Viacom FY 3Q17 Earnings Call Notes

Robert Bakish – President and CEO

Pay TV decline of ~3.5%

“So, there’s a bunch of questions in there. Let’s talk about the sort of pay-TV environment and some of the decline that’s been discussed. So, a couple of pieces. So, the internal data that we have showed a slight degradation from Q2 to Q3, and that data shows a run rate of about minus 3.5%. That’s a sad number.”

Investing in ad load reduction

“There’s a couple of pieces to the answer that question, although it ends with yes. Ad load reduction is an investment we’re making in the health of our brands which we believe will pay strong dividends. But going through it, we’re coming out of an up front that we’re very happy with. We have up volume. We’ve got a mid-singles rate of change or you could about it as CPM. Good demand across brands, so that’s a nice foundation.”

Scatter looks strong

“Scatter right now, we’re actually very pleased with scatter. I’d say it’s certainly a decent market. You look at MTV as an example and scatter is up double-digits. So, we don’t see any issues with access to money. We also candidly have the benefit that we do have an ADU bank that were anything to weaken a bit, we can ride through it, but again, the scatter market continues to look good.”

Viacom FY 1Q17 Earnings Call Notes

Bob Bakish

We need more focus

“Thanks, Wade. Now, let’s get into the strategy. Having undertaking a comprehensive review of our business, we arrived at four underlying needs for Viacom. We need more focus. We have to align the Company against areas where we can have the greatest impact. We need to be distinct. Our brands, content and culture must truly be unique and differentiated. We need to unlock the benefits of our scale. We need to better harness the power of our portfolio and grow our competitive strength. And finally, we need to be more adaptable. We need to flex the market shifts, create new opportunities, and strengthen partnerships.”

We will put the full power of Viacom behind six flagship brands

“With these in mind, we’ve established a new five-point strategic plan. We will, one, put the full power of Viacom behind six flagship brands; two, revitalize and elevate our approach to content and talent development; three deepen partnerships to drive traditional revenue streams; four, make big moves in the digital world and the physical world; and five, continue to optimize and energize our organization.”

Valuable and distinct brand promise

“A flagship brand must have a compelling, valuable and distinct brand promise; it must resonate with the target audience or in a genre that is big enough to matter; it must have a rich offering comprised largely of wholly-owned content; it must be global; and it must have the ability to deliver at for points of distribution, linear television, digital, off channel, and theatrical. So, here are the flagship six: Nickelodeon, Nick Jr., MTV, BET, Comedy Central and Paramount.”

Rebranding Spike to Paramount network

“I am also excited to announce that we will be bringing the Paramount brand to TV in a big way by rebranding our U.S. Spike Network in 2018 as the Paramount Network. Adopting the Paramount name and fortifying its programming is a natural way for Spike to strengthen its position as a major general entertainment network which will enhance our adult audience delivery and enable us to grow this important sector of the ad market.”

Will increase the volume of originals

“we will increase the volume of originals and push more aggressively into new format and life. And we want to share ideas more aggressively across borders for our flagship brands. Nickelodeon is already very established in this model, and MTV is moving quickly with MTV U.S. now developing several MTV U.K. formats.”

More likely than not OTT is a negative outcome for the US

“if you think about the impact of OTT on the market, on an international basis, you can argue that given current pay TV penetration levels, OTT should be a positive catalyst for growth in penetration and reach. In the U.S., it’s hard to make that argument. In fact, the more likely outcome and one outcome that I think is increasingly talked about is, it’s a negative impact on price at different tiers of opportunities come to market for consumers. As that happens, there is a very compelling market opportunity in the development of an entertainment pack. And if you look at the flagship six, the flagship six is essentially the strongest entertainment pack you could get in the market, because you have preschool, kids, young adults, you have comedy, you’ve got African-Americans and you’re going to have a general marquee general entertainment network”

Shift to scripted didn’t work for MTV

“Ultimately, the scripted strategy for MTV on a large scale basis didn’t really work. And there is no question that under Chris’s — Chris McCarthy’s leadership — he is bringing back a better balance to MTV including a real push on reality, which is very attractive to the audience, has very compelling economics for us and is really right from a brand filter perspective too.”

