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Viacom Looks For More Video Growth in 2006

23 Feb, 2006 By: Jessica Wolf

The new Viacom posted double-digit revenue growth for 2005 and an overall 18% leap, to $9.61 billion, in revenue for the year.

Viacom — comprised of Paramount Pictures, Paramount Pictures Home Entertainment and the MTV Cable Networks — reported its first financial results last week as a separate company from CBS Corp., which held on to the old Viacom's TV and radio businesses.

Historical 2005 operating income for the company increased 4%, to $2.37 billion in 2005 from $2.28 billion in 2004. Net earnings from continuing operations decreased to $1.3 billion in 2005 from $1.39 billion in 2004.

The company's entertainment segment, which includes theatrical and home video revenue from Paramount films, was up 19%, even though the segment experienced a 5% decrease in 2005's fourth quarter.

Company executives attributed that dip to a weaker comparative theatrical slate, lower box-office revenue than 2004 and a “moderation” in worldwide home video sales.

Viacom CEO Tom Freston singled out War of the Worlds, The Longest Yard and Four Brothers as Paramount's strongest DVD and theatrical performers in 2005.

DVD accounts for 55% to 60% of revenue at Paramount, said Viacom CFO Mike Dolan. Even faced with a “moderating market,” Viacom expects further growth out of the DVD category in 2006, he said.

“We think a lot of growth will come from the better slate we will be producing beginning about mid-year with Mission: Impossible 3,” Dolan said.

The high-definition market will factor in this year as well, but to what extent is still a question, he said.

Freston said Viacom is close to a deal to sell the DreamWorks library, which Viacom acquired this year. Viacom retains distribution rights to the DreamWorks catalog, but the library sale will cut down the company's acquisition expenditure of the mini-studio to about $600 million, Freston said.

The DreamWorks acquisition is a key element of Viacom's target for a “turnaround” of Paramount, Freston said.

Reiterating Viacom's commitment to digital platforms for content, Freston said the company plans to broaden the availability of its proprietary content outside of its internal Web-based portals, he said. The company has signed on with Google and Yahoo for video search features, and Verizon and iTunes for downloads.

Since Viacom made selections from such MTV Networks shows as “South Park,” “Laguna Beach,” and “Punk'd” available for sale via iTunes, the company has seen 900,000 episodes downloaded, Freston said.

Viacom earned $150 million in digital revenue last year, primarily from subscriptions and advertising, Freston said. That number will grow to $500 million over the next three years, he said.

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