Viacom CEO Bob Bakish tried his best to reassure investors, in a quarterly earnings call, that all’s well with the entertainment company. But it apparently didn’t work: The stock dropped 7.3% in post market trading even after it reported June quarter results that beat analysts’ expectations.
Bakish declined to specifically address Viacom’s recent interest in Scripps Networks Interactive. Investors fear it showed he might be willing to take on more debt, endangering Viacom’s investment-grade rating. (Scripps ultimately agreed to sell to Discovery Communications.)
“Incremental opportunities may or may not happen,” Bakish says. But it’s “our obligation to look at the full range of opportunities” while being “very rigorous” about terms to ensure shareholders are protected.
Viacom also professed to be unworried by a delayed payment in June from China’s Huahua Media as part of its agreement to fund 25% or more of Paramount’s film slate for the next three years.
Viacom did not book the missed June payment in its quarterly earnings report. Last month Huahua was sold to Oriental Times Media.
“The deal continues to be in effect, and we view Huahua Media’s acquisition by Oriental Times Media — who we know well — as a positive,” CFO Wade Davis says.
He added that Viacom has “been in business with Huahua for a long time and they have and continue to be a valuable strategic operational and financial partner.”
Oriental Times is “also well aligned with our media networks business in China,” he added. “Notwithstanding the delay in the June payment, everything’s on track. We’re happy with our partnership there. We’re working with those guys every week. And everything’s fine.”
Bakish says he plans to “play through” another problem: Charter Communications in May took channels including Nickelodeon, MTV, VH1, Spike, BET and Comedy Central off of its basic package — putting them on a higher priced tier — for new subscribers. It also has a bundle without sports, or Viacom.
Viacom contends that the move violates its carriage deal, and reserves the right to sue.
“They don’t have the contractual right to tier our services the way they have,” Bakish says. Still, “I don’t fundamentally believe suing big customers is the way to solve problems. The better way to solve them is through engagement and exploring ways we can create value together.”
But it probably won’t be resolved, he adds, “until we get to a new deal. This could take a little time.”
Bakish wouldn’t say how long that could be.
Bakish took credit for improvements at MTV. The 3% increase in year over year ratings in June was its first since 2011.
What’s more, “the new content that the team is bringing to air is much more cost effective” than previous shows. MTV will end up with “more original hours, and will actually spend less.” For example, he noted that when TRL returns in October it will “program as many minutes for social as for linear” TV.
Next year he expects it to benefit from a “bigger focus on live events and feature films.”
For the media networks generally, the company says domestic ad sales in the current quarter will decline about 2% — similar to the current quarter. Some of that is due to the company’s decision to reduce its ad load.
In addition, he says a turnaround at Paramount is “well on its way” — although he acknowledged that Transformers: The Last Knight “didn’t perform up to expectations.”
Paramount “will take time to turn around,” he says.