Viacom turns it on

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Viacom was focused on execution in the past year, investing in programming to boost ratings at its cable networks and pushing Paramount back to prominence. By year's end, most on Wall Street seem confident that the ratings turnaround at the MTV Networks unit will continue. Plus, they apparently feel good about Paramount's creative position despite expenses that cut into the bottom line and the risk that DreamWorks principals Steven Spielberg and David Geffen could end up opting out of their Paramount contracts. Viacom also pushed into the fast-growing video game space with a vengeance, releasing "Rock Band" in partnership with Harmonix. The music game flew off shelves and led analysts to predict a small but sustainable contribution to Viacom's revenue.

Summary and outlook:
Although many of its peers saw their stocks decline, Viacom shares were up 6.6% year-to-date at $43.73 as of Thursday. While its film unit's bottom line swung to a slight operating loss for the first three quarters, its boxoffice performance was solid. Meanwhile, its cable networks units' profitability edged up only minimally because of continued programming investments. Key challenges in the new year will include proving that network ratings can continue to improve. Also, the future of Paramount's DreamWorks relationship will be a focus.

THR rating: $$$ out of 5

Top performers:

Films: Shrek the Third, Transformers, Bee Movie
DVDs: Transformers, Shrek the Third, Charlotte's Web
TV shows: The Hills, A Shot at Love with Tila Tequila

Rankings: Boxoffice by U.S. gross; DVDs by total units; TV in total viewers through Dec. 18 for calendar-year 2007


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