Earnings: As Viacom’s Digital Content Revenues Grow, Lines Between New Media And Old Blur

During Viacom’s 4Q earnings conference call Thursday morning, Viacom Chairman Sumner Redstone, CEO Philippe Dauman and CFO Tom Dooley discussed the company’s view of its present and future digital activities and how it will mix with the traditional media offerings at its core.
Dauman said that Viacom’s online properties collectively registered more than 40 million unique visitors in Dec. 2006, and ranked as the number one online entertainment destination and the 10th most popular destination on the web. He also outlined Viacom’s increased blending of traditional content into virtual worlds and the agreement to place its programming on Joost.
“There are two primary pillars to our strategy,” Dauman said. “First, we are accelerating the growth of our internal initiatives, in terms of strong stable digital properties and virtual worlds. Second, we will continue to selectively pursue both partnerships and smaller acquisitions that strengthen our capabilities and distribution footprint, and we will integrate the acquisitions into the fabric of our organization so we can generate maximum value as quickly as possible.”
Viacom is also pleased with the results of experiments like Nicktropolis, a Nickelodeon site that incorporates the aspects of virtual worlds, social networking and broadband content. Also, MTVN’s Virtual Laguna Beach and Virtual Hill, now boast over 360,000 registered users and without any major promotion, Dauman added.
“We’ve also rebuilt our largest sites for more content and better features. Based on initial tests, these changes will lead to more time spent on our sites, more marketing opportunities and more revenue. For example, MTV.com’s monthly unique visitors in January increased over 55 percent year-on-year and ComedyCentral.com was up over 90 percent. MTV digital ad revenues were up 60 percent in 4Q06. Revenue from digital only clients grew more than two-fold.”
Based on that progress, Dauman expressed confidence that Viacom will achieve its previously announced goal of $500 million in digital revenues in 2007, the majority of which will be ad sales.
In a response to whether the emphasis on digital ad revenues meant that the traditional media core revenues were in decline, CFO Tom Dooley defended the strength of Viacom’s traditional media offerings. Nevertheless, the current emphasis on digital content reflects the recognition that the lines are blurring between new media and conventional content.
“Down the road, it will be harder and harder to segregate digital from the traditional media growth,” Dooley said. “Two-thirds of our digital ad sales growth sold in tandem as one package negotiated with the advertisers. They are melding together faster and faster as we go quarter to quarter.”
Another questioner during the conference call said he did his own research on video sharing sites and found that the top 100 videos on YouTube, Google and Yahoo, less than five of those videos have been from established media companies. Since those sites have built their business on the back of user-generated content, despite the perception of their being heavily reliant on copyrighted material from major media companies, why is Viacom conducting deals with the likes of Joost when it could maintain the content on its own corporate sites.
“As far as Google and YouTube, obviously we required them to take down over 100,000 of our clips that were appearing on the site. Our content was a substantial part of the traffic on those sites. We are very pleased to have more traffic on our sites since we took down our video from YouTube because we are able to monetize that as opposed to someone else doing so,” Dauman said.
“At the same time, we are interested in deals that provide an additional distribution platform for our content as long as it respects our copyright. We think we can generate incremental revenues that way. That’s why we did the deal with Joost. It’s a great opportunity for consumer experience and meets all our criteria for content, controlled advertising relationships, as well as linking back to our sites. We are looking at this very strategically, as we have in the history of many decades of this company, of looking at every window in the development of content. We love being a pure content company. That is a great place to be, no matter what distribution platform there is.”
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