In a conference call with Wall Street analysts that was devoid of any M&A conversation, Viacom chief Bob Bakish rhapsodized about the effort to turn around the company, especially its long-troubled Paramount Pictures unit.
The studio posted its first quarterly profit since 2015, a highlight of mixed-to-positive results for Viacom’s fiscal second quarter. Bakish is in the spotlight as Viacom continues advanced merger talks with its longtime corporate cousin, CBS. (A disclaimer at the beginning of the call announced that execs would not touch on the topic, even though it looms over pretty much everything these days.) The potential combination of Paramount TV and CBS Studios would be one of the many integration and management challenges, which have made the early negotiations fairly contentious. A Wall Street Journal story yesterday featured several juicy details of the talks, including what food and drink the various principals (including Bakish) were enjoying during the discussions.
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“I was going to ask you about the milk and cookies,” joked BTIG analyst Rich Greenfield as he posed a question.
Cost-cutting helped Paramount finish in the black despite a 17% drop in total revenue, to $741 million, as operating income swung from a $66 million loss in the year-earlier period to $9 million in profit. In its earnings release, the company blamed the revenue drop on “carryover performance of the legacy slate” produced during the Brad Grey regime. Viacom said it now expects a return to profitability for the full fiscal year.
The Jim Gianopulos era, Bakish emphasized on the call, is on a much firmer footing despite booking just $50 million in theatrical revenue during the quarter. A Quiet Place, the left-field blockbuster that had the No. 2 opening of the year earlier this month and has steamed past $200 million worldwide, occurred outside of the second quarter but shows the direction of the studio, Bakish maintained. “It’s what we believed we were putting together, but now you’re actually seeing it happen,” he said. “The new team has already green-lit and dated 12 films for 2019. We will likely get to 16. We’re excited about the diversity and balance of the upcoming slate.”
In talks with Gianopulos, before the longtime Fox veteran hopped aboard the Paramount train, Bakish recalled, the executive was “troubled” by the 2017 Paramount slate. The 2019 slate, by contrast, has “great balance,” with more than half of titles costing $25 million or less.
Television has become a key driver of Paramount’s revenue, with a contribution for this fiscal year slated to be around $400 million, from zero just a few short years ago. Asked by an analyst what the potential revenue could be two years from now, Bakish demurred. He would only say that the unit has 19 series teed up for future distribution, on top of the 17 it has generated across SVOD platforms plus linear broadcast and cable. “There’s no indication whatsoever that demand is anything but strong,” Bakish said. CFO Wade Davis also noted that the studio is making more money by leveraging its library. Contributions from library material (including TV series like Shooter or Jack Ryan) increased 45% compared with the year-ago quarter, he said.
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