Viacom Earnings Preview: All Eyes on Media Networks Division

Viacom reports its quarterly earnings after the bell today and all eyes will be on the results of its Media Networks Division. Wall Street's expecting eight percent revenue growth from the group of cable networks that includes MTV, VH1, Comedy Central and Nickelodeon.

In light of concerns about a potential ad slowdown, everyone's curious for a sense of the company's advertising outlook. Cable networks across the board are expected to benefit a bit from the decline in ratings on network TV, snagging some of those ad dollars. And Viacom's (VIA) bundle of cable channels- particularly MTV--have been undergoing a turnaround and ratings are on the rise. Now that a consumer slowdown could impact the ad econmy, will ad revenue growth hold up?

Investors will also be taking a hard look at Paramount, Viacom's Studio, which is well on its way to a turnaround. It's box office market share has risen dramatically thanks to huge hits like Transformers (a joint venture with DreamWorks). This quarter should be logging some significant revenue from the Transformers DVD, plus the "Shrek the Third" DVD. (DreamWorks Animation (DWA)) - an independent company makes "Shrek" but distributes through Paramount). And it looks like it's full steam ahead for Paramount.

The much-awaited Indiana Jones sequel, due out in May is sure to be huge (I'm dying to see it). And "IronMan," the joint production with Marvel Entertainment should tap into the interest in action hero movies.

And this quarter Viacom will show incremental growth from an entirely new revenue stream--something you can't say often about Viacom--which has been working with the same brands for years. Rock Band--MTV's first self-published video game--is a huge hit. And it shows that the company is really willing to be innovative, and to build on MTV's brand strength (music) and exploit it across a totally new platform.

I expect there to be lots of talk on the post-earnings conference call about digital distribution. In this day--on the heels of the writers strike which was all about digital revenues--all the media giants are pushing to show they can monetize their content online.