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Viacom Details Pay Cable Plan

May 2, 2008  •  Post A Comment

Viacom said it will limit spending to $100 million on its new premium TV and video-on-demand joint venture.
Speaking on Viacom’s first quarter earnings conference call with investors Friday, CEO Philippe Dauman said the joint venture with MGM and Lionsgate would give the company more flexibility and enable it to better monetize its content.
Mr. Dauman said Viacom is the lead investor in the project and will have a significant stake in it, but not a majority holding.
He said that with output deals from multiple studios available, there was a unique opportunity to change the rules in the pay business. There won’t be a similar opportunity for a long time, he said. (Ironically those output deals had been with Showtime, which was part of Viacom up until it was spun off with CBS Inc. in 2006.)
“We are optimistic about where it stands,” Mr. Dauman said. “Having it be announced allowed us to speak very freely to potential distributors across many, many platforms. The level of interest, and in many cases enthusiasm, has been extremely encouraging to us.”
Viacom also said that domestic advertising sales rose 7% in the first quarter, and that they are expected to rise by a similar amount in the second quarter, despite concerns about a weakening economy.
Mr. Dauman said that the strength of its networks’ ratings, their momentum and the strength in the scatter market were positive signs.
He added that the economic environment “does not seem to impact in any significant way our major categories of advertisers, which include motion pictures, quick-serve restaurants and games.”
All of those categories “seem to be recession-resistant, slowdown-resistant, whatever you want to call it,” Mr. Dauman said. “At this early point in the quarter, we expect our domestic ad sales growth in the second quarter to be comparable to the first quarter.”
Some analysts on the conference call questioned why Viacom’s ad growth wasn’t in the double-digit range like some other cable network owners.
Mr. Dauman said that Viacom’s youth-oriented audience was largely unchanged while networks catering to older viewers were showing gains because of the effects of the Writers Guild of America strike.
He also said that the company is adjusting well to the new commercial ratings system being used for ad sales.
Networks like MTV and VH1 took big hits because their viewers didn’t stay on the channel during commercial breaks. “We’ve used a combination of methods in those networks where there is falloff,” Mr. Dauman said. Those included increasing the number of breaks and making them shorter, allowing sponsors to take over commercial pods and adding program content to pods.
“All of these things have made our viewer retention better than anticipated and we see room for improvement,” he said.
(Editor: Jensen)

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