Redstone near deal for National Amusement
Theater sales likely; Viacom profit falls 69%Viacom and CBS Corp. controlling shareholder and chairman Sumner Redstone is getting close to a deal with creditors of his holding company, National Amusements, and reiterated Thursday that he expects NA won't have to sell additional shares of the two entertainment conglomerates.
A deal to restructure $1.6 billion of debt at National Amusements, which also houses the movie theater chain of the same name, is "within reach," Redstone said during Viacom's quarterly earnings call. A final agreement could be announced by month's end and is likely to involve the planned sale of some of the 1,500 cinemas in the NA circuit.
Viacom shares closed up 3.9% at $17.70 on Thursday despite a mixed fourth-quarter earnings report.
Redstone said the U.S. is in "the most pronounced economic trough in generations," joking that he was likely the only participant on Thursday's call to remember a recession as bad as this one. But he expressed hope it could be "short-lived."
Viacom CEO Philippe Dauman, meanwhile, warned analysts that the advertising market slump is likely to get worse before improving, citing weaker ad trends in the current first quarter. He also said ad visibility remains "very limited."
Viacom reported a fourth-quarter profit of $173 million, down 69% from $559.5 million in the year-ago quarter, driven by restructuring and other charges after recent layoffs, weaker advertising and DVD trends. Profits at the cable networks and film units fell 44% and 81% to $509 million and $22 million, respectively.
Revenue was unchanged at $4.24 billion as the company's media networks division saw a 1% increase and the film unit dropped 2%, fueled by a 6% decrease in home entertainment amid an industrywide DVD sales slump.
Asked whether the current DVD weakness has been caused by the recession or other secular reasons, Dauman said it was and will continue to be "driven by the economy." He emphasized that major new releases still perform solidly on DVD, and this encourages Viacom to focus more on tentpole releases.
For all of 2008, U.S. ad sales ended up flat amid weakening trends. In the latest quarter, global ad revenue was down 3%, better than some analysts had expected.
Dauman lauded the MTV and VH1 networks for showing promise thanks to recent programming changes, which have stemmed their ratings declines. "While cable TV ad trends in the first half are likely to deteriorate, we believe Viacom's network specific ratings declines at MTV and VH1 have likely troughed," Barclays Capital analyst Anthony DiClemente said.
On the film side, the CEO touted the continued rebuilding of Paramount and its "strong" 2009 slate, including "Monsters vs. Aliens," "Star Trek," the "Transformers" sequel, "G.I. Joe: The Rise of Cobra" and "Shutter Island."
Hit video game "Rock Band 2" should be a rare highlight in 2009, management said, although executives admitted that sales have been weaker than expected amid a sudden dropoff in consumer spending.
Dauman also signaled that the recession makes original programming on the Web less viable.
To reduce costs, Viacom is not giving merit pay increases to senior executives. This and layoffs will save the firm about $200 million this year, Dauman said. (partialdiff)