Big screening for Viacom's Q2

Film revenue up 20% buoyed by 'Shrek,' 'Disturbia'

More media firms make earnings news on Wall Street. Story on page 6.

NEW YORK — Viacom Inc. president and CEO Philippe Dauman raved about his company's film unit Thursday, lauding its strong second-quarter financials, saying his team is "very pleased" with the path that Paramount Pictures chairman and CEO Brad Grey has set and calling "Transformers" a franchise whose sequel is already "well under way."

Addressing chatter about tension between Viacom and the heads of recent Paramount addition DreamWorks, Dauman said, "We are glad to have Steven (Spielberg) on board and we will continue to make him happy," adding that the director is enjoying his work on the latest "Indiana Jones" film.

The exec also highlighted that DreamWorks is "an important part of the success" of Paramount and that he's pleased with his firm's relationship with the studio.

Jeffrey Katzenberg got a shout-out as well, with Dauman saying the DreamWorks Animation boss is happy with a distribution relationship with Paramount.

Viacom on Thursday reported a 0.8% decline in second-quarter profit to $434 million. The $437.3 million a year ago included a tax benefit and earnings from discontinued operations. The latest figure includes a $94 million gain from the sale of MTV's Russian investment partially offset by a $22 million after-tax impairment charge for an investment in Amp'd Mobile, which filed for bankruptcy, and restructuring charges at Viacom's cable networks of $7 million.

Profit from continuing operations rose 4%, and revenue increased 13% year-over-year to $3.2 billion.

Overall, the results exceeded Wall Street expectations, and Viacom Class B shares rose 1.7% on Thursday to $38.41.

The company's film unit boosted revenue 20% to $1.3 billion, with its operating income multiplying from $4.8 million to $21.4 million.

Boxoffice hits, including "Blades of Glory," "Disturbia" and the distribution of DWA's "Shrek the Third," boosted the unit. "Transformers" was released in the current third quarter and already has grossed more than $500 million.

Upcoming films that Dauman highlighted as key releases include "Stardust," "Beowulf" and "The Heartbreak Kid," which the CEO said had him rolling on the floor with laughter.

The media networks unit saw revenue rise 10%, including a 6% global advertising gain, to $1.9 billion, with operating income up 3% to $734.2 million.

Wall Street observers loved that Viacom brass predicted U.S. ad revenue would grow faster in the current third quarter than the 4% seen in the second quarter.

"We expect U.S. advertising will accelerate in the second half of this year, fueled by continued tightness in the scatter market, a healthy upfront and the potential for ratings improvement," Bear Stearns analyst Spencer Wang said in a report.

Ratings at Viacom's networks, especially MTV, should also strengthen, with his team "encouraged" by the early momentum of new series, Dauman said.

Discussing the advertising market, he said the cable upfront is pretty much done for Viacom, with low double-digit percentage ad rate improvements and slightly higher dollar volume for its adult channels. The firm held back inventory because of what he called a "strong scatter" market.

Dauman also said Viacom saw strong ad rate gains in the kids upfront and double-digit volume expansion — a marked contrast to Time Warner Inc.'s description of the kids upfront as being down overall.

Viacom said it managed to drive an average of 85 million unique visitors per month to its branded Web sites globally, a 68% increase year-over-year. Digital revenue remains on track to exceed $500 million this year.

Viacom chairman and controlling shareholder Sumner Redstone in a brief appearance lauded Dauman for being a "decisive and visionary leader" and the company for having made "phenomenal progress."

Looking ahead, Dauman pushed the outlook for 3-D cinema, saying it "will drive more traffic."