Viacom's U.S. Revenue Lags Amid Declines in Cable Subscribers--Update
November 16 2017 - 12:26PM
Dow Jones News
By Keach Hagey and Allison Prang
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.
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."
"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)
Copyright (c) 2017 Dow Jones & Company, Inc.
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