By Keach Hagey
Viacom Inc. said it would take $785 million in pretax charges
this quarter for job cuts and to write down the value of
underperforming shows due to weak ratings, a soft advertising
market and growing online competition for viewers.
The layoffs affected as many as 400 people, according to people
familiar with the matter, while the shows being written down
include reruns of "CSI," "Entourage" and "Community," among others.
Charges include an accounting change for programming such as
reality and game shows that are losing their allure faster than in
the past.
New York-based Viacom is grappling with weak ratings across all
its major networks, and concerns on Wall Street that pay-TV
providers may decide they can do without its bundle of channels. In
the first quarter, its Nickelodeon channel was down 34% in its
target demographic, its Comedy Central was off 30%, Spike dropped
23%, and MTV lost 34%, all compared with a year earlier, according
to Jefferies and Nielsen estimates.
On Monday, it said the restructuring is expected to provide
annual savings of about $350 million, and $175 million this year.
The company disclosed plans for the restructuring in February
during its first-quarter earnings call.
Net income in the media giant's fiscal second quarter is
projected to fall 15% to $429 million, according to analysts'
estimates compiled by FactSet. Viacom earned $502 million in net
profit on $3.17 billion in revenue a year ago.
About $430 million of the write-down is to account for
underperforming programming, including abandoning some acquired
shows, according to a regulatory filing on Monday. The charge
underscores the difficulty that many big media companies are facing
with reruns as they cope with cord-cutting, Netflix's popularity
and rapid changes in what viewers find popular.
The restructuring formalizes the reorganization of Viacom's
television networks into two groups from three. That move was
signaled when longtime Viacom executive Van Toffler, who led the
group that included MTV, VH1 and CMT, said in February he would
leave the company in April and his division's channels would be
absorbed by two newly reorganized groups.
The company said the new structure "realigns sales, marketing,
creative and support functions, increases efficiencies in program
and product development, enhances opportunities to share expertise,
and promotes greater cross-marketing and cross channel programming
activity."
The company also said that the savings would let it reallocate
resources to expand in new areas like "data analysis, technology
development and consumer insights." Viacom Chief Executive Philippe
Dauman has been one of the most vocal critics of Nielsen's ability
to measure viewing that occurs on nontraditional platforms like
mobile devices, and has pledged to increase the amount of its
revenues that are "non-Nielsen-dependent" to 50% from 30%.
The recent proliferation of competition for viewers' attention
from streaming video services like Netflix, Amazon and Hulu may be
largely to blame for the steep drop off in cable TV's ratings. The
Cabletelevision Advertising Bureau estimates that about 40% of
third- and fourth-quarter TV ratings declines can be attributed to
such subscription online video services, according to people who
attended the industry group's March meeting.
Because of the charge and other acquisitions, Viacom said it
would "temporarily pause" until October a $20 billion share
repurchase program.
Viacom, which is controlled by media mogul Sumner Redstone, fell
as much as 1.8% in late trading after closing up 98 cents at $68.92
in 4 p.m. Nasdaq trading. Its shares were off 19% in the last 12
months.
Josh Beckerman contributed to this article.
Write to Keach Hagey at keach.hagey@wsj.com
Access Investor Kit for Viacom, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US92553P1021
Access Investor Kit for Viacom, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US92553P2011
Subscribe to WSJ: http://online.wsj.com?mod=djnwires