• by Wayne Friedman , David Goetzl , August 10, 2006

Despite advertising marketplace softness, Viacom's worldwide cable network revenue grew 8 percent in the second quarter to $1.75 billion.

Viacom cable network's advertising revenue growth outperformed the marketplace as a whole, said Tom Freston, president/chief executive officer of Viacom.

On a conference call to discuss second-quarter results, Freston said MTV Networks and BET have virtually completed their upfront dealings, with volume up in the 5 percent range. He said CPMs were flat to slightly up. The company sold 50 percent of its cable inventory--the same as a year ago, but down from what historically has been in the 62 percent range.

"While it was difficult and drawn out and not as robust as a few years ago, our performance compares well to the broadcasting category, which appears to have ended down meaningfully on volume," Freston said.

Freston estimated that about 6 percent of the upfront commitments were for digital advertising initiatives.

"It's been difficult with a lot of agencies to make these multi-platform purchases within the context of a rushed upfront," he said.

MTV Networks did strike a sprawling multi-platform deal with OMD--an agency Freston said is nimble enough for that type of deal-making--and more are moving that way.

Almost 70 percent of Viacom's worldwide cable network revenue comes from advertising sales. For the second-quarter period ending June 30, ad sales grew by 8 percent to $1.06 billion, while its subscriber fees climbed 11 percent to 501.8 billion. For the six-month period ending June 30, ad sales climbed 6 percent to $1.9 billion, and subscriber fees improved 10 percent to $990 million.

Cable network net profit rose 12 percent to $710 million from the same period a year before.

Viacom's quarterly results as a whole improved because of better financials from its cable and movie business and its DreamWorks acquisition. Operating income rose 14 percent to $663.2 million. Revenues were 24 percent higher, to $2.85 billion.

In general, Viacom slightly outperformed analysts' estimates. William Drewry, media analyst of Credit-Suisse, says his cable network revenue estimate was $1.73 billion versus the actual number of $1.75 billion. His cable network EBITDA estimate--earnings before interest, taxes, depreciation, and amortization--was $742 million. The actual number was $771 million.

Going forward, despite a perceived slowness in cable ad sales, Freston said Viacom remains bullish in the area. "We continue to feel very strongly that targeted basic cable networks--niche networks like we have--are still very attractive options for advertisers," he said.

Forecasting annual ad revenue increases in the 8 percent to 9 percent range, Freston said the growth will come from increased distribution, ratings jumps, and leveraging high-demand multi-platform ad opportunities to boost sales on linear channels.