Viacom Reports Dip in Q1 Profit, Unveils Snapchat Ad Deal

NEW YORK: Revenues for the first fiscal quarter of 2016 declined 6 percent to $3.15 billion at Viacom, with soft performances from its Media Networks and Filmed Entertainment businesses.

Philippe Dauman, the executive chairman, president and CEO of Viacom, said, “As the media industry continues to evolve quickly, Viacom is generating sustainable opportunities using great new content, innovative technology, marketing and data applications, along with the benefits of our substantial footprint in key international growth markets. Our investments in new content have led to higher ratings at most of our networks, including VH1, Spike, BET, TV Land, CMT and Nick at Nite, as well as Nickelodeon, which recaptured its lead as the top network for kids 2 to 11. In addition, we saw significant sequential improvement in domestic advertising sales, due to the success of our new programming and our highly-desirable new advertising products. Paramount is off to a strong start in 2016, with a promising and diverse film lineup throughout the year, and our Paramount Television unit is also thriving.

“2015 was a challenging year operationally as we redesigned ourselves and adapted to significant industry disruption. Our first fiscal quarter of 2016 reflected these challenges. However, our revitalized organization and our investments in content, technology and strategic innovation are now beginning to bear fruit. Although our industry continues to face headwinds, we expect our positive momentum to continue and build throughout the year.”

Media Networks revenues declined 3 percent to $2.57 billion. Domestic advertising revenues declined 4 percent, as pricing increases were more than offset by a decline in traditional ratings at some of the networks. Worldwide advertising revenues decreased 3 percent, with an unfavorable 1 percent impact of foreign exchange. International advertising revenues declined 2 percent, due to an 8 percent adverse effect of foreign exchange. Absent the impact of foreign exchange, international advertising revenues increased 6 percent, driven principally by growth in Europe. Domestic affiliate revenues were stable, due to the impact from the timing of product available under certain distribution agreements. International affiliate revenues dipped 6 percent, with a 9 percent unfavorable impact of foreign exchange. Absent the impact of foreign exchange, international affiliate revenues increased 3 percent.

Filmed Entertainment revenues were down by 15 percent to $612 million, as an increase in license fees was more than offset by declines in theatrical and home entertainment revenues. Worldwide revenues declined 12 percent, excluding foreign exchange, which had a 3 percent unfavorable impact. Worldwide theatrical revenues decreased $75 million in the quarter, as carryover revenues decreased $46 million, mostly due to a tough comparison with the strong performance of Teenage Mutant Ninja Turtles in Q1 2015. Worldwide home entertainment revenues decreased $77 million in the quarter, primarily reflecting a comparison with carryover revenues from Transformers: Age of Extinction in the first quarter of 2015. License fees increased 25 percent to $237 million in the quarter, driven by the licensing of certain titles for SVOD services and television.

Quarterly adjusted operating income declined 13 percent to $839 million, impacted by the timing and mix of current-quarter Filmed Entertainment releases, as well as lower contributions from films in release across post-theatrical distribution windows. Media Networks adjusted operating income declined 4 percent to $1.06 billion, as the decline in revenues was partially offset by decreased expenses.

Viacom also announced a global partnership with Snapchat, covering both content production and advertising sales. The pact sees Comedy Central International and an MTV channel in the U.S. coming to Snapchat Discover. The agreement also grants Viacom the right to sell Snapchat’s U.S. owned and operated advertising inventory. In addition, Viacom has agreed to provide Snapchat with expanded access so Snapchat can produce live stories covering more of Viacom’s tentpole events.

“Viacom and Snapchat naturally complement each other in significant ways that make us ideal partners in both content and business development,” said Wade Davis, CFO of Viacom. “Snapchat captures young audiences on an intimate and immersive mobile video platform while Viacom is the leader in premium long- and short-form storytelling for these same audiences. Add in Viacom’s custom marketing solutions and commitment to evolve our global mobile strategy and you’ve got a partnership that is great for both companies, for advertisers, and is a real evolution of the marketplace.”

“Snapchat provides the best storytelling experience on mobile. Through this partnership with Viacom, we can now offer television advertisers a way to tell their stories across television and mobile in a frictionless way,” added Imran Khan, Snapchat’s chief strategy officer.