Q1 is rough, but Viacom has 'resolve'

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Viacom on Thursday reported an 11% decline in TV advertising revenue for the first quarter, including a 9% drop in the U.S., but management said the ad market has shown positive signs of late.

"In the last few weeks, we have seen the advertising market stabilize," CEO Philippe Dauman said on a conference call. He also echoed suggestions from a number of economists that the broader economy might be stabilizing and predicted a potential turnaround this year.

The CEO also argued that a growing number of companies, "even those in weakened market sectors," are looking to gain market share by advertising more again. Overall, the scatter market for ads remains "soft," but pricing is stable. His comments come amid a recent run-up in key media stocks on hope that the worst of the ad declines is over.

Earlier, Viacom chairman and controlling shareholder Sumner Redstone acknowledged that "the global economy continues to present significant challenges for all businesses, including those in the entertainment industry."

However, Redstone said Viacom is navigating the troubled waters well, and he defended his management team's lack of flashiness, which has led some analysts to call for a new CEO.

While economic drama always draws a crowd, he said Viacom hopes to win points and benefit when the economy turns around with "a well-planned strategy executed with understated resolve."

Viacom posted first-quarter earnings of $177 million, down 34% amid lower revenue at its film and TV networks businesses. Revenue declined 7% to $2.91 billion because of foreign currency exchanges, lower advertising revenue and weaker sales of DVDs and the video game "Rock Band."

The networks and film units saw revenue fall 8% and 5%, respectively. Operating income at the TV arm dropped 9%, and the film operating loss nearly doubled to $123 million following a $29 million one-time payment last year from Toshiba after it abandoned the HD DVD format.

Dauman deflected analysts' concerns about the Epix premium TV service joint venture with Lionsgate and MGM, predicting that affiliate deals will be ready closer to the fall launch. Asked by analysts about the worst-case scenario if the channel didn't get carriage, he said, "There is no worst case here." (partialdiff)
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