Viacom profit beats, but U.S. ad sales lag

[April 28, 2016]  By Jessica Toonkel and Sai Sachin R

(Reuters) - Viacom Inc reported a higher-than-expected quarterly profit on Thursday as revenue from its film unit topped estimates, helped by the success of "The Big Short" movie, but a drop in domestic ad revenue was more dramatic than Wall Street expected.

The owner of such networks as Comedy Central, MTV and Nickelodeon said domestic ad revenue dropped 5 percent in the second quarter ended March 31, more than the 3 percent that analysts expected. This was the seventh straight quarter of declines.

Viacom also said affiliate fee revenue fell 2 percent.

"It's hard to convey optimism about Viacom when the numbers aren't showing improvement," said Pivotal Research analyst Brian Wieser. "Investors are not likely to get confidence back anytime soon."

Viacom, like its peers, has struggled with ratings for its television networks as younger viewers, a key demographic for networks such as MTV, increasingly view content online or on smartphones.

This has led to an increasing number of consumers cancelling their cable subscriptions. This trend, dubbed "cord cutting," threatens the revenue streams of media companies.

Viacom's shares have lost more than half their value since hitting a record high in July 2014.

Results from the filmed entertainment unit, which houses the Paramount movie studio, helped offset the lower domestic advertising sales.

Filmed entertainment revenue fell 1 percent to $655 million, but this was well above the analysts' average estimate of $593 million, according to research firm FactSet StreetAccount.

Paramount, in which Viacom Chief Executive Officer Philippe Dauman plans to sell a minority stake, also benefited from the Will Ferrell-Mark Wahlberg comedy "Daddy's Home," which was released late last year.

Viacom's media networks business, which also includes VH1 and Comedy Central, reported a 2.9 percent decline in revenue to $2.38 billion for the quarter.

Total revenue fell 2.5 percent to $3 billion. Analysts on average had expected $2.98 billion, according to Thomson Reuters I/B/E/S.

Net earnings attributable to Viacom were $303 million, or 76 per share, compared with a year-earlier loss of $53 million, or 13 cents per share.

Analysts had forecast a profit of 74 cents a share.

(Reporting by Sai Sachin R in Bengaluru; Editing by Shounak Dasgupta and Lisa Von Ahn)

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