Earnings Watch: Viacom and DreamWorks Animation
Tuesday, Viacom delivered some good news. The company said its premium movie channel joint venture, Epix (developed jointly with Lionsgate and MGM), has signed a carrier deal with Verizon. Viacom also said it was “very pleased” with advance bidding (called “up fronts”) for commercial time on its cable properties in the upcoming TV season. The ad sector, CEO Philippe Dauman suggested, is showing signs of recovery. What was less positive, however, was Viacom’s performance in the quarter ended June 30th.
Adjusted earnings (earnings less severance charges of 3 cents per share) came in at 49 cents a share for the second quarter, the company reported. Down 23% year over year, that was just good enough to beat analyst’s consensus expectations of 48 cents (Thomson Reuters) but revenue numbers missed.
Analysts projected revenue of $3.5b. Viacom totaled up $3.3b in revenue for Q2, a 14% drop over the same period last year.
Dauman cited the broader economy as explanation, saying during the conference call, “our second quarter results reflect challenges that many companies are facing… The ongoing impact of a weak global economy continues to impact the advertising and retail markets.”
At Viacom’s Film unit, where current titles couldn’t match to the results of “Iron Man” and “Indiana Jones” last year, the impact translated to a revenue decline of 22% ($1.38b). Operating income downshifted from gains of $86m last year to losses of $25m this year.
Theatrical revenues were down 27% to $584m. Home Entertainment revenue was down 29%.
Dauman acknowledged the decline in Home Entertainment may support views the DVD market is shrinking. “While the economy is certainly playing a role in this decline, the trend does support the notion that the consumer’s appetite for DVDs may be showing signs of fatigue,” he said
On a percentage basis, Viacom’s Media Networks group fared somewhat better than the film group with results that showed elements of positive and negative news.
On the negative, ancillary revenues “driven by lower sales of the music video game” declined 41% – that’s a possible sign that over-saturation of the music game genre is numbing consumer interest. (Or consumers are holding off in anticipation of future games like the Beatles edition due in the fall)
On the positive, domestic ad revenues (down 6% year over year ) were a 3 point sequential improvement over Q1 – trending the right way, even if still down.
Overall, Revenue for Media Networks shrunk 8% on the quarter to $1.97b while Operating Income shrank 12% to $671m.
In other media earnings…
DreamWorks Animation also reported Tuesday. Second quarter sales came in at $132m for the family-centric studio. Net income was $25.6m, or 30 cents a share. Both revenue and earnings were down approximately 7% year over but well ahead of analysts’ expectations. Analysts previously forecast EPS of 16 cents on revenue of $116.8m.
The performance was largely the result of the company’s 2008 movies. Kung Fun Panda added $32.7m to revenue. Madagascar Escape 2 Africa contributed $26.1. Monsters vs Aliens, the company’s first 3-D feature, which premiered in March, contributed $10.3m.
CEO Jeffrey Katzenberg called the result “solid.”
Gross margin came in at 43.9%, down from 46.2% last year.
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