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'Transformers 2', 'Star Trek' Discs Drive Q4 Paramount Income Surge

11 Feb, 2010 By: Erik Gruenwedel and Chris Tribbey

transformers 2

Strong DVD/Blu-ray Disc sales for Transformers: Revenge of the Fallen, Star Trek and G.I. Joe: The Rise of Cobra contributed to Paramount Pictures reporting fourth-quarter (ended Dec. 31, 2009) operating income of $298 million, compared to operating income of $84 million during the prior-year period.

The studio, whose results include Paramount Home Entertainment, reported worldwide home entertainment revenues of $1.15 billion, up 12% over the prior year's fourth quarter.

Overall filmed entertainment revenue declined 1% for the quarter, though Viacom president and CEO Philippe Dauman noted in a conference call with investors that Paramount delivered strong year-over-year profitability. Paramount finished the year No. 2 in terms of the total domestic box office, Dauman said, with Paramount films averaging $115 million per picture.

Tom Dooley, Viacom’s senior EVP and CFO, said Paramount’s fourth quarter was its most profitable in seven years.

“At Paramount Pictures, we are making hits and making money,” said Viacom chairman and founder Sumner Redstone. “Content remains and always remains king, and Viacom is leading the pack and setting the pace as a content-focused enterprise.”

Dauman said the fourth quarter showed  “a nice uptick” in home entertainment revenue, with DVD and Blu-ray “sellthrough conversion ratios of Star Trek, and G.I. Joe in particular, well above industry averages.”

“Notably, we had the No. 1 and No. 2 titles in the Blu-ray format, [with] Transformers and Star Trek,” he said. “Blu-ray has now become a significant portion of DVD sales, and we think that will grow and that’s a nice margin product.”

Looking ahead, Paramount this year will release Martin Scorsese's Shutter Island, Iron Man 2 and M. Night Shyamalan's The Last Airbender, as well as distribute three DreamWorks Animation SKG films.

Regarding Epix, the high-definition pay-TV and online streaming channel co-owned by Lionsgate, MGM and Paramount, Dauman said the channel should be available to nearly 20 million homes by May.

“The breadth and quality of movie content Epix is offering is unmatched by any other single pay TV network’s,” he said. “Importantly, we are no longer a testing phase. We are authenticating customers today and offering full access to all of our content online.”

Viacom’s online sites attracted nearly 100 million unique visitors worldwide during the quarter, Dauman said, up 9% from the previous year.

“Digital content can be created at a fraction of the cost of linear programming,” he said. “And with limited distribution costs and pre-sold sponsorships, we have already created compelling products such as MTV’s ‘$5 Cover’ and Paramount’s ‘Circle of Eight.’”

Also during the conference call, Viacom revealed that on Feb. 8 the company had taken on $400 million in debt to repurchase the DreamWorks live action film library.

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