Earnings Jump At Viacom

Cable network's operating income up 14%
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Viacom on Thursday became
the latest media company to report sharply higher earnings for the second
quarter thanks to a rebounding economy and a buoyant advertising market.

Net earnings rose to $420
million, or 69 cents a share, up 52% from $277 million, or 46 cents a share, a
year ago.

On the company's earnings conference
call with analysts, Executive Chairman Sumner Redstone sounded particularly
upbeat.

"With six months under our belt in this
calendar year, day after day our confidence continues to grow as the emerging
economy recovery builds. Now of course we're not all the way back, but the
light is brighter than it's been for some time," Redstone said. "Consumers are
returning to the marketplace, marketers are beginning to spend again to grow
revenues and capture share and Viacom, Viacom, with the leading entertainment
brands, strong audience connections, is now and will continue to benefit from
the upswing in confidence and the upswing in spending."

Revenue at Viacom's media networks
group rose 6% to $2.1 billion. Because revenue from Viacom's movie business was
down 10%, the company's total revenue was up only slightly to $2.1 billion.

Domestic advertising
revenues increased 4% as the strong scatter market more than offset the impact
of a weaker 2009 upfront, the company said.

The ad revenue growth was
significantly lower than at Time Warner and Discovery, which reported earnings
earlier this week. But Viacom COO Paul Dooley said that the advertising rebound
was stronger with marketers seeking older consumers.

"It's important to note that our older
skewing networks like the TV Lands, the Nick at Nites and to some extent CMT
are very high demand networks and are pacing at great growth rates," Dooley
said. "The majority of our demos that we have to sell are in the younger
skewing demographics and those have recovered at a slower rate than the older
skewing demos. We are seeing an acceleration in the advertisers who are advertising
to the younger demos and we think that, combined with the new upfront that we
just completed, will help us launch our advertising revenues and accelerate the
growth there."

Viacom CEO Philippe Dauman added that
ad revenue growth has been improving quarter by quarter.

"Once we get into October and into the
December quarter, we will benefit from this upfront where we have greater
volume than last year at higher pricing," Dauman said. "We see no reason why
the scatter market shouldn't continue to be strong and we'll be able to ride
the solid ratings that we have at our key networks and our objective is to keep
that sequential growth going."

Operating income for the
media networks group was up 14% to $789 million in the quarter. Viacom said
growth in advertising and distribution income was offset by higher programming
costs. Losses from the Rock Band video game were lower, the company said.

Viacom cited ratings
turnaround at many of its networks, including MTV, Nickelodeon, Comedy Central,
BET and TVLand, crediting slates of new and returning programming. Programming
expenses were up 10% in the second quarter and are expected to remain that high
in the current quarter, Dooley said. Normally, the company aims for programming
cost increases in the mid-single digit range.

While some of the
programming giving MTV a boost might be seen as controversial, Dauman said in
response to a question that content issues are not scaring off sponsors.

"Actually there were some issues when Jersey Shore first launched," Dauman said.
"Now we have advertisers scrambling to get on it. We have advertisers who want
to be wall to wall in particular episode . . . we're turning them away."

Other expenses will also be
going up at the networks. "We will be increasing the compensation line, which
we held pretty tight last year," Dooley said.

Viacom continued to post
equity losses from its Epix joint venture. But Dooley said the company expected
it to approach break-even by the end of the year and Dauman said that Epix
would be announcing a new distribution agreement "pretty shortly."

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