Struggling Viacom reported lower fiscal first quarter earnings, but new CEO Bob Bakish outlined a five-point plan to revive the media company.
The plans include focusing on five of the company’s key cable networks and making big moves in the digital and physical world.
Net earnings fell 12% to $396 million, or $1.00 per share, in the quarter ended Dec. 31, compared to $449 million, or $1.13 a share, a year ago.
Revenues rose 5% to $3.32 billion.
The earnings and revenues were better than expected and Wall Street reacted well to the turnaround plan. Viacom share were up nearly 7% in morning trading.
Bakish became CEO after a public boardroom struggle in which the family of Sumner Redstone ousted long-time CEO Philippe Dauman. The company’s revenues and earnings have been falling as young consumers shift their viewing habits away from Viacom’s cable networks, including MTV, Comedy Central and Nickelodeon.
The new plan calls for the company to:
- Put the full power of Viacom behind six flagship brands: BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount. The network currently known as Spike will be rebranded as the Paramount Network in 2018. The network will leverage the very best in Viacom original scripted and non-scripted programming and incorporate even more high-quality original and third party programming.
- Revitalize and elevate approach to content and talent
- Deepen partnerships to drive traditional revenue
- Make big moves in the digital world and physical world
- Continue to optimize and energize the organization
Instead of spreading resources among dozens of cable networks, Viacom said its flagship brands will now benefit from significant and increased resource commitments. The other brands “will be realigned to reinforce the six flagship brands,” the company said.
Bakish employed a similar strategy in his previous job running Viacom's international businesses.
Viacom is also looking to get its Paramount studio more closely aligned with its TV brands. Its film slate will include co-branded releases. There is a commitment to create four films with Nickelodeon, including Amusement Park starring Jennifer Garner and Mila Kunis, which will premiere in theaters in 2018. An Amusement Park series will debut on Nick the following year.
Viacom is starting a short-form content unit and will look to extend its reach through live experience and consumer products.
"Viacom's first quarter results reflect improvement in our core businesses, with increases in revenues and operating cash flow, continued strong international performance, including initial contributions from the acquisition of Telefe, and a return to positive growth in affiliate revenues,” said Bakish. “We are already benefiting from changes made early in the second quarter and seeing green shoots in our strongest businesses, as well as those that are poised for a turnaround. As we implement our strategy across the company, we believe we can drive significant value for shareholders."
"Today we share a strategy that will enable Viacom to realize the full potential of its premier global portfolio of entertainment brands," he added. "Building on our leading domestic and growing international footprint, this strategy will expand the depth and reach of our flagship brands across multiple platforms and around the world, while also providing for more competitive differentiation and increased adaptability for our business overall. There is much work to be done, but we are confident we have the plan and people to take our brands to greater heights and build a bright future for our company."
Operating income for Viacom’s media networks group fell 7% to $987 million from $1.06 billion a year ago.
Revenues were up 1% to $2.59 billion. Domestic revenues were flat at $2.06 billion, while international revenues increased 5% to $534 million.
Affiliate revenues were up 2% to $1.14 billion. Domestic affiliate revenues were up 2% to $985 million. While subscribers were down “modestly,” the revenue gain includes SVOD and other over-the-top agreements.
Ad revenues fell 2% to $1.29 billion. Domestic ad revenues were down 3%, reflecting softer ratings at certain networks, the company said.