Viacom's Domestic Ad Revenue Declines -- 2nd Update

By Austen Hufford and Joe Flint Features Dow Jones Newswires

Viacom Inc. beat revenue and profit forecasts in its latest quarter, but saw a decline in domestic advertising revenue.

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In recent weeks, Viacom had entered talks to acquire Scripps Networks Interactive Inc., but eventually left the process, paving the way for Discovery Communications Inc. to strike a $11.9 billion deal for the cable TV programmer.

On a call with analysts to discuss its results, Viacom Chief Executive Robert Bakish declined to discuss the Scripps talks but said the company will "look broadly at potential partnerships and M&A opportunities." Asked about the possibility of reuniting with CBS Corp., which like Viacom is controlled by National Amusements Inc., Mr. Bakish said, "that's really the decision of the board not by myself as the CEO. Late last year National Amusements abandoned its plans to explore recombining CBS and Viacom.

In its third quarter, domestic advertising revenues declined 2% to $955 million from a year earlier, as higher pricing was offset by a reduction in the amount of commercials on Viacom networks. International advertising grew 14% to $280 million as the company bought one of Argentina's main free-to-air channels for $345 million last year.

Viacom Chief Financial Officer Wade Davis said if the company's networks had maintained the previous level of commercials in its content domestic advertising would have been up 1%. The number of commercials on Viacom networks however had become a sore point with viewers and Mr. Bakish said on the call that, "our ad loads, in my opinion, were unhealthily high."

In its media networks unit, revenue grew 2% to $2.56 billion, with affiliate revenue increasing 4% and total advertising revenue up 2%. In June, the company's MTV channel saw year-over-year ratings growth for the first time since 2011.

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MTV, Mr. Bakish said, "is really starting to gain traction."

On the distribution front, Mr. Bakish again reiterated that he thinks Viacom is well-positioned to offer its channels to subscribers as part of a smaller package of entertainment networks for consumers tired of paying for channels they don't watch. "The ship has sailed on everyone having a $100 bundle," he said.

Viacom's most immediate distribution challenge is a contractual dispute it is in with Charter Communications Inc., which recently moved Viacom networks including MTV, Nickelodeon and Comedy Central off its most popular offering of channels to a more expensive package with fewer subscribers. Charter's move last May caused Viacom stock to tumble.

Mr. Bakish played down the possibility of filing suit against Charter, saying he would rather not take customers to court. Mr. Davis though interjected that the company "will reserve the right to enforce" what it believes its distribution deal with Charter allows.

Revenue at its filmed entertainment unit rose 36% to $847 million, driven by the latest "Transformers" movie. The company also sought to soften speculation that one of the studio's financial partners -- Chinese film company Huahua -- is on shaky ground. "We've been in business with Huahua for a long time, everything's fine," Mr. Davis said.

The media giant has been working to reduce its hefty debt load. At the end of June, total debt outstanding was $11.17 billion, compared with $11.91 billion at the end of last September.

In all for the quarter, Viacom's profit rose to $683 million, or $1.70 a share, compared with $432 million, or $1.09 a share, in the prior-year quarter. Excluding certain items, Viacom earned $1.17 a share.

Revenue increased 8.3% to $3.36 billion. Analysts polled by Thomson Reuters had expected $3.29 billion in revenue and adjusted earnings per share of $1.05.

Viacom shares rose 0.3% to $41.30 in after-hours trading.

Write to Austen Hufford at austen.hufford@wsj.com and Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

August 03, 2017 19:05 ET (23:05 GMT)