Viacom Unveils Five-Point Turnaround Plan (MESA)

New Viacom CEO Robert Bakish laid out a five-point plan on Feb. 9 that he told analysts was designed to improve the company’s performance. Key elements of the plan include the creation of a new unit that will focus on developing short-form video content that is increasingly in demand by viewers, a strengthened relationship between its Nickelodeon and Paramount brands in TV and film projects, and the rebranding of its Spike TV network as The Paramount Network in early 2018, he said on an earnings call for Viacom’s first quarter (ended Dec. 31).

“It’s early days in our efforts to chart a new course for Viacom,” he said. But the company “made solid initial progress financially and operationally” in the first quarter and “we made excellent progress on our go-forward strategy,” he told analysts. Highlights of Viacom’s Q1 performance included a return to revenue growth in the company’s Media Networks and film segments. Media Networks revenue inched up 1% from the same quarter a year earlier to $2.59 billion, while film revenue jumped 24% to $758 million. Total revenue grew 5% to $3.32 billion.

But “we still have work to do,” Bakish conceded, pointing to the 16% operating income decline that Viacom reported for the quarter. Profit also slipped 12% to $396 million.

Viacom needs “more focus” in areas where it can “have the greatest impact,” he told analysts. The company also must be “distinct” from its rivals and needs to “unlock the benefits of our scale” and “better harness the power of our portfolio,” he said. Viacom also must become “more adaptable” and “create new opportunities,” while strengthening its partnerships, he said.

The five-point plan that he outlined was designed to accomplish all of those goals, he said. That new strategy calls for Viacom to, the company said in a news release: No. 1 Make an effort to “put the full power of Viacom behind six flagship brands” (BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount). No. 2 “Revitalize and elevate” its approach to content and talent. No. 3 “Deepen partnerships to drive traditional revenue.” No. 4 “Make big moves in the digital world and physical world.” No. 5 “Continue to optimize and energize the organization.”

The new Viacom short-form content division will build on existing company programming and new, original intellectual property (IP), it said. The company also plans to “further extend the reach” of its brands via live experiences and consumer products that it said will create “valuable new channels for marketing, talent development and connecting with audiences.”

Viacom also said it “identified opportunities to bring the best of Paramount to the network business, and the best of the network business to Paramount.” Paramount’s movie release slate will, as a result, include co-branded releases from each of the flagship brands, along with Paramount-branded films focused on franchises, tent poles and other projects, it said. The first plan on that front is a commitment between Nickelodeon and Paramount to move forward on a slate of four films, the first of which – “Amusement Park” — will premiere in theaters in summer 2018 and then launch as a TV series on Nickelodeon the following year, Viacom said.

“You can expect to see strong growth in the second half of the year” for Viacom, driven at least in part by the new strategy, Viacom CFO Wade Davis said on the call. Media networks is “well-positioned for future growth” and Viacom also continues to see “strong demand in the scatter market, which bodes well for the upfront,” he said. TV networks will hold their annual upfront events in March-May, where they will meet with advertisers and reporters to tout their fall programs and start selling ads. Scatter advertising is sold closer to the airing of those programs.

But Davis warned that although Viacom’s fourth quarter was helped by a relatively strong box office performance, the first quarter’s box office performance to date has been “somewhat soft.”

On the call, Bakish also told analysts, during the Q&A, that he believed that we will “absolutely” start to see an entertainment pack of networks being offered by over-the-top “skinny bundle” providers. “Whether that will launch in 2017 or not, we’ll see,” he said, but added: “There’s lots of conversations going around. I’m not going to namecheck any particular companies, but certainly there is activity in the marketplace.”

There is a “very compelling market opportunity” for the development of an entertainment pack and that stands to benefit Viacom,” he said. That’s because its six flagship brands are “essentially the strongest entertainment pack you could get in the market,” providing content targeted at preschool children, older kids, young adults and adults, including African-Americans, he said.

Viacom’s Q1 results came in “ahead of our and consensus expectations,” with domestic advertising “in line with our and consensus expectations,” Stifel Research analyst Benjamin Mogil said in a research note.

The fact that Viacom is “further integrating Paramount with more crossover IP development with the key Media brands … likely ends any speculation” about its film segment being sold, Mogil said. Viacom shares were up 3.35% at $46.25 in afternoon trading Feb. 9.