Viacom cable net revenue down 3.5%; analyst calls business model 'doomed'

Viacom's Philippe Dauman stridently defended his leadership, as well as the company's recent decision to give him a raise and appoint him executive chairman, as weak cable network performance dragged down Viacom profits once again in the most recent fiscal quarter.

Revenue from Viacom's cable networks slid 3.5 percent to $2.57 billion for the three-month period. Total revenue declined 5.7 percent to $3.15 billion, missing analysts' projection of $3.26 billion.

Profit declined to $470 million, down from $538 million.

For Viacom and Dauman, it was only the latest in a series of dower earnings reports, with cable networks including MTV, Spike TV, BET and Comedy Central suffering from declining linear ratings and softer advertising sales. Like other media companies, Viacom has seen viewership for its linear channels suffer due to migration of audiences to SVOD channels.

In a statement, Dauman tried to spin investors on moves Viacom is making into digital platforms, such as the $5.99-a-month kid-targeted SVOD site Noggin. "Our revitalized organization and our investments in content, technology and strategic innovation are now beginning to bear fruit," he said. "Although our industry continues to face headwinds, we expect our positive momentum to continue and build throughout the year."

At least one analyst wasn't convinced. "Longer term, we continue to hold the view that the old business of serving kids/teens with linear TV networks is doomed," Bernstein Research analyst Todd Juenger said. "And the new business of serving kids/teens with on-demand, digitally delivered entertainment is unlikely to be won by Viacom."

Last month, Comcast confirmed that it had moved several Viacom channels out of its basic programming tier. Dauman hinted that legal action might be forthcoming. 

"They have violated our agreements and we are not going to sit back," he said. "We will preserve our rights as we go forward."

For more:
- read this Wall Street Journal story
- read this Variety story

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