MTV and SpongeBob Looking Kind of Ragged in Viacom Results

What should you take away from Viacom's recent results?

Aug 6, 2014 at 4:17PM

MTV owner Viacom (NASDAQ:VIAB) just found out what happens when results stop being polite ... and start getting real. The owner of Comedy Central, MTV, Spike, BET, and SpongeBob SquarePants home Nickelodeon, among others, today reported a third-quarter revenue drop of 7.4% year over year with its Filmed Entertainment division dropping more than 26%.

Revenue missed analyst projections as well -- missing by $130 million as it reported $3.42 billion versus an expected $3.55 billion. Although EPS missed as well, with the company providing $1.42 per share vs. $1.43 analyst expectations, the miss was narrowed by Viacom's share repurchase program that lowered shares outstanding by 8 million on a quarter-over-quarter basis.

What's the cause of this underperformance?

Filmed Entertainment: A poor performance
As previously mentioned, Filmed Entertainment presented huge headwinds for the company this quarter with a massive 26% year-over-year drop. And while this is a smaller part of Viacom's business, the huge drop was enough to offset the company's larger division -- Media Networks -- which had a modest 1% revenue increase on a year-over-year basis. 

Filmed entertainment performed rather poorly in each subdivision: Theatrical was down an astonishing 43% on a year-over-year basis. But this is a rather tough comparable period for the company. The only blockbuster-type release this quarter was Transformers: Age of Extinction compared to Pain and Gain, Star Trek: Into Darkness, and the huge, half-trillion-dollar megahit World War Z in last year's comparable period.

The other core subdivisions in Filmed Entertainment also declined on a year-over-year basis with Home Entertainment and TV License Fees reporting 20%-plus drops on a year-over-year basis. The remaining "ancillary" category saw a 21% gain, though it chipped in just $147 million, compared to, say, the next smallest subdivision, home entertainment with $209 million.

Media Networks should worry investors more
Although Filmed Entertainment's numbers might seem more shocking, investors should worry more about the company's Media Networks division, which includes flagship stations MTV, Nickelodeon, and Comedy Central, for a couple of reasons. First, it's a larger part of revenue -- this quarter clocking in at nearly 76%. Second, the business of Filmed Entertainment is rather lumpy with variability common -- for example, following a huge hit like World War Z it is rather common for a distributor, even as one as big as Viacom's Paramount -- to report a fall off of revenue.

But the core business, Media Networks, which includes revenue from advertising and affiliate fees from its host of networks, had a gain of just 1%, which is cause for concern. Media Networks' advertising revenue, which accounted for 37% of total revenue this quarter, only grew at an anemic 2% clip. And that's what spooked analysts. This follows the realization that ratings in the key 18-49 demographic are trending downward at many of the company's flagship channels.

To be fair, the company credits much of this to content being consumed outside of the traditional format -- TVs -- by more tuning in to iPads and tablet devices. That content doesn't monetize as well for the company.

Final thoughts
As in many cases, the big number isn't the scary number. Although Filmed Entertainment looks bad, the numbers are entirely explainable. But Viacom is facing a more prevalent, more insidious, threat. How will the company perform in the face of continued cord-cutting and from copycat reality TV competitors that learned all too well from Viacom? We'll all have to stay tuned to find out!

Jamal Carnette has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers