Nov 16, 2018

Accelerates transformation behind strengthened core business and growth initiatives.

 

Viacom released its fourth quarter and full-year 2018 financial results today, demonstrating the impact of turning around the core business and articulating a blueprint for the company’s continued transformation into a pre-eminent global supplier of multiplatform content for both in-house and third-party platforms.

“Our strong performance in the fourth quarter capped off a pivotal year for Viacom,” said Viacom President and CEO Bob Bakish. “We successfully turned around our core business, with dramatic improvements across our networks, at Paramount and in distribution. We also took important steps to evolve Viacom for the future – investing in our portfolio of advanced marketing solutions, digital and experiential offerings and global studio production business. As we head into 2019, we are excited about the company’s evolution and expect to return to topline growth.”

Strong financial performance underscored the company’s progress, with year-over-year quarterly growth in consolidated revenue, adjusted diluted EPS and adjusted operating income. The full fiscal year ended with a return to full-year growth in consolidated operating income for the first time since 2014, record revenue and profitability for Viacom’s international networks, and another $1 billion reduction in the company’s debt.

With the content-driven core business strengthened and growth initiatives accelerating to scale, Viacom is set to return to full-year growth in fiscal 2019. Here is a closer look at five areas of strength that are driving the company’s transformation:

1) A laser focus on content has driven increased share across Viacom’s flagship networks and digital presence

When it comes to content, Viacom’s goal is to be a pre-eminent global supplier of multiplatform entertainment – created for its owned-and-operated networks and platforms, and, increasingly, for others. The company has already made significant progress toward this goal.

Viacom continues to hold the No. 1 share of U.S. basic cable groups across key demographics, and that share has increased year-over-year across the flagship networks for six consecutive quarters, with MTV, BET and Comedy Central demonstrating particular strength in the fourth quarter. Viacom held nine of the top 10 unscripted cable shows and six of the top 10 highest-rated original cable series in the key 18-34 demographic this quarter.

Viacom Digital Studios continues to drive social video engagement, as the company more than doubled views year-over-year in fiscal 2018, jumping 14 places to the No. 10 spot on Tubular’s media industry rankings. YouTube subscribers doubled over the same timeframe.

Internationally, Channel 5 in the UK drove four percent share growth this quarter, while Telefe in Argentina recorded its 10th consecutive month of ratings leadership.

2) Domestic affiliate revenue returned to growth behind deepened and expanded partnerships

The strength of Viacom’s brands played a key role in our return to growth in domestic affiliate revenue. So too did the company’s expanded and strengthened relationships with its distribution partners.

As Viacom has renewed deals with Charter, Comcast, Altice, Mediacom and others, the company has in many cases updated digital rights and sewn AMS products and original content partnerships into these agreements. The result is vastly expanded dynamic ad targeting across linear and digital platforms, a video-on-demand share increase that leads all cable groups, and, most importantly, a three percent return to domestic affiliate growth in the fourth quarter.

These core distributors remain immensely important even in an era of cord-cutting, but Viacom is also meeting consumers who have migrated online, securing partnerships with an increasing number of digital platforms across the OTT, SVOD and vMVPD spaces, including DirecTV Now, Sling and Philo.

3) Renewed management, content strategy, boost Paramount Pictures to third straight profitable quarter

As Paramount Television has quietly grown into a third-party television production powerhouse, a new management team has transformed Paramount Pictures’ other three divisions: Motion Picture Group, Animation, and Paramount Players. The studio has strengthened its content engine, better monetized its century-old library, more fully integrated with Viacom’s constellation of IP via Paramount Players, and secured long-term external partnerships with franchise hubs such as Hasbro and talent that includes David Ellison at Skydance and Fast and the Furious producer Neal Moritz.

The result: a third consecutive profitable quarter and a $241 million full-year improvement in adjusted operating income. The studio will ride the momentum of smash hits A Quiet Place and Mission: Impossible -- Fallout into a 13-release 2019, with a diverse slate reflecting Chairman and CEO Jim Gianopulos’ make-it-for-someone-or-make-it-for-everyone philosophy, from blockbuster-in-waiting Bumblebee to BET co-branded What Men Want. Ten of these films will carry net production costs below $50 million.

The studio will continue to build revenue streams beyond theater and television, with a concerted effort to significantly boost revenue in the home media and global television distribution realms and a multi-picture first-run partnership with Netflix.

4) A $1 billion business is sprouting as Viacom’s studio production business begins to scale

Driven by production expertise, fueled by a nearly bottomless vault of IP, and enabled by the company’s vast global reach, some of Viacom’s most iconic brands are complementing their core network content with productions for third-party platforms.

MTV Studios, launched in June, is creating three regional versions of MTV’s The Real World for Facebook. Nickelodeon is reviving Avatar: The Last Airbender for Netflix. Viacom’s newest acquisition, Awesomeness, produced Netflix’s To All The Boys I’ve Loved Before—one of the most watched movies in the history of the platform. And the newly consolidated Viacom International Studios – already one of the world’s top producers of Spanish-language content – announced two new series for Amazon earlier this week.

At the vanguard of Viacom’s third-party production machine sits Paramount Television – an arm of Paramount Pictures that did not exist four years ago – which clocked revenues of almost $400 million in fiscal 2018 behind highly regarded hits such as Tom Clancy’s Jack Ryan on Amazon and The Haunting of Hill House and Maniac on Netflix. Sixteen more shows have been ordered or are in production for fiscal 2019.

This collection of premium content production houses is set to become a $1 billion business within a couple of years.

5) Advanced Marketing Solutions continues to rise

Just as Viacom’s third-party studio production business barely existed a few years ago, what the company is calling its Advanced Marketing Solutions (AMS) – a basket of seven products across the linear, branded content, influencer and shopper marketing, experiential and other spaces – has formed relatively recently.

It is already surging. AMS revenue shot up 32 percent last quarter, and accounted for 10 percent of total ad sales revenue in fiscal 2018. That share should accelerate into 2019 behind strong growth at Viacom Digital Studios, Viacom’s Vantage ad-targeting product, WhoSay integration and Awesomeness-produced branded content.

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

Visit Viacom’s Investor Relations page for more information on Viacom’s fourth quarter and full-year 2018 earnings.