Viacom CEO Dauman Promises Rebound, but Analysts Skeptical
Analysts are skeptical of Viacom's plan to rebound from ratings declines at some of its biggest pay-TV networks, given the onslaught of newer media and online competition. Speaking as Viacom announced results Tuesday for FY Q1 that ended Dec. 31 that disappointed some analysts, CEO Philippe Dauman said the company would rebound, but analysts said they're not so sure. Investors, too, were cautious, with Viacom stock closing down 18 percent Tuesday and closing Wednesday down another 4.4 percent to $35.15.
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While affected by down performances of Comedy Central, MTV and Paramount, Viacom was particularly hurt the last year by "a lot of noise," Dauman said Tuesday on a conference call. It was one Dauman's first major acts since being named executive chairman of the company last week, replacing Sumner Redstone, who moved to chairman emeritus. Revenue fell 6 percent from the year-ago quarter to $3.15 billion. Media Networks revenue fell 3 percent, with domestic advertising revenue down 4 percent because of ratings declines. Dauman said Paramount "is into its rebuilding process with the movie pipeline improving and TV operations off to a strong start." Viacom said cable affiliate revenue likely will grow in the low mid-single-digit percentage range in FY 2016. In a note to investors Tuesday, analyst Michael Nathanson of MoffettNathanson said that guidance "is broadly interpreted to be a signal that Viacom’s pricing power has faltered."
The conference call was a "bad call -- really bad call," Wells Fargo analyst Marci Ryvicker wrote investors Wednesday: "Unfortunately, the conference call had an even greater defensive tone than normal and the lack of detail was somewhat uncharacteristic, which to us means things are just bad. We can’t overlook the fact that management is making changes -- with new executives at MTV, lower ad loads across its networks." It was also "just bad," wrote Ryvicker, that the fees Viacom gets from pay-TV companies carrying its channels aren't rising as fast as the company predicted. Analysts said AT&T, Dish Network and others seem to be paying less to Viacom than the company expected for carriage fees.
While Viacom had broad ratings weakness last year, results have been improving, with six of its top 10 networks having growth as of December, said Chief Operating Officer Tom Dooley. Dauman said Comedy Central and MTV ratings are expected to turn around, particularly because MTV has new leadership making programming changes, leading to higher ad revenue. Comedy Central has "creative output there," he said. "I think we have a healthy pipeline and over time that will take care of itself.” Viacom is in negotiations to renew its distribution relationship with Dish, and is in a short-term extension, Dauman said. Asked about Comcast moving some Viacom channels to a specialty tier, Dauman said Viacom hasn't sued, but "we are not going to sit back. We will preserve our rights as we go forward."
Viacom is increasing online efforts. Tuesday, it said it signed an agreement with Snapchat for Snapchat Discover -- part of the Snapchat app -- to carry Viacom's Comedy Central International channel and an MTV channel. The two networks already had been developing content for Discover. Under the new deal, Viacom also will have the right to sell Snapchat's U.S.-owned and -operated advertising inventory, it said in a news release. Dauman said Snapchat also will increase the amount of content it publishes about Viacom events such as MTV's Video Music Awards and the BET awards. Dauman said moves like Viacom's reach into other platforms such as Snapchat, combined with moves by Nielsen to improve its measurements, “will move toward better capturing the actual reach our networks have."