After a long slide, advertising revenues at Viacom’s media network turned positive, but the operating income at the networks slipped in the quarter and the company’s overall earnings were also lower because of lower movie box office results and viewer home video titles.
Second-quarter net earnings fell 18% to $478 million, or 96 cents a share, from $585 million or $1.07 a year ago. The earnings were slightly better than Wall Street expectations.
Revenue fell 6% to $3.1 billion.
Viacom CEO Philippe Dauman had earlier predicted that ad revenues would turn up this quarter. He said the improvement came mainly because ratings at Nickelodeon had improved after a deep decline. The kids network has revamped its programming management and is in the process of launching a wave of new series.
MTV, which is trying to recover from the departure of its hit Jersey Shore, is planning to run more series and run new seasons of those series more frequently, Dauman said.
Overall, he said the ad market is also showing improving demand, particular in the categories where Viacom is strong, including toys, video games, autos and quick serve restaurants. Pricing has also be strong in the scatter market, with scatter over scatter pricing up 20%, and scatter prices versus the upfront showing double digit gains.
Dauman said he expected ad revenues to show further improvement in the current quarter.
Since Netflix announced that it would not be renewing its current deal to stream Viacom library titles, analysts have been concerned about how that will affect Viacom’s affiliate revenues. Dauman said that for this year Viacom was on target to achieve its target of 10% affiliate growth this year. He said Viacom is in talks with streaming VOD companies including Netflix about future deals and that it would consider licensing some content on an exclusive basis, if that maximizes revenues. Long terms, he said that digital revenue would remain a growth area for the company.
Dauman also said that the company would continue its stock repurchase plan and that its directors would be reviewing the company’s dividend at its next board meeting.
Operating income for Viacom’s media networks unit fell 2% to $873 million in the quarter. Revenues rose 2% to $2.2 billion. Domestic and worldwide dvertising revenues both increased 2%. Domestic affiliate revenues increased 3%. Excluding digital distribution, domestic affiliate revenue growth was up at a low double-digit rate, the company said.
Analyst John Janedis of UBS Securities said advertising results and media networks earnings were better than forecast. “We expect the combination of better ad growth and likelihood of a positive tone around the SVOD business 9despite the recent comment from Netflix) will drive the stock higher today,” he said in a research note.