M&E Connections

OTT Provided a Q4 Boost for Viacom

The strong performance of “Mission: Impossible – Fallout,” combined with growth in revenue from over-the-top (OTT) streaming and other digital services, helped Viacom report stronger quarter in its fourth quarter (ended Sept. 30) than it did a year earlier, according to the company.

Paramount Pictures growth has brought the film studio “within striking distance of break-even for the full year,” Viacom CFO Wade Davis said Nov. 16 on an earnings call. “Growth in the quarter was driven by” the virtual multichannel program distribution (VMPD) contribution, growth in digital and OTT revenue, and rate increases, while Viacom also benefited from the multi-platform expansion of products tied to its intellectual property, he said.

Paramount has a “diverse slate” of 13 theatrical releases planned for fiscal 2019, up from nine this year, and will include the latest “Transformers” movie (“Bumblebee”) and a live-action “Dora the Explorer” film, James Gianopulos, CEO and chairman of Paramount Pictures, said on the call. Five of the 13 movies will be co-branded Paramount and Viacom, while the rest will be from its main production division alone, he noted. The studio will further extend its theatrical slate in fiscal 2020, with 19 release planned now, he said. Paramount is also “exploring various new revenue streams” and its first such deal on that front is a multi-picture deal with Netflix, he told analysts.

The company is being helped by a “revitalization” of Paramount Pictures, while Viacom also “turned around our core business” and saw “strong gains in audience share across our networks” and a “dramatic turnaround” in its distribution business in fiscal 2018, Viacom CEO and president Robert Bakish said.

Viacom “strengthened and expanded our core pay-TV partnerships,” securing and expanding deals with service providers including Altice, Charter, Comcast and Mediacom, Bakish told analysts.

The company’s TV brands also grew their share of video on demand (VOD) transactions more than any other cable TV network family in the fourth quarter, he said. Meanwhile, Viacom “strategically expanded our distribution relationships to capitalize on our advanced advertising and content capabilities,” he said, adding: “As a result, Viacom can now deliver dynamic ad targeting to more than 90 percent of U.S. pay TV VOD homes, as well as live linear ad insertion to a growing roster” of multichannel video program distribution (MVPD) partners.

“With a stronger core distribution business, we can also focus on securing greater participation on next-generation platforms including OTT” and subscription video on demand (SVOD), he said.

In the VMPD space, Viacom is seeing subscription growth on AT&T’s DirecTV Now and Dish Network’s Sling TV OTT “skinny” bundles, he told analysts. Viacom also recently launched six networks on AT&T’s new WatchTV streaming service, he noted, adding: “We also have dynamic ad insertion on Sling and the same will be true for DirecTV Now and AT&T Watch in the near future. And we continue to believe that some MVPDs will launch OTT offerings targeting their broadband-only subs – offerings that Viacom will be part of.”

Viacom is also focused on new subscription products for specialized audiences including its Noggin video subscription app for preschoolers and “we see additional opportunities to package offerings for more platforms focused on the genres and demos where we excel, including reality, Spanish language and African-American audiences,” he said.

Viacom, meanwhile, continues to increase its international mobile offerings and now has distribution deals with operators in 29 countries, he pointed out, adding the company’s mobile subscribers “nearly tripled to just under 5 million over the past year and we have more coming.”

During the Q&A with analysts that followed, he said Viacom is seeing subscription growth on DirecTV Now and Sling TV, and it has a “material audience share” on those services. Viacom’s also “pleased with the trajectory of Philo, though its early days and the numbers are small” now, he said of that Internet TV service.

In addition, he pointed out that Viacom already had “deals in place with MVPDs for inclusion on” the potential future OTT services he cited earlier in the call.

The OTT sector is facing some challenges, he conceded, telling analysts: “It’s not surprising that the category’s evolving given its early state. Margin pressure is driving price increases, as we predicted well over a year ago and which we feel still points to the need for lower-cost, higher-margin, non-broadcast, non-sports options. More recently, some carriage disputes and changes in marketing is impacting key players. In the near-term, that is softening sub adds. But subs are still being added, so the category remains positive. In general, we feel positive about where we are and our opportunities in this broader OTT ecosystem. This includes our emerging SVOD business for specialized audiences.”

Another major positive for Viacom is that “mobile remains a source of big upside potential – one where we are gaining early traction outside the U.S.,” he said.

Viacom reported Q4 revenue grew to $3.5 billion from $3.3 billion a year earlier. Filmed Entertainment revenue soared 25% to $984 million. The double-digit gain in Q4 revenue was “driven by a nearly 3x increase in worldwide theatrical revenues and growth in worldwide licensing,” Viacom said in its earnings news release.

For more information about Viacom’s Q4 results, click here.