QUOTE AND NEWS
The Economic Times  Jun 24  Comment 
Sudhanshu Vats, Group CEO of Viacom18, a joint venture between Viacom and Reliance Industries-owned Network18, has led the company for about five years.
Forbes  Jun 20  Comment 
Viacom’s BET Networks is known for building community. BET’s Nneka Norville shares her strategies and offers four tips to start a career in corporate social responsibility.
TechCrunch  Jun 15  Comment 
 Lip-syncing social network Musical.ly is getting into original content, thanks to new deals with Viacom, NBCU and Hearst, which will bring short-form video series to the app. However, unlike the original videos found on Snapchat – an app...
Wall Street Journal  May 26  Comment 
Viacom Inc.’s television networks will make at least a limited return to the lineup of Suddenlink Communications, ending a more than two-year dispute over costs to carry the media giant’s channels.




 
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Viacom, Inc. NYSE:VIA is a leading global entertainment content company. Viacom owns and operates some of the world's best known media networks and film production studios including networks such as MTV, BET, Nickelodeon and Spike TV as well as filmed entertainment companies including Paramount Pictures and DreamWorks Pictures. Viacom's content reaches over 520 million households world wide in over 160 countries and territories. In 2005 Viacom became a stand-alone public company when it separated from CBS (CBS). In 2007 the company earned $13.82 billion in revenues, an increase of 18% from 2006.

Business Segments

Viacom operates through two separate business segments in the media industry. andThe first is their media networks segment which includes television networks as well as digital properties both domestic and international. The second business segment is known as Filmed entertainment and is responsible for the production, promotion and distribution and licensing of feature films.

Media Networks

Viacom's media networks segment controls over 150 television channels and more than 300 digital properties, which include online, broadband and mobile television services. The media networks segment generates revenue from three sources: The sale of advertising time on cable and digital networks, from fees that are payed to cable network television operators and satellite television operators and other distributors and finally ancillary revenue which includes the sale of consumer products including video games, as well as the licensing of its content to third parties. In 2007 the media networks segment was responsible for $8.10 billion in revenues earned.

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Filmed Entertainment

The filmed entertainment segment is responsible for the production, financing and distribution of motion pictures. Viacom's filmed entertainment segment owns and operates Paramount Pictures, Paramount Vantage, Paramount Classics, DreamWorks Pictures, MTV Films and Nickelodeon movie brands. Films are generally released in theaters in the United States and abroad and then released to DVD and licensed to Video-On-Demand distributors and other third parties for further distribution. All revenues from these various forms of distribution are recorded under the filmed entertainment segment. In 2007 filmed entertainment earned %5.48 billion in revenue and increase of $1.2 billion, or 28%, from 2006. The process of creating, releasing and later licensing filmed entertainment is broken down into four segments that create different revenue streams. These segments are home entertainment, television licensing and ancillary revenues.

  • Theatrical: Revenues from the theatrical release of Viacom's films are recorded in this segment. In 2007 theatrical revenues accounted for $1.47 billion of the company's total revenues, an increase of 69% from 2006. This increase was largely due to the successful release of the films Transformers and DreamWorks' Shrek the Third, which performed better than comparable films released in 2006. A complete list of Viacom's theatrical releases can be seen below.
  • Home Entertainment: Revenues from the distribution of filmed entertainment to households through DVD sales are recorded under the home entertainment segment. Home entertainment earned $2.49 billion in 2007, an increase of 18% from 2006. The increased revenues were largely due to the success of many DVD releases during the year, again included Transformers and Shrek the Third.
  • Television Licensing Fees: Once films are released in home entertainment formats (and thus out of theaters) Viacom sells the rights to distribute its content to various third parties. Television networks, video-on-demand services, pay and free cable services and in some cases airlines and hotels are all service providers that pay Viacom for the rights to air the company's films. Television licensing fees also increased in 2007, returning $1.29 billion, 15% higher than 2006.
  • Ancillary Revenue: Revenues from studio revenues, consumer product licensing and the distribution of filmed entertainment through new online and mobile platforms are recorded as ancillary revenue in the filmed entertainment segment. In 2007 these revenues accounted for $221.8 million, an increase of 30% from 2006.


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Theatrical Releases 2007
Quarter Title
First Quarter Freedom Writers
Norbit
Reno 911: Miami
Black Snake Moan
Zodiac
Shooter
Blades of Glory
Second Quarter Disturbia
Year of the Dog
Next
A Mighty Heart
Third Quarter Transformers
Arctic Tale
Hot Rod
Stardust
Into the Wild
Fourth Quarter The Heartbreak Kid
Things We Lost in the Fire
Beowulf
Margot at the Wedding
Kite Runner
Sweeney Todd: The Demon Barber of Fleet Street
There Will Be Blood
No Country for Old Men
DreamWorks Animation Releases Shrek the Third
Bee Movie
Source: Annual Report.

Trends and Forces

  • Intellectual Property: Piracy in the entertainment industry is a serious concern for Viacom. The rise of the internet has made it increasingly easy for consumers to gain access to content without paying anything. As a result, companies like Viacom don't see any revenue for the media content that they produce. Increased piracy regulations in the U.S. and abroad (particularly in China, where such regulations are very lax) could be very helpful for Viacom. If piracy is not controlled or strongly regulated in the future Viacom could see serious losses from the intellectual property violations.
  • Success of Content: The success of the programming that Viacom licenses to generate revenue is very central to the amount they can charge in affiliate fees. These fees are determined through negotiations with cable and satellite distributors and the more successful a program is, the larger the fee Viacom can charge for the licensing. As the entertainment industry is extremely fast paced, it is essential that the content Viacom produces keeps up with what is currently popular.
  • Decline in Cinema Viewing: Most movies produced today are break-even projects for Viacom and its competitors. As the costs of producing major block buster movies continue to rise the revenues from these movies must also increase in order for the projects to remain worthwhile. In recent years revenues from theater releases have fallen, causing high cost projects to become less attractive. This decline in cinema attendance is coupled with an increased demand in the DVD market. While Viacom is a major player in both areas, it does rely strongly on its theatrical release revenues.

Competition

Viacom competes directly with other major media conglomerates including Time Warner (TWX) and Walt Disney Company (DIS). The below table compares Viacom's revenues, market capitalization and operating margin with both Time Warner and Disney. While Viacom's revenues and market cap are significantly smaller than those of its competitors it does maintain an advantage in operating margin.

Comparison to Competitors in 2007
Company Revenues ($ billions) Market Capitalization ($ billions) Operating Margin
Viacom Inc. (VIA) $13.42 $25.17 21.87%
Time Warner (TWX) $46.48 $51.53 18.78%
Walt Disney Company (DIS) $36.38 $58.83 19.63%
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