Viacom CEO Philippe Dauman says that Paramount — which just came off a surprisingly weak quarter and fiscal year — “will come back and come back strongly,” even if it doesn’t merge with another studio to improve its scale.
The problem in the September quarter — when operating income fell 43% and revenue was off 24% vs the period last year — is that “we just had too few movies to support the infrastructure that we have,” he told analysts in a conference call this morning.
This year’s fiscal Q4 theatrical releases Terminator Genisys and Mission:Impossible – Rogue Nation compared to last year’s Hercules and Teenage Mutant Ninja Turtles. In home video, though, Paramount had no releases while last year it had Noah and Transformers: Age Of Extinction.
COO Tom Dooley says that Viacom also expects “difficult bottom line comparisons” for Paramount in the current quarter versus last year. Next year’s profits will largely come in the six months ending in September. In the fiscal year that ended in September, Paramount’s operating profits fell 46% to $111 million on revenues of $2.89 billion, down 23%.
But movie making is “a cyclical business,” Dauman says. “We’ve seen that in a big way with what Universal has done this year…That’s just the nature of the business.”
He reiterated his plan to raise Paramount’s film output to 15 releases this year. The CEO lauded the studio’s “large number of franchises” and relationships with directors including Martin Scorcsese, J.J. Abrams, and Michael Bay.
Dauman also talked up Paramount’s efforts to expand TV production, although he says “it does take a little time” to build.
As for the main cable networks business, the company expects its programming expenses to rise by a mid- to high-single-digit percentage rate in the new fiscal year as it invests in new programming and other initiatives.
Unlike rivals including Time Warner, Viacom didn’t say that it will cut back on syndicating shows to subscription VOD services such as Netflix, Amazon and Hulu. There’s a growing belief that these sales have encouraged viewers to cut the cord with pay TV — programmers’ main source of revenue — and grow accustomed to watching shows with few or no ads.
“We have successfully over the last several years generated a large amount of revenue from this revenue stream,” Dauman says. The company has tried to figure out the best way to offer rights without cannibalizing other sales, and recently “we’ve seen growth in our presence in Hulu and a diminishment in our presence in Netflix.”
Broadly speaking, though, he’d like to help cable and satellite companies compete by improving their TV Everywhere offerings and initiatives including dynamic ad insertion — targeting messages to specific viewers.
Dauman also says he wants to reduce the ad loads on his networks, which have become packed with commercials to compensate for the decline in their ratings. Viacom is “looking network-by-network and on shows” for possible ad reductions that he hopes will help to boost viewing.