Viacom's vibrant
Figures bolster Redstone's optimism
Redstone was particularly bullish on the earnings and cash flow of MTV, Nickelodeon, VH1, Showtime, TV Land, and Viacom's other cable networks, which he said are "maintaining a record-setting pace" that could top $1 billion in cash flow for calendar 1999.
For the third quarter ended September 30, Viacom harvested $3.32 billion in revenues compared with $3.29 billion for the same period in 1998.
Third-quarter cash flow reached $610 million (excluding a one-time restructuring charge generated by the merger of Spelling into Paramount's TV operations) compared with $599.8 million for last year's third quarter.
Operating income was off in the third quarter, from $407.3 million in 1998 to $402.3 million this year (excluding the restructuring charge). Redstone said the loss was surprisingly small considering that last year's third quarter included the huge profits ignited by the release of James Cameron's "Titanic" in the video stores.
Net profit was also down for the quarter, dropping nearly 22% to $97 million.
"Viacom had a great quarter," said Jessica Reif Cohen, a showbiz analyst for Merrill Lynch. "All of its engines of growth are healthy. And I was glad to hear Sumner say he was planning to get rid of Blockbuster."
Redstone tried to scotch reports that the chairman of CBS Mel Karmazin may not want to proceed with the plan to sell Viacom's 82.3% stake in Blockbuster Inc.
"It remains our intention to split off Blockbuster from Viacom at the end of the year," Redstone said in a conference call with analysts. "But we're not going to give it away. Blockbuster is not a sick child but a booming, thriving business. We hope and expect that the market will recognize the value of Blockbuster so we can proceed with the split-off."
Cohen and two other analysts, Chris Dixon of Paine Webber and Ed Hatch of Cowen & Co., stressed the big increases in advertising revenues, both domestic and foreign, for Viacom's cable networks, increases that are expected to continue in a surging economy. The cable networks, as a category, jumped 15% in revenues during the third quarter, to $753 million, and their cash flow advanced by 22%, to $285 million.
In the conference call, Redstone said he and Karmazin got a "favorable" reception in Washington from the regulators and legislators over Viacom's push to change the rules governing the number of TV stations one company can own.
But if the regulators fail to modify these rules, Redstone says he and CBS will sell UPN (in which Viacom holds a 50% stake) and a number of TV stations (to get down to the 35% limit).
"Nothing will impede the closing of this merger," said Redstone.
The figures for the entertainment division of Viacom are down, again because the "Titanic" cassette inflated the income numbers for last year's third quarter. But Redstone trumpeted Paramount's theatrical track record, pointing to the $100-million summer grosses chalked up in U.S. theaters by "Runaway Bride," "The General's Daughter" and "Double Jeopardy," which has already pocketed $80 million.
