(Rewrites with executive and analyst comments; adds share
activity)

By Jennifer Saba

NEW YORK (Reuters) - Viacom Inc's quarterly
revenue missed Wall Street expectations due to a sharp drop in
DVD sales, while gains in advertising were not as strong as
reported by other media conglomerates.

Shares of Viacom were down 1.4 percent Thursday
afternoon, in contrast to Time Warner Inc and News Corp
whose shares rose after their quarterly results beat
expectations Wednesday.

"They haven't put up the numbers in Q2 that some other
programmers have put up," said Matthew Harrigan, an analyst
with Wunderlich Securities.

Viacom's revenue for the quarter ending in June was
essentially flat at $3.3 billion, compared with analysts'
average forecast of $3.4 billion according to Thomson Reuters
I/B/E/S.

Viacom, owner of the MTV and Comedy Central cable networks
and the Paramount film studio, said domestic advertising
revenue rose 4 percent. That was less than the 11 percent
increase reported by News Corp for its domestic cable network,
and less than the 14 percent reported by Time Warner's cable
networks.

Harrigan said Viacom is working against weak pricing from
last year due to ratings declines at its cable networks, though
they are are now experiencing a comeback with hit shows like
"Jersey Shore," "Teen Mom" and "Tosh.0."

Viacom Chief Executive Philippe Dauman said he expects
advertising to increase in the next quarter. "We are expecting
to see further sequential improvement in domestic ad sale
growth," he told a conference call with Wall Street analysts.

Dauman cited improvements in advertising sales to
auto-makers, the electronics and insurance industries and
consumer product companies like Procter & Gamble Co. "We
see a lot more progress going forward," he said.

He also said advertisers were "scrambling" to buy ads for
"Jersey Shore."

"It's encouraging that ad revenue continues to march," said
BTIG analyst Richard Greenfield. "Viacom is in the very early
stages of an ad recovery."

IRON MAN HELPS FILM STUDIO

Viacom reported earnings of $418 million, or 68 cents per
share, from continuing operations, compared with $277 million,
or 46 cents per share, a year earlier. Analysts on average had
forecast 66 cents per share.

Profit was helped by a roughly 7 percent drop in expenses.

At Viacom's film entertainment division, which houses
Paramount, revenues fell 10 percent to $1.25 billion on weak
home entertainment sales -- mainly DVDs -- which dropped 43
percent.

The company said it released three motion pictures in the
latest quarter including Marvel Studios' "Iron Man 2" and
DreamWorks Animation's "Shrek Forever After", compared with six
a year earlier. It also received lower revenue from third party
distribution arrangements.

Executives with Viacom said they expect home entertainment
sales to remain soft.

Shares of Viacom have outperformed rivals in the
year-to-date period. The stock has advanced almost 14 percent,
compared with an 11 percent increase in Time Warner shares.
News Corp is down 0.4 percent

Christopher Marangi, an analyst with Gabelli & Co who has a
buy rating on Viacom, said the company is disciplined with its
cash. "It's a pure play cable network company that has good
secular growth trends behind it," he said.
(Reporting by Jennifer Saba; Editing by Lisa Von Ahn and Tim
Dobbyn)