Viacom's U.S. Revenue Lags Amid Declines in Cable Subscribers--2nd Update

By Keach Hagey and Allison Prang Features Dow Jones Newswires

Viacom Inc. said ratings gains at its core TV networks helped it halt a yearslong slide in domestic advertising revenue in the most recent quarter. But the good news was overshadowed by the company's expectation for declines in distribution revenue to continue through the next fiscal year.

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Thanks to a 6% increase in ratings across six core channels including MTV, BET and Nickelodeon, advertising revenue was flat in the U.S. in the quarter, beating analysts' expectations.

However, Viacom shares declined 4.5% in late morning trading on a grim outlook for the fees the company's cable channels receive from pay-TV distributors.

Domestic affiliate revenue declined 3% to $948 million in the fiscal fourth quarter, in line with analysts' estimates, reflecting subscriber declines, the impact of Charter Communications Inc.'s temporary relegation of several of Viacom's channels to more expensive tiers and a strategic decision to stop licensing content to subscription video services like Netflix for now.

On a call with analysts, Viacom Chief Financial Officer Wade Davis said he expected domestic affiliate revenues "will show high single-digit [percentage] declines" in the first half of fiscal 2018 and "mid-single-digit [percentage] decline" for the second half, before returning to growth.

The decline showed how Viacom is being pinched by consolidation among pay-TV distributors, who pay lower rates to carry Viacom's channels when the distributors are bigger. On Wednesday, Viacom announced it had reached a new agreement with Charter Communications, which acquired Time Warner Cable last year. On the call, Viacom Chief Executive Bob Bakish said the deal Viacom completed with Charter was "in line with other large distributors."

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"I anticipate that this is part of a stabilization process," he said. "And as we move forward, we leave that in our taillights."

While Viacom's eight most popular networks will be available on Spectrum's base package, customers seeking more channels will have to watch them in more expensive package tiers.

The companies also agreed that Viacom -- which also owns Spike, VH1 and Comedy Central -- would make original content for Charter's Spectrum subscribers.

Media networks division revenue rose 3% to $2.55 billion, as the company reported double-digit percentage gains in world-wide advertising.

Filmed entertainment rose 2% to $789 million, but domestic revenues declined by 11%.

Revenue from licensing was up 30%, which Viacom said benefited from more money coming in from Paramount Television productions as well as film-licensing arrangements. Theatrical revenue and home entertainment revenue fell 43% and 5%, respectively.

For the fourth quarter, Viacom reported a profit of $674 million, or $1.67 per share, up 167% from a year ago. Excluding gains on asset sales and a tax benefit, Viacom's adjusted profit rose 14% to $310 million, or 77 cents a share. Analysts polled by FactSet expected Viacom to earn a profit of 86 cents a share.

Revenue rose 3% to $3.32 billion, ahead of analysts' estimates of $3.23 billion.

Write to Keach Hagey at keach.hagey@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

November 16, 2017 12:11 ET (17:11 GMT)