Cable TV

Viacom's Q1 revenues up 12 per cent to $2.37 bn

MUMBAI: US media conglomerate Viacom has reported a 12 per cent rise in revenues at $2.37 billion for the first quarter ended 31 March 2006.
Eight per cent of the revenue increase was attributable to the acquisition of DreamWorks on 31 January 2006. The growth in revenues reflects a seven per cent increase in the cable networks segment, and a 25 per cent rise in the entertainment segment, including DreamWorks.

Ad revenues, which accounted for 36 per cent of total revenues in the quarter, increased three per cent versus first quarter last year, while affiliate fees, representing 21 per cent of total revenues, increased by nine per cent.

Feature film exploitation accounted for 34 per cent of total revenues, an increase of 26 per cent. Ancillary revenues, which accounted for nine per cent of total revenues for the quarter ended 31 March 2006, increased 14 per cent versus 2005 first quarter results.

In the cable networks segment, US channels revenues were up six per cent. This was partially offset by a decline in international ad revenues of 13 per cent due principally to lower ad spending and change in channel format in the first quarter of this year in Germany.

Affiliate fees were up nine per cent in the first quarter of 2006 with subscriber increases and rate increases both contributing to the growth. Subscriber increases were led by distribution growth at domestic channels including Digital Suite, MTV2, Tempo and Noggin, which added an aggregate of over 40 million subscribers.

In addition Logo, which launched on 30 June 2005, now has 20 million subscribers. Rate increases were strongest among MTV Networks core channels, led by Nickelodeon and MTV. Ancillary revenues were up 15 per cent in the first quarter of 2006, driven primarily by a 36 per cent increase in home video/DVD sales, higher syndication fees resulting from the availability of South Park as well as other licensing and merchandising revenues contributing to the improved performance versus 2005.

Operating income in the cable networks segment rose by eight per cent to $621.1 million in the first quarter of 2006 from $577.5 million in the first quarter of 200. Higher revenues were partially offset by a seven per cent increase in operating expenses.

The increase in operating expenses primarily reflected higher programming costs across domestic channels for shows including The Daily Show and The Colbert Report which air on Comedy Central; acquired movies and Fresh Baked Video Games at Spike; Next, Making the Band and Laguna Beach at MTV; Miss America Pageant on CMT and Lil’ Kim, Countdown to Lockdown and CollegeHill at BET.
Increases for these shows were partially offset by the non-renewal of the WWE package at Spike and the ending of Osbournes and Newlyweds – Nick and Jessica on MTV.

Home entertainment revenues increased by $48.5 million, or 13 per cent to $421.8 million, inclusive of DreamWorks library titles contribution of $74.4 million. Other home video releases for the first quarter 2006, such as Hustle & Flow, Yours, Mine & Ours and Elizabethtown underperformed 2005 releases including Collateral, SpongeBob SquarePants and Without A Paddle.

Television license fees increased by 30 per cent to $220.4 million, including $55.6 million of DreamWorks related revenues which accounted for all of the increase. Worldwide theatrical revenues in 2006 increased by 50 per cent or $39.5 million to $118.9 million. DreamWorks titles She’s the Man, Munich and Match Point added $42.6 million in the quarter, partially offset by declines as Failure to Launch and Last Holiday, in theaters in the first quarter of 2006, underperformed 2005 titles including SpongeBob SquarePants, Lemony Snicket and Coach Carter.

Ancillary revenues increased by 78 per cent to $63.8 million driven primarily by increased revenues related to the rental of studio space.

Commenting on the result, Viacom executive chairman Sumner M. Redstone said, “The exceptional businesses and strong brands of Viacom are very well-positioned as we move into an increasingly multi-platform environment. Looking ahead, we believe we can create long-term value for our shareholders and outperform the industry as we deliver our content in more ways than ever before to even larger audiences.”

Added Viacom president, CEO Tom Freston, “There’s great excitement and momentum at Viacom. First off, we completed our first quarter as a new, focused and more nimble company. We closed the acquisition of DreamWorks and sold the library, continued to make strong progress in the execution of our digital strategy and hit many all-time viewership highs at MTV Networks and Bet Networks. We did face some challenges in the overseas ad market, but we have already taken steps that we believe will put that business back on track to deliver on its growth potential.

“Overall we’re pleased with the way our company performed, and are continually working to ensure that investors fully realize the success of our strong brands, film, cable and digital content and multiplatform opportunities. I’m very comfortable with our progress and our outlook, and am confident that we’ll meet our 2006 goals.”

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