Plan to Shed Blockbuster Boosts Viacom

For the fourth quarter ended Dec. 31, Viacom reported revenue of $7.52 billion, up 11% from the $6.78 billion reported one year earlier. The consensus of analysts surveyed by Thomson First Call was for $7.1 billion in revenue, and none of the 21 analysts polled appeared to forecast higher than $7.3 billion.

Operating income before depreciation and amortization -- the cash flow measure formerly known as EBITDA -- amounted to $1.51 billion in the quarter, excluding the noncash Blockbuster charge, which stemmed from a reduction in Blockbuster's goodwill and other long-lived assets. That OIBDA figure, which matched the fourth-quarter 2002 number, was nearly even with analysts' expectations.

Overall, Viacom's fourth-quarter results reflect large growth at its cable TV properties, including MTV Networks, and higher revenue from Paramount's theatrical features and DVD releases.

Those trends offset relatively weak ad sales in television and radio, along with a 6.8% decline in same-store sales at Blockbuster.

At Viacom's Cable Networks division, revenue grew 24% to $1.7 billion in the fourth quarter, driven by 28% growth in ad revenue and 14% growth in affiliate fees. Operating income grew 19% to $635 million. Partially offsetting the operating income growth was the inclusion of $90 million in expenses for Comedy Central, of which Viacom acquired full control last year.

TV revenue fell 1% to $2.1 billion, and operating income fell 23% to $241 million. Higher ad revenue at the CBS and the UPN networks were more than offset by the absence of political advertising at the company's owned-and-operated stations, as well as lower revenue from cable sales. Television station ad sales will be up double-digits in the first quarter, accompanied by operating margin improvement, Karmazin said on the call. Strong network ratings, he said, particularly at 10:00 pm, are helping to boost ratings for local newscasts.