Viacom Posts Lower Profit, Touts Digital Plans

Nov 9, 2006  •  Post A Comment

On his first earnings call since taking over for Tom Freston, new Viacom CEO Philippe Dauman discussed an aggressive digital strategy, saying he plans to launch new multiplatform networks, social-networking sites and possibly a return to television production for the company’s Paramount unit.

Viacom announced that third-quarter net income fell to $356 million, from $423 million a year earlier, partly due to severance pay to Mr. Freston. Revenue rose 8 percent to $2.7 billion, with cable networks sales growing 10 percent. Both earnings and revenues beat some analysts’ expectations.

During the company’s earnings call with analysts Thursday morning, Chairman Sumner Redstone said the new management team has been “so impressive” in its first few weeks at the helm. He praised Mr. Dauman for bringing a sense of rigor and urgency to the company while reviving its entrepreneurial spirit. “It’s truly a new day at Viacom,” Mr. Redstone said.

Management is “making sure Viacom is not missing a step,” Mr. Redstone said, referring to criticism that under Mr. Freston the company had missed the boat on digital opportunities, including allowing News Corp. to buy Myspace.com. Mr. Redstone forced Mr. Freston out in September, sending the executive packing with a severance package of about $58.9 million.

“Managing the transition of our business from the traditional linear world to one that embraces the digital world is my number one priority,” Mr. Dauman said.

Viacom had a 73 percent increase in digital advertising sales during the third quarter, Mr. Dauman said.

“We see our digital advertising sales continuing to expand at high double-digit growth rates,” he said, adding, “I believe there is a good chance we could reach $500 million in annual digital sales by as early as next year,” which would be a year ahead of the company’s previous projections.

MTV Networks will announce in the next few weeks the launch of a series of broadband, wireless and video-on-demand multiplatform networks, Mr. Dauman said. Those efforts are targeted at specific adult demographics and are intended to win new audiences while creating new revenue streams and business opportunities, he said.

The company is also updating many of its sites, adding more video content. New broadband functionality has been added to sites for Nickelodeon, Spike TV, CMT and iFilm, which has already led to increased use, he said.