• by Wayne Friedman , August 3, 2007

Viacom's TV networks may give viewers fewer commercial interruptions in an effort to keep them tuned into their programming.

"We are looking at reducing the length of our commercial pods, as well as introducing programming into commercial pods," says Philippe Dauman, president and chief executive officer of Viacom, speaking in the company's second-quarter financial results conference call. "We are [also] going to focus on the order of the commercials [in the pod]."

Among all cable and broadcasting networks, research has shown that MTV Networks is among the worst in retaining viewers from program to commercials--losing as much as 15% of its viewership.

As a result, MTV fought long and hard to sell its advertising on program-rating guarantees, versus the new approach the industry at large has adopted--inking deals based on commercial ratings plus three days of DVR playback, also known as C3.

MTV was able to reach a compromise--at least initially--with advertisers. Ad deals were done on both program and C3 ratings for the fourth quarter--with virtually all other deals, starting in the first quarter of 2008, being inked with C3 guarantees.

Yesterday, Viacom reported second-quarter net earnings similar to the same time period a year ago. Viacom pulled in $434 million--down 1% versus the second quarter of 2006. Revenues climbed dramatically--up 13% to $3.2 billion.

Media nets pushed by its MTV Networks witnessed revenue gains of 10% to $1.9 billion. The company said its ad revenues grew 6% worldwide to $1.15 billion. Domestic ad revenues moved up 4%, with big growth categories of theatrical movies, home video and wireless advertising.

Affiliate fees grew at a faster pace--15% to $577 million. Overall, net income for the group moved up 3% to $734.2 million.

During the recent upfront advertising market this summer, the company's adult-targeted programming grabbed "low double-digit price increases" with slight overall dollar volume increases, Dauman says.

"We deliberately turned away business," he notes, hoping that the strong double-digit growth scatter business continues. Adds Tom Dooley, senior executive vice president and chief administrative officer of Viacom: "We expect to see improvement in domestic advertising sales in the third quarter relative to the second quarter."

One industry analyst questioned why Viacom views the ad market this way, especially in the midst of a seemingly softer economy, with moderate-to-weak advertising growth. Viacom executives say its core group of advertisers--theatrical movies, video, fast foods and wireless--are generally still in a growth mode.

Nickelodeon had perhaps the best results of all its networks, said Dauman, with double-digit overall advertising volume increases.

Viacom's film entertainment divisions soared 20% in revenues to $1.3 billion, partly because of big theatrical releases during the reporting period. Paramount's "Blades of Glory" and "Disturbia," as well as its distribution revenue from DreamWorks' "Shrek The Third," contributed to the results.

In July, Paramount topped $1 billion in U.S. box office revenues, the fastest ever for any studio. The roaring success of "Transformers," launched early in the third quarter, will offer big financial results in the next reporting period. The film has now pulled in $500 million in worldwide box-office revenue.

Pushing more digital business, Dauman says its top 25 traditional TV advertisers are also heavily buying its digital platforms. Viacom says it is on track to grab $500 million in digital advertising sales this year.