* Q1 revenue dropped 16 pct on weak ad sales and film revenue
* Sees ad revenue to return to positive growth this year
* Adj EPS of 91 cents beats estimates by a penny
By Jennifer Saba
Jan 31 SpongeBob SquarePants and the Teenage Mutant Ninja Turtles could not lift ad sales at Viacom's stable of cable networks, which dragged down first quarter total revenue.
Specifically, it was Viacom's Nickelodeon - home to the undersea goofy character and fighting reptiles - that was responsible for the six percent decline in advertising revenue for the quarter ending Dec. 31.
Viacom Chief Executive Philippe Dauman singled out Nickelodeon during a quarterly earnings call on Thursday explaining that ad revenue would have been positive during the quarter excluding the network targeted to kids.
And yet he also offered some uplifting news to investors: Viacom is climbing out of the advertising slump that started last year because of weak ratings at its cable networks including MTV and Comedy Central.
Advertising revenue is expected to be flat and then turn positive during the year, Dauman said on a call with analysts.
"The results were pretty much on target," said Alan Gould, an analyst at Evercore Partners. "The fact of improving ad sales going forward that would be a positive."
Shares of Viacom rose 1.8 percent to $60.36 in morning trade on Thursday.
In the past year, Viacom has been struggling with declining cable ratings and is trying to gain a steadier foothold with its programming.
Ratings are the currency for TV commercials that set prices based on the popularity of programs. The more people that watch, the higher the cost of the ad.
"All of our groups are focusing intently on developing more new compelling programs," Dauman said.
The decline in ratings has multiple roots including intense competition from Walt Disney and that younger audiences watch TV shows on demand, which are not always captured in ratings.
Still, after the wild success of "Jersey Shore," Viacom is rapidly trying to revive its status as a destination for young audiences. It has invested in a new slate of TV shows, including "Teenage Mutant Ninja Turtles," "Catfish" and "Buckwild," which are beginning to show promise.
"At the end of the day, I have been optimistic on Viacom," said Pivotal Research analyst Brian Wieser. "It's a hit driven business and hits are cyclical."
Viacom reported total revenue fell 16 percent to $3.3 billion, shy of analysts average forecast of $3.48 billion, according to Thomson Reuters I/B/E/S.
While its film entertainment revenue, which includes Paramount Pictures, dropped sharply, down 37 percent, it is the company's cable channels that represent more than 70 percent of Viacom's revenue.
Net income fell to $473 million, or 93 cents per share, from $591 million, or $1.06 per share, a year earlier.
Earnings before special items were 91 cents a share, beating analysts' average forecast by a penny.