Key points from Viacom’s earnings call: TV up slightly. Digital growing quickly, but still small as per cent of business. No update on YouTube litigation.
- Organic worldwide revenue growth was 4% (MTV and BET). (Approx. 1 point better than inflation.) Domestic growth also 4%, but this includes digital, so no clear picture of TV alone. Gains driven by growth in three ad sectors: movies, video games, and wireless.
- Expect stronger Q3 due to pipeline and scatter market.
- Networks operating income up 5%; not clear how much of this from acquisitions. Margin declined due to higher programming expenses and comp.
- Adult upfront: double-digit price increases but overall dollars up only slightly (i.e., volume down). Explanation: “Deliberately turned away business because of strong scatter market we see ahead.”
- Kids’ upfront: Strong price growth and project double-digit increase in dollars.
- Convergent ads (multi-platform deals) increasing.
CEO Dauman on Viacom’s forthcoming movies:
- Ben Stiller’s “Heartbreak Kid” had me “rolling on the floor with laughter.”
- 3D effects in Beowulf so amazing will drive people back to theatres.
- On track to “well-exceed” this year’s revenue goal of $500 million. (Good, but to put in perspective this is 1/32nd of Google’s digital revenue.)
- Not seeing slowdown in online ad revenue like other companies.
- All TV shows created with online properties in mind: e.g., Comedy Central’s Indecision2008.com
- Will launch “hundreds of new web sites” over next year, each tied to shows, characters, etc. Also expanding presence in virtual world, casual online gaming, and mobile.
- Nicktropolis, kids’ virtual world, has 4.5 million reg users. (How many active?) MTV virtual worlds have nearly 1 million reg users (Same question). Neopet accessories and virtual Nikes selling well.
- Casual online gaming: GameTrailers, AddictingGames, and Quidzilla all high double-digit growth in uniques each quarter. Nickelodeon Kids and Family Group investing $100 million over two years in casual game development. 86% of kids 8-14 now playing games online.
Dauman’s full comments on Digital after jump, courtesy of SeekingAlpha:
As I told you during our last earnings call, the execution of our digital strategy is moving forward at a rapid pace. We are well on our way to exceeding our goal of $500 million in digital revenues this year. Our digital strategy is not only about delivering near-term growth, but building a solid, sustainable platform for long-term success. We are a vertical content company with a focus on our key demos and our digital strategy mirrors this.
Our television assets are a huge competitive advantage for us. All of our brands have a 360 degree development process. When we create content, it is not only for the TV screen, but for every platform. With these powerful brands, we are uniquely positioned to become the point of access for all things comedy, all things kids and family, or all things men by aggregating the content and connections across every platform on the topics that our audiences are most passionate about.
A good example is Comedy Central’s Indecision2008.com, the perfect site for political junkies who prefer a more irreverent take on the presidential race. This site will aggregate video content from Comedy Central’s on-air shows with original web content and encourage user participation, including user-generated content.
Over the next year, we will be launching hundreds of new websites, each tied to one of our branded shows or a character or other related interest. As we link these targeted sites on a common platform, we will draw highly dedicated, enthusiastic audiences, which in turn attract a premium in advertising revenues. We intend to reach our audiences wherever their interests takes them, so another part of our strategy is to expand our presence in the virtual world, casual online gaming and the mobile arena.
Nicktropolis, our kids-targeted virtual world, now boasts more than 4.5 million registered users. In addition, there are nearly one million people who have registered on one of MTV’s virtual worlds such as The Hills or Virtual Laguna Beach. We are going to be launching several other virtual worlds before the end of the year. We are really just beginning to tap into the many possible revenue streams that virtual worlds offer with advertisers selling virtual Nikes on The Hill or virtual Neopet accessories for very real dollars.
Another promising area of growth is casual online gaming. What started as a simple pastime has evolved into a booming social network with a very loyal following. GameTrailers, AddictingGames and Quizilla all continue to generate high double-digit growth in unique visitors each quarter. Last month, Nickelodeon Kids and Family Group announced plans to invest $100 million over the next two years in the development and distribution of casual gaming titles, sites and platforms. With more than 86% of kids age 8 to 14 playing games online, this is another great example of how we intend to extend our brands to new revenue-generating opportunities.
We have high expectations for the holiday release of Rock Band, which was introduced last month by MTV and our wholly-owned Harmonix in partnership with Electronic Arts to rave reviews at the E3 Summit. In fact, we were just named Best of Show at E3. This new platform for games and music lovers will be the first to offer full-length albums at digitally distributed game levels and new music content will be available for purchase every week following Rock Band’s launch. It is a multiplayer platform that will have very important online extensions for us and serve as the foundation for many other applications, creating significant new business opportunities for Viacom.
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