News

Karmazin Eyes Viacom Acquisitions

10/27/2002 7:00 PM Eastern

Viacom Inc. president Mel Karmazin said he's confident that the media conglomerate — a potential buyer for stakes in both Comedy Central and Court TV — will be making acquisitions in the next 12 months. But he wouldn't elaborate on what those purchases might be.

During a conference call on Viacom's third-quarter results last Thursday, Karmazin was also bullish on the recovering advertising market, as the giant company's overall ad revenue was up 14 percent.

In addition, he was upbeat about the one weak link in the company's cable stable, namely VH1, which is in the midst of a turnaround effort.

"VH1's ratings are up 20 percent from last year and getting better," Karmazin told analysts. "And what's really interesting is that in spite of that rating problem that the network had, which is over, our [profit] margin in the third quarter was 40 percent."

In the third quarter, revenue for Viacom's cable networks increased 13 percent, to $1.24 billion from $1.1 billion a year ago. Operating income for cable was up 41 percent, to $510.8 million from $363.1 million. Third-quarter EBITDA — or earnings before interest, taxes, depreciation and amortization costs — for Viacom's cable stable increased to $556.8 million from $470.2 million, a gain of 18 percent.

Many net gains

Those third-quarter revenue and operating-income gains were driven by double-digit ad sales growth at MTV: Music Television, Nickelodeon, TV Land, TNN: The National Network and Black Entertainment Television, as well as double-digit increases in affiliate fees, according to Viacom officials.

Also in the third quarter, subscriptions for Viacom's Showtime premium service were up 9 percent, or by 2.7 million homes, bringing its distribution to 32.3 million.

As a whole, Viacom's revenue in the third quarter was up 10 percent, to $6.3 billion from $5.7 billion.

Viacom and AOL Time Warner Inc. jointly own Comedy Central, and sources have said that Viacom is in preliminary talks about acquiring AOL's stake. Viacom is also reportedly interested in Court TV, which is owned by AOL Time Warner and Liberty Media Corp. AOL has said it is exploring selling non-core assets, including its stakes in Comedy Central and Court TV.

In discussing Viacom's third-quarter results, Karmazin said, "I'm confident that we will be able to make accretive
acquisitions in the next 12 months as well."

But when asked for more specifics on potential acquisition targets, Karmazin said, "It's nothing we're going to talk about, obviously."

He added: "We have said many times that our interest is in expanding in our core competency. We're interested in businesses that will grow. And we're interested in business that we can buy at an accretive
price on a free-cash-flow basis. So stay tuned."

Other ratings bumps

In addition to discussing VH1's ratings gains, Karmazin pointed out that CMT: Country Music Television's ratings are up 29 percent, and that TNN's audience has now grown for the 25th consecutive month. He also said that TNN has seen a ratings bump now that it is airing off-network episodes of CBS's CSI: Crime Scene Investigation .

"CSI
on TNN is up 62 percent for the time period," Karmazin said.

From now until year-end, Viacom's Paramount Pictures will release three theatrical films that are related to Viacom cable networks, according to Karmazin. The first is Jackass,
based on the MTV series.
"Jackass, which I'm convinced Johnny Knoxville will win an Academy Award for," said Karmazin, tongue apparently in cheek.

Also on tap are Star Trek: Nemesis
and The Wild Thornberrys,
based on the Nick hit. Karmazin noted that the Star Trek
franchise is an important one to both TNN and broadcast network UPN.

Karmazin made brief reference to the financial woes of scandal-ridden Adelphia Communications Corp., which owes programmers such as MTV millions of dollars in back-due license fees.

"We did not lower our guidance because of Adelphia," Karmazin said. "We just sold more spots."

For the first nine months this year, revenue for Viacom's cable properties hit $3.38 billion, up 8 percent from $3.14 billion in the prior-year period.

October
November