Viacom’s Dauman: Harmonix Sale Is About Focus; Digital Dollars, Not Dimes

Viacom (NYSE: VIA) is currently in talks with several buyers for game developer Harmonix, said Philippe Dauman, Viacom’s president and CEO, at the start of the company’s Q3 earnings call. He didn’t say anything about the poor sales that have plagued the unit subsequent to its high with its release of its Beatles Rock Band game late last year. “Our decision to exit this business strategy is to focus on what we do best, and that’s creating world class entertainment,” he said. “The console games business requires expertise we don’t have. For us, this is all about focus.”

Digital dollars, not dimes: Dauman also took time to highlight the deal signed between Netflix (NSDQ: NFLX) and Viacom’s pay TV channel Epix this past August.

Under the terms of the deal with Netflix, which went into effect in September, Epix will make its movies available to Netflix 90 days after the channel’s premium pay TV and subscription-on-demand debuts elsewhere. Historically, the rights to distribute these films are pre-sold to pay TV for as long as nine years after their theatrical release.

Dauman on Epix/Netflix: “This deal represents an inflection point. It was the first time a non-traditional distributor valued content, in this case, for a new segment of the pay window at a level that is comparable to (indeed, higher than), the rates traditional distributors pick. Windowing content has always given consumers the choice of how and when they can view content. This new segment of the pay window provides a new option for consumers. It is an incremental opportunity for us to monetize our content. And it attests to Netflix’s ability to innovate. We expect to add digital dollars, not dimes, for our interactive future.”

Much ado about cord-cutting: During the Q&A, JP Morgan analyst Imran Khan asked Dauman if the deal between Netflix would result in users cutting the cable cord. Dauman dismissed the notion of cord-cutting, which according to Nielsen, hasn’t really materialized. Netflix has positioned itself as a complementary service, not a replacement for cable, Dauman said. “Even through this powerful recession, TV viewership held up. There is much ado about nothing, when it comes to talk of cord-cutting. We have seen subscribers on more networks increase, because we’ve seen incremental distribution from the telcos. We don’t see cord-cutting happening. If anything, it’s the economy that holds down subscribers. As it returns, so do the subscribers.”

The rest is core: Aside from Harmonix, does Viacom have any other “non-core asset sales” in the works? The short answer is no. “The beauty of this company is that we’re focused on content. There are no non-core assets.” That said, he expects the sale of Harmonix to be completed “expeditiously,” though Dauman offered no specifics on price or the prospective buyers the company is in negotiations with.