Viacom 3Q16 Earnings Call Notes

Philippe Dauman

Upfront was strong

“In ad sales, we concluded a strong upfront. More advertisers committed early instead of waiting for the scatter market later when inventory is scarce. This movement and ratings progress at core networks, as well as our new advertising products resulted in mid to high-single digit price and volume increases. ”

South Park entering its 20th season

“And, of course, Kyle, Cartman and the South Park gang are back for an historic 20th season premiering next month. Their anniversary celebration was the hit of Comic-Con. Their extraordinary longevity is a true testament to the creative excellence of Trey and Matt, the deep devotion of the show’s fans, and the outstanding team at Comedy Central.”

Turmoil is a distraction but we’re not deterred

“Well, obviously, it’s somewhat of a distraction, but we’re not deterred from pursuing the strategic initiatives that I described. Our brands are what drive our business. So to some extent, and probably the biggest impact has been on the ability to move forward rapidly on the Paramount transaction, which had initially been targeted to result in an agreement about a month ago. So that’s certainly been slowed down. But as I indicated in my prepared remarks, they continue. And I hope that we will reach a conclusion on that that will be beneficial to the company in due course.”

We are not disadvantaged by the skinny bundle

” I just want to point out that our top six networks account for close to 85% of our affiliate revenue. Our top eight networks account for close to 95% of our affiliate revenue. So some have erroneously suggested that somehow whatever falls in that little segment of the market, the skinny bundles, somehow are disadvantaged compared to others, we are not. I just want to point that out I’ve pointed it out before.”

MTV leadership has been revamped

“So MTV, we have completely revamped the senior leadership of MTV over the last several months. The team is complete. They’ve been working on bringing the volume and quality of development to what it was not too long ago. We really had a fallow period there. So we’ve remedied that. And we’re going to start seeing the output from that development from the new team – in this quarter we’re going to start seeing it, and then building up again as we go into the new year. That will be very meaningful for us.”

Viacom FY 1Q16 Earnings Call Notes

Philippe Dauman

This is great for content providers

“An enhance distribution ecosystem is coming together with strong upside for content providers. We are experimenting and reaping the benefits of increased consumer choice.”

Bringing content to Snapchat

“we will bring two new high profile channels to Snapchat discover, a Comedy Central international channel and an MTV channel in the U.S. These on top of our other successful discover channels make us one of the largest publishers on Snapchat discover.”

Original programming is key

“Original programming is a key to reducing view fatigue, provides greater opportunities for advertiser integration brings value in secondary markets and reinforces our network’s cultural impact at the virtual and the real work water cooler.”

Paramount is a significantly undervalued part of Viacom

“Paramount is a very valuable and significantly undervalued part of Viacom. Its library of hit films, generate significant recurring income year after year. It has been from a historical standpoint and a brief income slump due impart to a recent low number of theatrical releases, which reduces the positive waterfall impact of prior year film releases. This will change, no that we are back on track to release approximately 15 high quality releases a year including numerous tent-poles.”

We’ll leave no stone unturned

” We have taken a significant number of steps which I outlined in my remarks, I won’t repeat it, to move into the future, to build the existing ecosystem, we finalize our brands grow internationally, grow on multiple platforms the Snapchat deal that we announced this morning is an indication. You will see more deals to come. As I said in my remarks, I will leave no stone unturned, I never have and I never will.”

MTV is in a rebuilding mode

“As far as MTV goes, MTV is in more of a rebuilding mode. We have a new Head of MTV that started just a very few months ago, who has rehabbed his team, has as I mentioned in our remarks, Green let new series. We needed and need more programming on MTV. That will start kicking in overtime. We are accelerating the hearing of the shows that are already in production so that we can fill the schedule better.”