Two-speed Viacom growth rates justify split
Viacom yesterday justified its decision to split the business in two, with third quarter results that showed sharply differing rates of growth among its various units. The media conglomerate said its cable networks division, including MTV and VH1, showed profits of $682m (£385m), an 11% increase on the previous year on a 15% rise in revenues. The Paramount Pictures film division, which will join cable networks in the newViacom, had profits of $110m, compared with $5m a year earlier.
The broadcast television business, which will anchor the new slower-growth CBS Corporation, reported a 19% earnings drop to $376m on a 2% decline in revenue.
Viacom announced its plan to split into two in March. The aim is to have more clearly defined businesses: one fast growing, the other slower but with steady cash flow and dividends. Sprawling media conglomerates have fallen out of favour in the past year and others, including Clear Channel and Time Warner, are spinning off businesses to present a more clearly focused investment story.
Sumner Redstone, Viacom chairman and chief executive, said the results "highlight the rationale and promise of our proposed separation into two companies. The significant strengths of 'new' Viacom to deliver consistent double digit bottom line growth and the proven cash generation ability of CBS Corporation will underpin their performance and define their attractiveness to investors in the future."
CBS Corporation will also include the radio business Infinity Broadcasting, Viacom Outdoor, the TV stations division, and book publisher Simon & Schuster.
Viacom reported group earnings of $708m, compared with a $488m loss a year ago due to a huge write-off with the spin-off of Blockbuster Video. Group revenue rose 10% to $5.9bn. The cable networks business, including Nickelodeon and Comedy Central, saw a 17% growth in advertising revenues. Paramount Pictures was given a shot in the arm by the success of Steven Spielberg's War of the Worlds, which has taken $588m at the box office since its June release. The film unit revenue grew 54% to $845m.
During the quarter, Viacom recorded costs of $15m for damage from hurricanes Katrina and Rita and $17m associated with the break-up plan.