period when TV networks look to sell almost 80% of their advertising inventory. The scatter market is when networks sell the remaining ad space at a premium to marketers who need to run ads as the need arises.

Mr. Freston, meanwhile, said Viacom's cable properties -- including BET and MTV Networks, which comprises MTV, Nickelodeon, Comedy Central and Spike TV -- were seeing double-digit growth in both third- and fourth-quarter scatter markets, with rates up 20% over upfront pricing. Though he said advertisers were coming late into the market, he added that the "money is there.”

Expansion for CBS Corp.
When asked about possible areas of expansion for the future CBS-led entity, which will be named CBS Corp., Mr. Moonves said cable acquisitions might make sense, though not in areas already occupied by MTV Networks. “We’re looking at everything. ... Cable is a very good business and we like it.”

CBS Corp. will also include the Infinity radio division. In the call with analysts, Mr. Moonves played down the loss of radio star Howard Stern, who is defecting to Sirius Satellite Radio, saying that while ad revenues might be down, so would the cost of having Mr. Stern on the air. That in turn would aid overall margins in radio.

Several non-recurring items in the quarter brought down operating expenses by almost $58 million. Hurricanes Katrina and Rita cost Viacom $7 million in revenues and $15 million in expenses. Mr. Moonves explained the hurricanes had affected the outdoor media business. Viacom also recorded expenses of $17 million associated with the company split, though Chief Financial Officer Mike Dolan told analysts on the call that Viacom was also completing a company-wide examination of costs not just at the corporate level but at every division throughout the media giant.

Most Popular
In this article: