Viacom Turns In Double-Digit Profit Increase Despite Drop In Revenue

If you’re still looking for an explanation of Viacom (NYSE: VIA) CEO Philippe Dauman’s lucrative five-year contract extension, this should help. Revenues dropped 4 percent to $2.79 billion, missing Thomson analyst estimates and dragged down, the company says, by lower film revenues. But Viacom still managed a 21 percent increase in operating income, a 37 percent increase in profit and a 38 percent increase in profit that met expectations. To paraphrase Chairman Sumner Redstone, it’s all about the bottom line.

How did it get there?

Media Networks came in at $1.93 billion, up 4 percent on affiliate fee growth and ad sales. Domestic ad sales were up 1 percent, held back by upfront sales during the weaker 2009 marketplace but aided by higher scatter prices; worldwide, ad sales were up 3 percent to $960 million. Rate hikes helped affiliate fees rise 9 percent. MTV had its best rating performance in nearly two years. A big help: The company also cut operating expenses by 13 percent. Not helping so much: Rock Band. Slowing sales of the video games brought ancillary revenues down 7 percent, to $195 million. And really not helping: home entertainment, which managed not to release anything major in the quarter and dropped a whopping 34 percent in sales compared with the previous year. Theatricals dropped too; that should get a boost this quarter from way-hyped Iron man II, opening May 7.

Update Viacom didn’t break out any numbers about digital this quarter but it was still constant theme. Redstone channeled his inner Eisenhower to proclaim: “We’ll engage audiences on every screen, on every device and every place on this planet.” (He then introduced longtime adviser Dauman as “my forever friend.”) Some more notes from the call:

Nick mobile: Nickelodeon will launch 20 more iPhone apps this year, following a $5 Dora the Explorer iPad coloring book.

3D still nascent: Dauman said the company is exploring the potential of 3D, primarily for special events, “such as major music performances for our music channels and sporting events for Spike.”

EpixHD: Dauman said the fledgling network is “very well-funded” and should be safe from any issues with MGM. “Lionsgate (NYSE: LGF) and Viacom are in positions to handle Epix’s cash need; the capital needs are not that significant on go forward basis.”

Rock Band: Outsourcing the hardware should help the company’s inventory risk down and give it a shot st profitability