Viacom shares are down about 3.5% at midday on an otherwise up day for the market after CEO Philippe Dauman punted on the big question on the minds of analysts attending the UBS Annual Global Media and Communications Conference: What’s up with the steep decline in Nickelodeon’s ratings — which he said last month was due to a problem with Nielsen’s measurement system? “There’s nothing new” to report, he says. ”No one’s more frustrated than myself.” He didn’t continue his attack the ratings company, which said today that it made a mistake in calculating the number of kids who watch TV — but added that it’s unrelated to the double-digit change in Nickelodeon’s ratings. ”However imperfect Nielsen is, it’s the only game in town, so we have to live with it,” Dauman says. “It is what it is. We’re going to move on.” He acknowledged that the channel’s ratings dive is “unfortunate” because “this is by far the most important quarter for Nickelodeon” due to the number of toymakers who flock to the channel to advertise holiday gifts. But he says the Nick problem will become less significant after the holidays are over. ”One way or the other we’ll move forward” with growing profit margins. Viacom has “more new shows coming to Nickelodeon than we’ve ever had.” He adds that “next quarter we expect to see stronger ad sales growth because we won’t have that issue” with the ratings.
Viacom CEO Philippe Dauman will be playing with fire if he tries to sidestep questions about Nickelodeon’s declining ratings on Monday when he addresses the annual UBS Global Media & Communications Conference: Even some of his company’s more faithful supporters are beginning to wonder what the hell is going on. Today, Nomura Equity Research’s Michael Nathanson joined the pack, decreasing his price target for Viacom shares by $1 to $54 based largely on what he calls the “inexplicable declines” at the channel. He says that Viacom’s total ad growth could be as low as 3% in the last three months of 2011. The reason: Nick’s contribution to Viacom’s ad sales jumps from about 15% most of the year to 25% during the holiday season as companies turn to the kids channel to market toys, movies, and gifts. Nathanson says that’s a problem now given that Nick’s ratings “are down in the high teens, and that the remaining networks are also down (by about -4%).” The poor results plus Viacom’s refusal to provide guidance on ad expectations “remains the core controversy,” Nathanson says. (He still has a “buy” recommendation for Viacom, in part because its plan to repurchase $10B of its shares offsets the new earnings risks.) Early this month, Dauman described the drop in Nick’s ratings beginning in September as a “blip” largely attributable to problems with Nielsen’s measurements …
UPDATE: Viacom Says Nielsen Snafu Led To Decline In Nickelodeon Toy Ads; Forecasts Strong 2012 Despite Economic “Headwinds”
UPDATE, 8:50 AM: Listen up Occupy Wall Streeters: Viacom CEO Philippe Dauman told analysts that the company is doing better than ever financially – yet is still cutting jobs. It reported a $130M restructuring charge in the fiscal 4Q — $77M coming from the Media Networks and $53M from Filmed Entertainment. That will mostly go toward severance payments over the next year. Viacom expects to benefit from $140M in annual savings, improving profit margins even if the economy weakens, COO Tom Dooley says. Company SEC filings indicate that the Viacom cut 320 positions over the last year, ending with 10,580 full and part time employees in September. Most of the cuts took place overseas. Dauman says that in late October the company announced that it will hire 100 people for accounting, finance and corporate support at cable channel CMT’s headquarters in Tennessee, which means Viacom is “able to bring jobs onshore.”
Dauman cited two problems that worry some investors: He cited economic “headwinds” hurting ad sales — although he quickly added that Viacom can make up for any problems with additional revenues from rising fees that cable and satellite companies pay. Also, he said that Nickelodeon lost ad sales, especially from toy companies, beginning in September when Nielsen ‘inexplicably” reported unusually weak ratings. Although Dauman offered few details, Morgan Stanley’s Benjamin Swinburne says he believes live-only ratings in Nick’s key demos fell 9% in September and 15% in …
UPDATE, 3:50 PM: The folks at Paramount say that we misunderstood Dauman. He wasn’t trying to say that he plans to make cuts at home entertainment, they say. He was simply talking in general terms about being vigilant about all of Paramount’s costs. That’s not how it looks to me, but why don’t you decide for yourself? Here’s the transcript of Dauman’s response to a question about how he might “improve Paramount’s fortunes”:
There are some things you can control in the movie business…that is the
overhead. It doesn’t matter what movie you make. You can control that; that’s money in the bank if you can do that. And we have continuously improved that part of it. You continually have to adjust. For example, as the home entertainment stream is challenged, fewer DVDs are being sold, so you have to review your home entertainment overhead. That’s adjusting to the business model. We’re very focused on that. We continue to work on the overhead there.
PREVIOUS, 12:46 PM: This might be a good time to polish up your resume if you work at Paramount Pictures’ home entertainment unit. Viacom CEO Philippe Dauman plans to review the “overhead” — a bloodless synonym for “jobs” — there as DVD sales tank, he told an investor group today. The nation’s highest-paid executive last year said that cutting overhead is “money in the bank.”
The money is flowing again into Big Media. Just about every media CEO who recently spoke to Wall Street analysts about this year’s 1st Quarter earnings said that ad sales are up and consumers are spending. “Viacom has never been stronger financially,” CEO Philippe Dauman crowed. At Disney, where net profits fell slightly, CEO Bob Iger expressed he was “confident in the trends we’re seeing across our segments”. So will these companies do more hiring and give out raises? Don’t be naive. Dauman, for one, told investors that he’s “watching for head count creep” while the company returns $1.9 billion to shareholders over the first 9 months of its fiscal year. Most Big Media companies are buying back their stock, making publicly held shares more valuable. CBS doubled its quarterly dividend to shareholders and Viacom plans to follow suit.
Here are some of the other major themes from this earnings season:
TV Advertising: Network executives were predictably upbeat about what will happen in their upfront ad sales negotiations in coming weeks. Disney CEO Bob Iger predicted the market will be “strong”. NBCUniversal chief Steve Burke upped that to “very strong”. And News Corp COO Chase Carey claimed it’ll be “truly strong”. Their pronouncements made CBS chief Les Moonves sound refreshingly bold when he projected “solid double-digit increases” in ad sales for his broadcast network. Executives cited the price increases they’ve seen in scatter sales as the economy has improved and auto, technology, telecom, …
Viacom has been very good to Philippe Dauman. A company proxy statement filed on Friday with the Securities and Exchange Commission revealed that the CEO amassed $84.5 million in stock, salary and other benefits during Viacom’s fiscal year, which ended on Sept. 30. Included in the giant sum is a one-time stock award – $31.7 million – which is dependent on financial goals over the next five years and was part of his new agreement signed in April. The company’s three top executives – Dauman, chairman Sumner Redstone and COO Thomas Dooley – were paid $165 million in stock and other compensation. Dooley received a total of $64.7 million, while Redstone got $15 million. The amounts received were, according the proxy statement, based on performance; Viacom’s stock price rose 22% during the compensation period.
The amount was certainly a huge raise for Dauman, who received $34 million in 2009 – and it will be interesting to see how all media moguls fare as their compensation is reported for a much-improved (financially-speaking) 2010. In 2009, the top media mogul paydays included Les Moonves ($43 million), Comcast’s Brian Roberts ($25 million), News Corp’s Rupert Murdoch ($18 million), Disney’s Bob Iger ($21 million) and Time Warner’s Jeff Bewkes ($19.4 million)