NEW YORK (Reuters) - Viacom Inc., parent of MTV and Comedy Central, posted better-than-expected quarterly profit on strong growth in cable advertising and licensing of TV shows to online sites like Netflix and Hulu.
Chief Executive Philippe Dauman said digital distribution is on course to be increasingly important for its profits.
“These digital deals come with very high margins and fortunately for us, there is a lot more room for incremental growth from these types of deals both in the US and internationally,” he said on a conference call.
Viacom derives 26 percent of its revenue from distribution, which includes the fees it charges to cable, phone and satellite companies for its channels and licensing fees it gets from online sites for its programing.
The company raised internal forecasts for its distribution revenues this year due to growth from digital deals. It forecast “a high single to double-digit” annual percentage growth rate for distribution for the foreseeable future.
He added that profit margins were at least 75 percent for digital deals.
Edward Jones analyst Robin Diedrich said, “The company is doing pretty well though there’s always a concern that these digital deals might take away from other sources of distribution revenue like cable.”
Excluding special items, Viacom earned 99 cents per share in its fiscal third quarter, exceeding analysts’ average estimate of 86 cents per share, according to Thomson Reuters I/B/E/S.
Revenue in the quarter, ended June 30, rose 15 percent to $3.77 billion, ahead of the $3.52 billion expected by analysts.
Advertising revenue at its cable networks rose 14 percent to $1.28 billion, while distribution revenue increased by nearly one-fifth to $971 million, boosted by higher digital distribution revenue as well as rate increases to cable and satellite partners.
While healthy advertising growth has been a common feature of the big media companies’ results in the quarter, digital licensing of TV shows to online partners has been another significant driver of profits.
Viacom struck a new deal with Hulu in February and expanded an existing agreement with Netflix in May, helping to boost its bottom line with one-time licensing fees. A similar effect was seen at Time Warner Inc and CBS Corp.
At Viacom’s filmed entertainment unit. Paramount Pictures, revenue grew 13 percent to $1.41 billion on the back of higher TV license fees for movies and DVD sales. But movie box office revenue dropped 9 percent as titles “Thor,” “Super 8” and “Kung Fu Panda 2” fell short of what Viacom had hoped.
Shares were down 19 cents at $43.91 on the New York Stock Exchange in line with a wider market downturn.
Reporting by Yinka Adegoke; additional reporting by Franklin Paul; Editing by Derek Caney and Steve Orlofsky