Spongebob is a Nickelodeon star. Image source: Nickelodeon.

What: Shares of Viacom (NASDAQ:VIA) (NASDAQ:VIAB) plunged as much as 22% in Thursday's trading, following the release of disappointing third-quarter results. The producer of entertainment content in pretty much any category you'd care to name recovered somewhat later in the day, but around 2 p.m. share prices remained roughly 14% below Wednesday's closing prices.

So what: In the third quarter, Viacom's sales decreased 11% year over year to $3.06 billion. On the bottom line, adjusted earnings increased 4% to $1.47 per diluted share. Analysts had been looking for earnings of $1.45 per share on sales near $3.3 billion, so the reported numbers made for a mixed quarter.

Now what: Viacom's filmed entertainment division, comprising studios such as Paramount Pictures, Nickelodeon Moves, and MTV Films, faced a difficult year-over-year comparison in the third quarter. In 2014, this period included global blockbuster Transformers: Age of Extinction. In 2015, box office hits Mission: Impossible -- Rogue Nation and Terminator: Genisys hit wide release in the fourth quarter instead. Hence, filmed entertainment sales dropped from $856 million to $479 million, though segment operating profits held relatively steady at $48 million, down from $55 million in the year-ago quarter.

That's hardly cause for panic, though. Viacom, its investors, and Wall Street analysts all knew that the cinematic results would be weak since the company didn't publish any new films during the quarter. The fourth quarter will simply have to make up for the third period's weak sales in this department.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

The far larger media networks division saw sales holding steady at $2.6 billion, yielding 1% higher operating income. However, that figure rested on increased fees charged to domestic TV broadcasters who distribute Viacom's content. At the same time, advertising sales fell 9% year over year due to falling audience ratings for Viacom's media networks, which includes household names such as MTV, Nickelodeon, Comedy Central, and BET.

These numbers are supposed to go hand in hand, and a drastic drop on one side might lead to the other following suit later on. Viacom's revenue stream tends to balance fairly evenly between ad sales and affiliate fees. Strong fee collections may be nice today, but offer little long-term consolation for plunging ad sales. Eventually, affiliates will take a look at the soft ad revenues and struggling audience ratings, and come back to the negotiating table with demands for stable or even lower affiliate fees.

Viacom shares have now fallen 42% year to date. The company is looking for ways to win in an increasingly digital media world, without alienating the traditional TV networks and cinema audiences that created the media giant in the first place. It's a tricky balancing act, and Viacom investors have started paying more attention to the increasing risks than to the potential payoff inherent in this industrywide revolution.