Viacom's Domestic Ad Revenue Down but Conglomerate Beats Financial Expectations

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Viacom CEO Bob Bakish

Affiliate revenue grew slightly, even as Viacom's channels lost some subscribers.

In a challenging environment for entertainment amid cable TV cord-cutting and weakness at the domestic box office, Viacom managed to beat expectations on both the top and bottom line in its most recent quarter.

Transformers: The Last Knight, which has taken in nearly $571 million worldwide, helped the film segment to show 36 percent revenue growth to $847 million while the media networks segment grew 8 percent to $2.56 billion, despite lower advertising sales in the U.S.

Ad sales industry-wide have been a worry on Wall Street. On Wednesday, for example, Time Warner said quarterly ad revenue fell 6 percent year-over-year and forecast that it would drop again in the current quarter.

While ad revenue dipped 2 percent for Viacom domestically, the fall was less than some analysts had expected and in line with most of Wall Street's projections. Viacom's Comedy Central is seeing a nice boost from the rising popularity of The Daily Show With Trevor Noah.

For years, MTV has been a worry, but Viacom CEO Bob Bakish on Thursday called the young-skewing channel a "bright spot," in part because of healthy ratings for Fear Factor and Siesta Key. MTV, in fact saw a rare 12 percent rise in ratings in July compared to the same month a year ago.

Worldwide, Viacom's media networks business actually saw a 2 percent gain in ad revenue to $1.24 billion.

Affiliate revenue worldwide grew 4 percent, as it did domestically, even as Viacom's channels lost some subscribers, as expected amid competition from, Netflix, YouTube and others.

Overall, Viacom earned an adjusted $1.17 per share in the third quarter while Wall Street expected $1.05. Revenue rose 8 percent year-over-year to $3.36 billion while analysts were looking for $3.29 billion.

Viacom shares, flat for most of the year, closed 3 percent higher on Thursday and immediately jumped an additional 4 percent after the closing bell once its financial report was released.

The after-hours gain didn't hold, though, and the stock sunk 7 percent, probably because executives said during a conference call that U.S. ad sales might continue a slow decline and Bakish informed analysts that its Chinese partner HuaHua hasn't yet paid its June share of a movie-slate financing deal.

Bakish has been spearheading a turnaround at Viacom since taking over as CEO eight months ago, and on Thursday he said the conglomerate has made "considerable progress" with an improved balance sheet and revitalized brands.

"Media networks operating income held steady and filmed entertainment operating income returned to growth for the first time since the fourth quarter of 2015," Bakish told Wall Street on Thursday.

Bakish said VH1 has had eight consecutive quarters of year-over-year growth — "the longest active streak among major entertainment networks" — and he noted positive ratings growth at TV Land and CMT.

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