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Digital Revenues Reach $500 Million at Viacom

Feb 28, 2008  •  Post A Comment

Viacom said it has reached its goal of generating $500 million in digital revenues for the year.
The giant media company announced its earnings Thursday, reporting fourth-quarter net earnings rose 16% to $559.5 million, or 86 cents a share, on a 19% revenue increase to $4.2 billion. Viacom said operating income for its Media Networks Group, which includes MTV, rose 18% and Filmed Entertainment was up 19%.
“Across our Media Networks business, we made substantive changes domestically and internationally to enhance our operations, from programming development and advertising to digital initiatives and new branded business ventures,” said CEO Philippe Dauman. “Our investments in original programming paid off, driving ratings gains and putting us in a strong position to continue to grow advertising revenues.”
When Mr. Dauman replaced Tom Freston as CEO, the company was criticized for moving too slowly into digital. Now, Mr. Dauman said, digital operations have reached a critical mass.
Viacom was one of the companies struck by the Writers Guild of America, which had been seeking a share of digital revenues for its members.
For the three-year period from 2008 through 2010, Viacom said it expects to deliver low double-digit annual growth in diluted net earnings per share from continuing operations.
During a conference call with analysts, Mr. Dauman said domestic ad revenues were up 7%, which is about what the company said it expected during its previous earnings report.
“We benefited from the strike-related flow of ad dollars from broadcast to cable,” he said. The company’s older-skewing networks, TV Land and Nick at Nite, benefited the most.
“The double-digit scatter premiums we saw in the fourth quarter are continuing in the first quarter of 2008,” Mr. Dauman said, adding that the company expected a similar rise in the first quarter.
The company also has made changes in the way its shows are formatted and has adopted commercial pod-busting initiatives to reduce the erosion in viewership as measured by the new commercial ratings system. Viacom’s MTV and VH1 had relatively high rates of falloff due to the switch from the old program ratings used for ad sales to the average commercial rating system, which counts only viewers who stay tuned during breaks.
He said the company also is doing more integrated marketing with clients, co-mingling Viacom brands and messages with sponsor messages and creating ad content for marketers.
At this point 50% of the company’s digital ads are from convergent ad deals, he said.
Looking ahead, Mr. Dauman said the economic slowdown has not affected ad sales.
“Most of our traditional lead advertiser categories, including movie studios, quick-service restaurants, beverage and games, historically have been recession-resistant industries,” he said.
One analyst on the call questioned why, with ratings rising and the scatter market showing double-digit increases, Viacom’s ad sales weren’t growing faster.
Mr. Dauman reiterated most of his earlier comments, saying he was pleased with the 7% advertising revenue growth rate.
6:15 p.m.: Updated with Mr. Dauman’s comments from conference call

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