Viacom's Dauman: Ad Market Stabilizing

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Viacom CEO Philippe Dauman told analysts on a conference call Thursday that the sharp declines in the advertising market are beginning to level off, but stopped short of predicting an imminent recovery.
Viacom continued to see ad sales declines in the first quarter -- domestic ad sales fell 9% and overall revenue dipped 7% to $2.9 billion. While that is a big difference compared to some of its peers -- Time Warner Inc. said Wednesday that its domestic ad sales were down about 2% in the quarter -- Dauman said that he is encouraged by what is shaping up to be a robust kids' upfront and consistent scatter market pricing.

"We have seen signs in the last several weeks that the economy may be stabilizing," Dauman said. "We are by no means out of the woods yet, but I am confident in our ability to manage through the times ahead."

Dauman said that beginning two years ago, Viacom set the stage for weathering any rough patches -- increasing operating efficiency, strengthening its balance sheet, growing its international business and exercising discipline in acquisitions and capital allocation.

"As a result, we are very well-positioned and as the environment begins to improve, we will have the invigorated brands and financial strength to pursue new growth opportunities," Dauman said.

When pressed during the call just what he meant by stable -- as in, should analysts expect 9% declines for the foreseeable future -- Dauman backed off.

"As far as advertising, we're one month into the [second] quarter," Dauman said. "We have seen the environment stabilize; we are seeing people enter the market. We are seeing more robustness as we head into the next few months and the upfront season. As far as prognosticating what that will mean on the pace of ad sales for the full quarter into the year, we just don't want to be in a position to make that projection. We have seen over the past few weeks signs that are encouraging."

Dauman did say that Viacom is beginning to see some advertisers that have backed away as the economy worsened re-enter the market, including foreign auto manufacturers and at least one domestic automaker.

"Where you had companies that have had to step back for awhile, if they are going to have ongoing businesses, they're going to have to spend. Advertising does work," Dauman said.

Dauman also said that efforts to boost ratings at some of its networks are beginning to pay off. Ratings, for example, at VH1 rose about 6% in the period, and MTV saw a sequential ratings improvement in the first quarter.

Dauman said that plans for its premium movie network Epix also are moving forward and the company and its partners are in discussions with several potential distributors.
While Dauman would not reveal who those discussions are with, he said that affiliate deals will be reached as the October launch date for the network

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