Viacom to invest up to $100 mil in new TV net

Company reported better-than-expected Q1 earnings

Viacom will invest a maximum of $100 million in its premium TV joint venture with MGM and Lionsgate during its lifetime, management said.

The update came Friday as the entertainment firm reported better-than-expected first-quarter earnings on improved results in its cable network and film units.

"We are the lead investor, but we will not be the majority owner," Viacom president and CEO Philippe Dauman said. He added that while Viacom's MTV Networks will handle affiliate relations for the new channel, it will not package it with its own networks in negotiations with distributors.

Cable and satellite TV firms reportedly have given the planned premium channel an icy reception, but Dauman called early talks "extremely encouraging." He also promised further announcements on the venture in the coming weeks.

Viacom on Friday posted a 33% increase in first-quarter profit to $270 million on double-digit growth in its cable networks division, with hits like MTV's "The Hills,' and a narrower loss at the film unit, which houses Paramount Pictures and DreamWorks. Revenue rose 15% to $3.1 billion.

The networks unit grew revenue 16% and profit 15%, helped by an 8% advertising revenue improvement and strong sales of the "Rock Band" video game.

Viacom's film unit boosted revenue 12%, while its operating loss narrowed from $108 million to $63 million. The main driver here was a better-than-expected 22% increase in home entertainment revenue. The company cited higher revenue from third-party distribution arrangements, including $29 million in revenue recognized in connection with the conclusion of its HD DVD deal. Theatrical revenue fell 7% despite the success of "Cloverfield."

Viacom chairman and controlling shareholder Sumner Redstone again lauded his management team. "I constantly think what a wise decision it was to ask Philippe to join Viacom as CEO and Tom (Dooley) as CFO," he said.

Viacom also reaffirmed its projection for earnings from continuing operations to grow in the low double-digit percentage range through 2010.