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Viacom first-quarter profit drops 65% on weak advertising

February 2, 2012 |  8:37 am

LeadEven Tom Cruise wasn't enough for media company Viacom Inc. to pull off a nearly impossible mission: turning a crowd-pleasing first-quarter earnings.

The New York-based media company's profit plummeted 65% on lower advertising sales at its important cable television networks for the quarter ended Dec. 31. Advertising woes were particularly nettlesome at children's channel Nickelodeon, which has experienced a precipitous drop in ratings. 

Viacom's earnings were also dragged down by a $383-million charge for payments to former shareholders of the Rock Band video game franchise, part of the company's long-running legal dispute over Harmonix Music Systems. The payout was the latest sour note in Viacom's failed attempt to get into the video game business.

Net income dropped to $212 million, or 38 cents a share, compared to $610 million, or $1, during the same period the previous year. The earnings, reported Thursday, slightly beat analysts' forecasts.  Viacom's revenue increased 3% to $3.95 billion. Analysts, however, had expected slightly higher revenue.  

Hollywood-based movie studio Paramount Pictures delivered an admirable box office performance, boosted by the late-December release of "Mission: Impossible -- Ghost Protocol," starring Cruise and directed by Brad Bird. (The film has taken in $575 million worldwide.) The century-old Melrose Avenue film studio also thanked "Paranormal Activity 3" and "Puss In Boots" for its box office results. "The Adventures of TinTin" underperformed.

Paramount generated $1.6 billion in revenue, an increase of 4%.  Theatrical revenue was up 37% to $570 million.  Home entertainment sales dipped 6% to $598 million.  Overall, the expense-laden studio reported a $31-million deficit for the quarter.  

Viacom -- which is controlled by 88-year-old billionaire Sumner Redstone -- depends almost entirely on its collection of cable channels, including MTV, Nickelodeon, BET, VH-1 and Comedy Central, for income. Most alarming to analysts was Viacom's admission that advertising was off 3% to $1.35 billion for the quarter.  

The company's Media Networks unit took in $2.44 billion, which was a 3% increase over 2010.  Operating income for the media networks increased 7% to $1.1 billion.

"Despite some early headwinds, Viacom is off to a strong start in 2012," Viacom Chief Executive Philippe Dauman said during an early morning call with analysts. 

Dauman said the company would produce nearly 30% more hours of original TV programming this fiscal year to try to gain back lost ratings and boost advertising sales. The company expects to spend $3 billion on programming this year.


Viacom executives again among America's highest paid

Viacom is ordered to pay $383 million more to Rock Band makers

Disney gains on Nickelodeon, which points a finger at Nielsen

-- Meg James

Photo:  Tom Cruise in "Mission: Impossible -- Ghost Protocol." Credit: Paramount Pictures