Feb 05, 2019

By Stuart Winchester
Evolution Continues on Strong Execution Across the Business, and Agreement to Acquire Pluto TV

Viacom unveiled financial results today for its first quarter of fiscal 2019, delivering growth in key financial metrics for the second consecutive quarter and underscoring the breadth of the company’s evolution. Consolidated revenue, adjusted operating income, and adjusted diluted earnings-per-share grew for the second consecutive quarter, and the company is on track to continue delivering these improvements for the full year.

“Through strong execution of our strategic priorities, we delivered another quarter of solid financial and operational results,” said Viacom President and CEO Bob Bakish. “Beyond the growth at our flagship networks and the resurgence of Paramount Pictures, we took a major step forward in our evolution with an agreement to acquire Pluto TV. This service will create a scaled direct-to-consumer offering for Viacom, and expand our opportunities in next-generation distribution and advanced advertising. With this momentum, we are progressing toward a return to topline growth in 2019 as Viacom continues to evolve for the future.”

 

Stocked with a collection of media networks that lead key U.S. viewership demos and a resurgent and iconic movie studio in Paramount Pictures, Viacom has reoriented its business toward growth initiatives that build on the depth of its intellectual property (IP), its global footprint and its advanced advertising capabilities. Among these are an improving domestic affiliate business, strong growth in its Advanced Marketing Solutions (AMS) portfolio that is driving sequential increases in domestic advertising revenues, and expansion of its premium content studio production business and digital initiatives such as Viacom Digital Studios (VDS).

Pending the closing of the deal, it’s the addition of Pluto TV to Viacom’s portfolio that perhaps best demonstrates the company’s ambitions and potential. The largest free streaming television service in the country, Pluto TV promises to accelerate Viacom’s evolution by acting as a direct-to-consumer home for the company’s deep content library and an stimulant for its AMS business. Pluto TV also provides an instant promotional platform for both Viacom’s digital products and the company’s distribution partners.

Here is a closer look at some of these areas of strength that are driving Viacom’s evolution in 2019:

Pluto TV is a game-changer for Viacom

Pluto TV has attracted an audience of 12 million monthly viewers, and it has so far achieved that growth without the benefits of Viacom's global scale.

Viacom’s infrastructure and knowhow can expand Pluto TV’s footprint, in the United States and globally. With a library of genre-specific content – kids, African-American, reality, comedy, Spanish-language – Viacom can expand the platform’s 100 live linear channels and its video-on-demand warehouse (which already includes more than 5,000 hours of programming). And, since Viacom has for the last several years curtailed large licensing packages to streaming-video-on-demand (SVOD) services, the vast majority of this deep library can be deployed quickly on Pluto TV.

As Pluto TV grows, it should act as a powerful marketing engine for Viacom’s SVOD products (Noggin, Comedy Central Now, and the latest, Nick Hits), its brands and content that live on other platforms (first-run Viacom content will not live on Pluto TV), and, importantly, the company’s current distribution partners, as the free service acts as a gateway to and a pamphlet for basic pay television options.

Fifty percent of Pluto TV’s audience is between the ages of 18 and 34 years old, and most are watching on an actual television. As a result, Pluto TV’s billions of high-quality, addressable monthly impressions will act as an accelerant for Viacom’s AMS business, a suite of best-in-class advanced advertising products that is projected to nearly double revenues this fiscal year.

MTV has evolved into a multiplatform brand built on a treasure trove of IP

Viacom maintains its long-held No. 1 share in key demographics (2-49, 2-11, 18-34, 18-49), among cable families, with more top 20 original cable series than any other group, but the evolution of MTV best showcases the blueprint for Viacom’s long-term evolution.

Behind brand president Chris McCarthy, MTV has reoriented itself as a cross-platform ecosystem that taps its enormous library of youth and music IP to expand across linear television, digital, third-party studio production, and live events -- a strategy that aims to grow the brand’s audience, deepen its engagement and drive incremental revenue.

MTV’s linear channel is riding a best-in-network-history six quarters of primetime ratings growth behind updates to classic properties such as Shore (Jersey Shore: Family Vacation and Floribama Shore), and new concepts such as Siesta Key and Ex on the Beach.

It’s the fastest-growing network in primetime across all of cable and broadcast among 18- to 49-year-olds, soaring 22 percent in ratings and 35 percent in share.

Five of the top 10 biggest new hits in that demo debuted on MTV (another four aired on sister network VH1, which McCarthy also runs).

The network’s digital expansion is leaning on updates of fan-favorite IP such as Wild N Out, which has more than 3 billion YouTube streams already. MTV’s The Real World, debuting soon across three markets on Facebook Watch, will similarly reintroduce classic IP to fuel the ongoing growth of MTV Studios. Finally, the brand, like much of Viacom, is expanding its presence into live events, either by acquisition (of the SnowGlobe Music Festival in November), or by reviving iconic properties such as Spring Break, which will broadcast globally from Cancun this year.

“The brand is clearly resonating,” McCarthy said on a conference call with investors this morning. “There is a lot we did to get here – and it all centers around the power of the MTV brand and the wealth of our IP. MTV is a global brand with near universal awareness – that’s on TV and across every platform. In this increasingly crowded landscape, a powerful and durable brand is a clear advantage.”

Viacom’s other networks continue to make gains as well. Comedy Central increased its Total Day share growth for the seventh consecutive quarter among adults 18-49, while Viacom International Media Networks delivered strong viewership on the strength of share growth at MTV, Paramount Network, Telefe (Argentina) and Channel 5 (the UK). Nickelodeon and Paramount Network, meanwhile, are reorienting under the new leadership of Brian Robbins and Kent Alterman (who also oversees Comedy Central and TV Land), respectively. 

Key Viacom growth initiatives maintain their momentum

Teams across Viacom are executing on initiatives that are driving growth both in the core business, and ones that didn’t exist just a few years ago. Domestic affiliate revenue ticked up for the fourth consecutive quarter, increasing five percent behind contractual rate increases and revenues from OTT and studio production.

The aforementioned AMS increased 54 percent year-over-year as it grew to encompass more than 10 percent of Viacom’s overall domestic ad revenue.

VDS’ year-over-year watch time and video views grew dramatically – 129 and 65 percent, respectively.

And Viacom’s studio production business is on track toward its $1 billion 2020 revenue target, with Paramount Television the primary driver. Awesomeness is producing a sequel to Netflix hit To All The Boys I’ve Love Before, Nickelodeon is set to make two feature-length films based on The Loud House and Rise of the Teenage Mutant Ninja Turtles on Netflix, and Viacom International Studios inked a series of Spanish-language content agreements with Amazon, Claro, Imagen, MediaPro and Mega.

Paramount Pictures continues executing on its turnaround

For the eighth consecutive quarter, Paramount Pictures improved year-over-year adjusted operating income. Revenue growth is up double digits, and Bumblebee made the power of Paramount’s library clear, raking in more than $450 million worldwide amid stiff holiday competition. IP-based upcoming films What Men Want and a new Terminator movie will only reinforce this built-in strength.

Paramount Television continues to soar as the studio puts up original premium content on key platforms, such as Netflix’s The Haunting of Hill House and Epix’s Berlin Station. The studio is anchoring Viacom’s larger studio production business, with year-over-year revenues shooting up 84 percent in the first quarter.  

To see what Viacom will debut in the months ahead, scroll through the timeline below, or click here to view the full-screen version.