• by Wayne Friedman , November 3, 2009

Viacom grabbed some hefty profit gains of 15%, in the third quarter -- but one of its main revenue generators, TV advertising, still showed weakness.

Domestic ad revenue fell 4%, and worldwide ad sales slipped 5% on flat revenue from Viacom's media networks at $2.12 billion.

"The scatter market was quite active throughout Q3 -- and so far in Q4 with increasing scatter premiums," says Philippe Dauman, president and CEO of Viacom. What business is transacted continues at the last moment. Advertising, he says, continues to reflect "just-in-time buying."

Dauman also hinted that the extent of overall volume for ad revenue gains is unknown. "With so much business yet to be written in the scatter market throughout the industry, the visibility on the depth and strength of the scatter market over the remainder of the quarter remains limited."

The big difference this period comes from Viacom's filmed-entertainment revenue. It swung to a $69 million quarterly profit from a year-earlier loss, thanks to a strong performance of "Transformers: Revenge of the Fallen." But revenue still fell 6% to $1.22 billion.

Part of these results came from operations cost cuts, such as merging Paramount Pictures theatrical and home entertainment marketing teams. Consolidating international operations could be next.

Paramount Pictures has also seen strong results from "Paranormal Activity," a low-budget movie that shot to top results -- $85 million in U.S. box office so far -- from a viral marketing campaign.

Viacom outpaced expectations, with the company posting 69 cents a share in earnings. Analysts predicted 56 cents a share. Overall, Viacom posted $463 million in net profit versus $401 million in the third quarter of 2008. Revenues fell to $3.32 billion from the prior year's $3.41 billion.

Dauman says there is still a major gap between the viewership produced and what cable operators pay per month for its programming. He says Viacom controls 20% of all cable viewing audiences, but only 8% of the license fees. "We remain focused on closing this gap," he says.

Ratings-challenged MTV declined another 3% in the period, year-to-year.

Dauman says new program development still has not revved up to its full potential. Soon, a massive marketing campaign will launch on the revamping of the MTV schedule: four differently themed nights targeting different demos.

Concerning the "The Beatles: Rock Band" video game, the company expects it to break even or be profitable in the fourth quarter, depending on holiday season sales.

According to estimates, in September -- its first month in release -- the game sold nearly 600,000 units in the U.S. While sales were better than the first-month sales of either "Rock Band" (2007) or "Rock Band 2" (2008), it's still far below major video game starts. For example, "Guitar Hero III" sold 1.4 million units in its first six days on sale in October 2007.