Viacom’s Dauman: Streaming Deals Will Keep Affiliate Fees Rising


Credit: Corbis / Kimberly White

Although Viacom’s stock, along with most everyone else’s, has been battered in recent days by the market declines the past few days, it might get a boost this morning, as its fiscal year Q3 results showed continued success, especially on the cable advertising front. Revenues rose 15 percent to $3.77 billion, thanks to gains across affiliate, ad sales and content-licensing deals.

Philippe Dauman, Viacom’s CEO, who was introduced by chairman Sumner Redstone as the “wisest man I know” (the other day, he opened CBS’ Q2 earnings call by identifying CEO Les Moonves as a “genius”), noted that the “media networks are thriving and our decision to increase our investment in original programming is paying off, fueling our expansion into international markets and raising ad revenue.”

So far, the current quarter is trending similarly, with advertising again up double-digits, Dauman said. He also pointed to digital distribution deals in the U.S., expecting a double-digit rate in affiliate fees “for the foreseeable future.”

Interestingly, in the previous quarter, Dauman told investors that Netflix (NSDQ: NFLX) and Hulu dollars aren’t significant, so the company wouldn’t bother breaking those figures out. Right now, the best the company would say is that through the end of the year, is trending “high, single-digit” to double-digit gains for the rest of the year.

BTIG’s Rich Greenfield noted that digital distribution added $70 million to affiliate revenues and asked how many of that is based on one-time fees? “As far as digital revenues, a lot of the deals we’ve been doing relate to library products, but there are refresh obligations and we are in a number of discussions for new ones,” Dauman said. “That gives us the wherewithal to predict the single-digit to even double-digit gains.”

As Viacom (NYSE: VIA) CFO Tom Dooley added that despite the healthy outlook for digital distribution fees, the growth may not be “linear” from quarter to quarter, meaning that because some might be short term (as little as two-year contracts) and therefore the gains may not be steady. “Viacom content was downloaded 180 million times, proving the desire for our content on these distribution platforms,” Dooley said.

Looking ahead, Dauman expects to expand Viacom’s international streaming deals with Netflix (the two have a Canadian arrangement) and its rivals in other countries. The one sticking point is that the market for paid streaming is uneven around the world, but Dauman expects that to smooth out.

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