Viacom Inc. on April 19 said a split-off of its fast-growing cable networks and film studio from its broadcast networks could come as early as the 2006 first quarter, as its quarterly operating profit
(Reuters) -- Viacom Inc. on April 19 said a split-off of its fast-growing cable networks and film studio from its broadcast networks could come as early as the 2006 first quarter, as its quarterly operating profit rose on growth in cable networks MTV and Nickelodeon.
Viacom, which owns the CBS television network and Paramount Pictures movie studio, has been mulling a split of the cable networks and film studio from its more mature, but cash-generative broadcast networks, to boost its stock value.
In the first quarter, Viacom's cable networks posted a 20% rise in revenue and operating profit. The television division, including the CBS network and broadcast stations, had a 5% drop in revenue and 8% drop in operating profit.
On April 19 Sumner Redstone, Viacom's chairman/CEO, said he was "personally committed to achieving the separation," but a thorough analysis had not concluded.
He expects a decision to be reached in the second quarter. Shares of Viacom rose 2.8%.
A Viacom split-off would be designed to address the divergent economics of its businesses that it believes attracts different types of investors. The move has been viewed as a tacit admission that the merger of CBS and Viacom has fallen short of its promise of better results through owning myriad media assets.
But after an initial investor euphoria over the prospect of improving the market valuation for Viacom's properties, media industry veterans said they saw little value in breaking apart the company.
Critics said if the company were broken apart, Viacom would no longer be able to threaten to withhold the CBS broadcast station signal, or retransmission consent, as a negotiating ploy in convincing cable and satellite operators to broadcast new cable channels.
But Tom Freston, co-COO of Viacom, who oversees the programming divisions, said retransmission consent, which helped make the MTV channel a household name, was no longer an issue.
"We think that game is largely over," Freston told analysts. "Most of our deals are done until the end of the decade and cable operators will be focusing more and more on VOD [video on demand] and broadband."
Freston also said Viacom was leaning heavily on new digital services over wireless networks and high speed Internet connections for future growth. The company currently generates about $100 million in digital entertainment revenue, he said.