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NEW YORK – Viacom will continue to focus on growing without major acquisitions and return an estimated $20 billion to shareholders over the next five years via dividends and stock buybacks, president and CEO Philippe Dauman said here Monday at a UBS media investor conference.
In a keynote lunch time interview at the UBS Global Media and Communications Conference, Dauman said he feels very good about Viacom’s outlook, including stronger advertising growth in early 2012, and said it has “a great platform for future growth.” The conglomerate would be a much more multi-platform and global company in five years, he said.
Asked about the recent ratings challenges of kids channel Nickelodeon, which Dauman previously said were “inexplicable” and could be an error, he said that there is no real news on that front and vowed that his networks unit’s advertising trends would improve in the first quarter of 2012. “There’s nothing new,” he said. “Noone is more frustrated by that than myself.”
The Wall Street Journal had reported earlier in the day that Nielsen still believes its ratings data for Nickelodeon is correct. “As of now, however imperfect Nielsen is, it is the only game in town,” Dauman told the UBS conference. “We are going to move on.”
But the ratings issue is “a problem that will be alleviated” due to more new shows on Nickelodeon than the network ever had in the near future. Plus, advertising sales from Nickelodeon will make up a much smaller percentage of the company’s total starting next quarter. He also highlighted that Nickelodeon continues to hold its lead over ad-driven competitor Cartoon Network.
For next quarter, all that means that he expects stronger ad growth due to a stronger content pipeline and a “better tone” in the market compared to some recent sluggishness in scatter ad market sales in recent weeks. “We are feeling very good,” Dauman said, reiterating that the Nickelodeon issue will turn out to simply be a “blip.”
Dauman once again acknowledged though that the current quarter’s ad revenue momentum will be dragged down by the Nickelodeon issue and “some softness in general scatter demand” over the last several weeks. But he vowed that his firm’s cable networks unit margins would grow this quarter.
On more upbeat notes, Dauman once again lauded such TV hits as Jersey Shore and its stars, as well as film franchise Paranormal Activity. He said that the Paramount studio, which will next year start celebrating its 100 years in business, plans to release a new Paranormal film every year given that it has made a Halloween franchise out of it that is “very profitable.”
Meanwhile, Epix, the premium TV venture of Viacom, MGM and Lionsgate, sees an exclusivity window in a digital distribution deal with Netflix expire in September, interviewer and top UBS banker Aryeh Bourkoff pointed out. The first two of the deal’s five years were exclusive. Adked if Epix expects to extend the exclusivity, Dauman said that “the value of our content has increased” since the deal. The firm could extend the exclusivity for “good value” or look for added deals with other online distributors after the exclusivity period ends.
Highlighting an 11 percent compound annual growth rate in affiliate fee revenue since he took over as CEO five years ago, Dauman on Monday said he expects high single digit to low double digit gains in this field in the future.
Dauman said he sees no move to a la carte offerings of cable networks in the future. But if this does happen, Viacom will do well even if this does become a trend due to the popularity of its channels.
Asked about competition from YouTube’s original content channel strategy, he said his firm spends billions a year on content, so it won’t be easy for Google’s online video site to compete with that.
Discussing Paramount and the performance of Viacom’s film unit, Dauman said the studio would continue to grow margins in the coming years, and its new animation unit would be “in full swing” in five years.
Asked about key challenges over the next five years, Dauman cited film piracy as a key concern.
But social media will continue to provide upside, Dauman predicted, pointing to how Beyonce’s baby bump drove Twitter traffic during the MTV Video Music Awards. That helped ratings, and his company knows how to “use social media to promote new shows we put on” as well, he said.
Discussing international opportunities, Dauman spoke of upside in the BRI countries – Brazil, Russia and India. He emphasized that he didn’t use the more common term BRIC “because China is still a very tough market.”
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