NEW YORK (Reuters) - Viacom Inc VIAb.N said on Friday quarterly net profit rose 33 percent, beating Wall Street forecasts, on strong sales of the “Rock Band” video game and higher advertising revenue at MTV Networks.
The owner of the Nickelodeon cable network and Paramount studios said it has seen no slowdown yet in U.S. advertising, temporarily addressing concerns that the credit crisis will lead to an advertising recession.
Based on ratings at its cable networks and rates for spot advertising, also called the scatter market, “we continue to expect our (second quarter) domestic advertising sales growth to be comparable to the first quarter,” Viacom Chief Executive Philippe Dauman told analysts.
First-quarter profit rose to $270 million, or 42 cents per share, from $203 million, or a 29 cents per share, a year earlier.
Excluding a non-cash impairment charge for a minority investment, Viacom earned 44 cents per share, ahead of Wall Street forecasts of 41 cents, according to Reuters Estimates.
Revenue rose 15 percent to $3.1 billion, beating analysts’ estimate of $3 billion.
“Investors have to be pretty pleased with what they’ve been showing over the last several quarters,” said senior media analyst Robin Diedrich at Edward Jones. “They’re delivering on expectations and better.”
Nevertheless, Viacom shares have fallen 13 percent since the beginning of the year on concerns about the overall media industry’s ability to weather a downturn. Shares fell 0.5 percent or 20 cents to $39.54 on the New York Stock Exchange, after rising 3.4 percent on Thursday.
Global advertising revenue rose 8 percent to $1.05 billion, and domestic ad revenue rose 7 percent.
“The trends seem very healthy despite concerns of an economic slowdown,” Standard & Poor’s analyst Tuna Amobi said about Viacom’s advertising performance.
Cable networks are viewed as a safe haven as viewers spend more time watching cable at the expense of broadcast networks. But it remains unclear if MTV Networks is a beneficiary.
“We estimate less than 25 percent of Viacom’s media networks ad revenue is from general interest cable networks that would benefit from a direct shift of broadcast ad dollars,” Goldman Sachs analyst Ingrid Chung said in a report.
Revenue at Viacom’s movie studios rose 12 percent to $1.15 billion, boosted by $29 million in connection with its arrangement to release next-generation movies in the HD-DVD format exclusively. The HD-DVD format ultimately lost out to Blu-ray, which garnered the support of most of Hollywood.
But worldwide box office revenue fell 7 percent on lower ticket sales, dragged down by “How She Moves” and “The Eye.” Results offset stronger DVD sales of DreamWorks Animation’s “Bee Movie” and Paramount’s “Beowulf” in the first quarter.
The film division narrowed its operating loss to $63 million from a loss of $108 million.
Paramount Studio’s release of “Iron Man” this week, the first of the big summer blockbuster movies, will be a key benchmark for the film industry this year. Amobi said that anything less than a $45 million to $50 million opening weekend will be considered a disappointment.
Viacom expects to book $175 million in worldwide movies prints and advertising expenses in the second quarter from a slate of big releases that include Steven Spielberg’s “Indiana Jones and the Kingdom of the Crystal Skull” and “Kung Fu Panda.”
The timing of the releases will push profitability in the division to the second half of the year.
The company also struck a deal last week to launch a premium television channel by next year with Lionsgate LGF.N and Metro-Goldwyn-Mayer. Viacom said it will not spend more than $100 million on the venture as a lead, but not majority, investor.
Viacom reaffirmed its forecast for 2008 through 2010, of low double-digit annual growth in earnings per share from continuing operations.
Reporting by Kenneth Li; Editing by Derek Caney and Steve Orlofsky