Lower film revenue contributes to Viacom fall in Q4-16 numbers

BENGALURU: Impairment charges for the unreleased Monster Trucks, foreign exchange impact because of Brexit, lower affiliate revenue, lower ratings and hence lower advertising revenue along with restructuring costs were some of the major factors that contributed to a fall in numbers across important parameters for Viacom Inc., (Viacom). For its fourth quarter ended 30 September 2016 (Q4-16, current quarter), Viacom reported a 14.8 per cent decline in total revenues to $3,226 million from $3,788 million in the corresponding quarter of the previous year (Q4-15).

Adjusted operating income for the current quarter declined to a little more than 50 per cent (declined 49 per cent) to $538 million as compared to $1,055 million in Q4-15. Operating Income declined to less than a third (31.5 per cent) y-o-y in Q4-16 to $332 million from $1,055 million in the corresponding year ago quarter. Reported operating income reflects restructuring costs related to executive severance incurred in the fiscal fourth quarter says Viacom.

The company has two segments – Media Networks and Filmed Entertainment.

Media Networks

Media Networks revenue in the current quarter declined 10.9 per cent led by a decline in affiliated and domestic (US) advertisement revenue as well as forex impact due the rising dollar vis-à-vis other currencies, among them Viacom’s UK business which was effected by the downward movement of the British pound with respect to the US dollar due to Brexit.

The Media Networks segment reported 10.9 per cent year-over-year (y-o-y) decline in revenue for Q4-16 at $2,483 from million $2,787 million reported for Q4-15.

Media Networks advertising revenue declined 7.6 per cent in Q4-16 to $1,150 million from $1,245 million in Q4-15. The company says that domestic advertising revenues declined 8 per cent, reflecting a decline in television ratings at select networks, partially offset by higher pricing. Worldwide advertising revenues also decreased 8 per cent, reflecting the domestic decline and a 7 per cent decrease in international advertising revenues. Excluding an unfavourable 13 per cent impact of foreign exchange, international advertising revenues increased 6 per cent, resulting from continued growth in Europe.

Affiliate revenues declined 16.3 per cent to $1,160 million in Q4-16 from $1,386 million in the corresponding year ago quarter. Viacom says that domestic and worldwide affiliate revenues decreased 19 per cent and 16 per cent, respectively, reflecting significantly higher revenues from SVOD arrangements in the prior year quarter. International affiliate revenues increased 7 per cent. Excluding an unfavourable 8 per cent impact of foreign exchange, international affiliate revenues increased 15 per cent, driven by new channel launches, increased subscribers, rate increases and the completion of certain SVOD and other OTT arrangements.

Ancillary revenues in Q4-16 increased 10.9 per cent to $173 million as compared to $156 million reported for Q4-15.

The segment reported a 26.9 per cent decline in operating income to $741 million in Q4-16 from $1,104 million in Q4-15. Adjusted operating income in the current quarter declined 26.6 per cent to $750 million from $1,022 million in the corresponding year ago quarter. Viacom says that Media Networks adjusted operating income decreased primarily due to the decline in revenues.

Filmed Entertainment

Filmed Entertainment reported 24.5 per cent decline in revenues in Q4-16 to $774 million from $1,025 million in the corresponding quarter of last year. Filmed Entertainment revenues declined 24 per cent to $774 million, driven by lower theatrical revenues due to the strong international performance of Mission: Impossible - Rogue Nation in the fourth quarter of 2015.

Theatrical revenues in Q4-16 for the segment declined to less than half (declined 54.6 per cent) y-o-y to $203 million from $447 million in Q4-15. Home Entertainment revenue increased 22.8 per cent y-o-y in Q4-16 to $199 million as compared to $162 million. License revenue declined 12.1 per cent in the current quarter to $326 million from $371 million in Q4-15. Ancillary revenue for the segment increased 2.2 per cent in Q4-16 to $46 million from $45 million in Q4-15.

The segment reported an operating loss of $141 million in the current quarter as compared to an operating profit of $118 million in Q4-15. Adjusted operating loss was $137 million in Q4-16 as compared to an operating profit of $122 million in Q4-15. Viacom says that Filmed Entertainment adjusted quarterly operating loss resulted from a decline in revenues and a previously-disclosed $115 million programming impairment charge.

Company speak

Viacom interim president and CEO Tom Dooley said, "Viacom ended the 2016 fiscal year well into our transition, as the company’s industry-leading data program increased in size and sophistication, ratings stabilized at several of our key networks and Paramount has begun to rebuild a full, dynamic slate of films. In addition, our international media networks business is stronger than ever, and we will continue to broaden our footprint and apply our successful strategies to additional territories in attractive markets. With new leadership across the company, continued investments in new content, technologies and targeted acquisitions, and an expanded Board of Directors, I have great confidence in Viacom’s next phase, as the company explores the exciting possibilities ahead."

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