Viacom (NYSE: VIA), a media company whose rivals include Disney (NYSE: DIS), Time Warner (NYSE: TWX), News Corp. (NASDAQ: NWS), and General Electric's (NYSE: GE) NBC Universal, had a lousy second quarter. True, you can blame a lot of it on the recession, I suppose. But somehow I get the feeling that management should be trying at least a little harder.
Revenues declined 14%. Earnings per share, with adjustments, dipped 23% to 49 cents. According to Reuters, analysts were looking for 48 cents per share, so we've got the proverbial beat-by-a-penny situation happening here. Should we be impressed? Well, I'll tell you, how can a shareholder be impressed with a 12% decline in operating income for the media division (this includes the MTV Networks) and an operating loss in the film division? Last year, the film department saw a nice operating profit!
I really disliked this earnings report. And, sure, the comparisons may have been tough with the film division, but come on, that's not all that's going on. The release mentions that the Rock Band video game has been having difficulties. Reuters highlighted this point as well. I hope Viacom isn't relying solely on that franchise to save the day in future quarters. Who knows when the fad for that category of gaming will eventually run out of gas (I do like the prospects for the version of the title centered on The Beatles, however). Viacom should instead put its muscle behind managing its movie business. There's a lot of work to be done there. Home video needs a reboot. Every media company is having trouble selling DVDs. Viacom should see if it can up with some novel plan for maximizing the exploitation of its catalog. So far, I don't perceive there to be any true strategy in that arena.
Of course, the market being the unpredictable mechanism that it is, shares of Viacom are up slightly as I write this during morning trading. I wouldn't be surprised if the stock dipped into the red later on in the day, but who knows, you can't predict those things. All I know is I won't be buying Viacom during this particular trading session ...
Disclosure: I own Disney, GE; positions can change without notice.
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
Reader Comments (Page 1 of 1)
7-28-2009 @ 4:27PM
epixfan said...
They signed the first distribution deal (Verizon) for the new pay channel / webservice you name it EPIXHD. Looks like a strategy to get their content distributed outside cinema, cable tv, dvd - isn't that a strategy. I remember before Hulu went live (we waited more than a year) and how they got blamed for a while for the wrong strategy, wrong technology etc. And today Hulu is a big success. If EPIXHD becomes a similar hit for the audience out there - and online advertising is very cheap these days, TV ads could run across MTV etc for almost free.... - Viacom has a way to grow again ... and deliver nice profits for a long time. (Disclosure: I don't own any shares of any media company).