Viacom's (NYSE:VIA) cable networks generally outperform the rest of the advertising industry, but even the likes of Comedy Central and MTV couldn’t escape the economic downturn.
The dramatic, worldwide advertising decline ate into Viacom’s once resilient cable profits. The company did beat Wall Street estimates with earnings per share of 29 cents per share, but that’s still down 14 percent from last year on a 7 percent revenue drop. Blame cash-strapped marketers: Viacom’s ad revenue fell 11 percent globally and 9 percent in the U.S. This is far worse than Time Warner’s report Wednesday that its cable network ad revenue dropped just 2 percent.
There is a sliver of good news about the foundering ad market as Viacom’s upfront ad sales period for next season is underway. Viacom’s CEO Philippe Dauman is seeing a stabilization in the ad market in this current quarter, saying “signs over the last weeks have been encouraging” and "there are real pockets of promise." Dauman says he sees companies that are trying to use this economic downturn to grow market share, which means more money for Viacom.
For now, every corner of the company is suffering from the economic downturn. Thanks to weaker DVD sales, which are both a cyclical and secular issue, the movie studio’s revenue dropped 5 percent. And remember when Rock Band, Viacom’s music-oriented video game, was going gangbusters? No longer. The division which includes Rock Band, “Ancillary revenue”, tumbled 37 percent.
Chairman Sumner Redstone didn’t make any big news yesterday, but he did generate a lot of buzz Wednesday. At the Milken Institute Global Conference in Beverly Hills Redstone bashed the newspaper business, saying it’s “dying” and that it won’t be around in ten years. That sounds a lot more reasonable than his repeated comment that he’s going to live forever. Viacom was the hot topic at the conference even when Redstone wasn’t on stage. News Corp (NASDAQ:NWS) President and COO, Peter Chernin, who’s departing the company this summer, was asked if he was in talks to go to Viacom. He dismissed the rumors.