Viacom's Netflix deal highlights content strategy; earnings mixed

(Reuters) - Viacom Inc announced another film production deal with Netflix Inc through its Nickelodeon kids division, fleshing out a strategy to produce more shows and movies for others as streaming video giants battle for viewers.

Nickelodeon will produce the films “The Loud House” and “Rise of the Teenage Mutant Ninja Turtles,” which are based on its hit television franchises. The company hopes those films on other platforms will send viewers back to Viacom-owned networks.

The announcement, made on a morning conference call with Wall Street analysts, underscored the significance of its multi-pronged strategy, as it delivered a quarter when ticket sales of “Transformers” reboot “Bumblebee” helped it beat profit estimates but revenue fell slightly short of expectations on weaker ad sales at its cable networks.

As Netflix and other existing and upcoming streaming service providers from Walt Disney Co and AT&T Inc’s WarnerMedia will shake up the traditional U.S. cable industry, Viacom and sister company CBS Corp are redoubling efforts to become original content resources for other distributors.

Both companies, controlled by National Amusements, are expected to rekindle merger talks in the coming months.

The latest production deal follows an earlier multi-picture deal with Netflix.

Viacom also played up its $340-million purchase of Pluto TV and said it had high hopes to build an international advertising-supported streaming TV service that will include programming from its archive. It will launch a Spanish-language version this year, Viacom chief executive Bob Bakish said.

The Viacom office is seen in Hollywood, Los Angeles, California, April 24, 2018. REUTERS/Lucy Nicholson

“It will be the next step in the evolution of this company,” Bakish told analysts.


Net income attributable to Viacom fell to $321 million, or 80 cents per share, in the first quarter ended Dec. 31 from $537 million, or $1.33 per share, a year earlier.

Revenue for the year-end quarter was $3.09 billion, below estimates of $3.12 billion, according to IBES data from Refinitiv.

That reflected lower advertising revenue and a hit from currency swings at a time when the company is fighting for its place in a hugely competitive and changing U.S. media landscape.

Domestic affiliate revenue, or the fees collected from U.S. cable and satellite operators and online distributors, rose 5 percent to $969 million. Analysts expected a 2.4 percent rise, according to research firm FactSet.

The company, which owns MTV, Comedy Central and Nickelodeon, said total affiliate revenue rose 3 percent to $1.17 billion, beating estimates of $1.11 billion, according to IBES data from Refinitiv.

Revenue from filmed entertainment division, which includes Paramount Pictures, rose 14 percent to $621 million.

Since taking charge in 2016, Chief Executive Officer Bob Bakish has focused on Paramount and the company’s cable TV business.

Excluding items, the company earned $1.12 per share, above the average estimate of $1.03 per share.

Viacom said it expected full year revenue growth in the mid-single digits on a constant currency basis. It also expects advertising growth in 2019.

Reporting by Akanksha Rana in Bengaluru and Kenneth Li in New York; Editing by Sriraj Kalluvila and Nick Zieminski