By Keach Hagey and Joshua Jamerson
Viacom Inc., in the midst of exploring a possible merger with CBS Corp., on Wednesday reported its profit plunged 71% in the latest quarter, hurt by continued soft performance at its networks and a weaker showing at the box office.
On an earnings call with analysts Wednesday, the company's incoming acting chief executive, Bob Bakish, said he has been charged with running Viacom as an independent company, even as it evaluates the possibility of the merger.
He will have his work cut out for him.
In the fiscal fourth quarter ended in September, Viacom's media networks revenue declined 11% to $2.48 billion due to declines in affiliate and advertising revenues.
Domestic affiliate revenues decreased 19%, primarily because the company made what Chief Financial Officer Wade Davis called a "strategic decision to reduce the amount of programming" the company sold to subscription video on demand services. Domestic advertising revenue was down 8%, due to lower ratings and a decision to reduce ad loads.
Revenue in the filmed entertainment division declined 24% to $774 million, as theatrical revenues fell 55% on a lower showing at the box office compared with the prior year's quarter.
Mr. Bakish said he plans to bring lessons from the international division that he spent the last decade running, including a tight focus on a small number of channels, to the job he will take over from interim Viacom CEO Tom Dooley on Nov. 15.
"I believe a lot of our successful international approach can be brought home to the domestic market," Mr. Bakish said on the conference call, adding that he planned to focus on turning around MTV, Comedy Central and the Paramount film and television studio.
Over all, Viacom posted a profit of $254 million, or 64 cents a share, compared with $884 million, or $2.21 a share, in the prior year's quarter. Excluding items, Viacom earned 69 cents a share. The company had forecast adjusted earnings in a range of 65 cents to 70 cents.
Revenue slipped 15% to $3.23 billion; analysts had expected revenue of $3.3 billion.
Mr. Dooley declined to give an update on the merger exploration process, except to say that its board's special committee is continuing to work with its advisers to "explore the merits of a combination with CBS."
Last week, CBS CEO Leslie Moonves said a decision on whether to reunite with Viacom was "still in the very early stages." CBS reportedprofit grew 12% in the latest quarter, thanks to continuing growth in fees from pay-TV distributors.
Looking forward, Mr. Dooley predicted that Viacom's advertising performance during the current quarter would improve by 5% over the fourth quarter's year-over-year decline, due to a strong advertising marketplace in the December quarter. And the company expects to see domestic affiliate growth in the "low single digits," even accounting for an expected 3% decline in subscribers.
Viacom's class B shares were up 1.3% in early afternoon trading.
Mr. Bakish pointed to his record at the international division, which he said just had its best year ever, as an example of how he would approach running the broader company.
Key to that success, he said, has been what he called "focus" on a core group of six channels: MTV, Nickelodeon, Nick Jr., Comedy Central, Paramount Channel and Spike. "We are investing to grow these brands whilemaintaining a lean, powerful portfolio that will be attractive to both pay-TV and emerging distributors," he said of the international division.
In the U.S., Viacom owns about two dozen channels. When asked what he thought about shutting down some of the smaller ones, he responded that the top six networks get between 80% and 85% of all the revenues from pay-TV distributors. "So even if you were to look at a scenario where you were to thin the portfolio a bit, the vast, vast majority of economics would be maintained," he said.
On Tuesday, Sony Corp. said its PlayStation Vue streaming TV service will stop carrying all of Viacom's channels to "continue to offer the most compelling value to our fans." Mr. Dooley, asked about it on the call, said Viacom was in an "ongoing negotiation" with Sony, adding "we are highly confident and comfortable that Viacom's channels will be on the successful [pay-TV] platforms in the future."
Writeto Keach Hagey at firstname.lastname@example.org and Joshua Jamerson at email@example.com
(END) Dow Jones Newswires
November 09, 2016 13:33 ET (18:33 GMT)
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