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Sunday, August 12, 2018

Viacom Reports Third Quarter Results

Viacom Reports Third Quarter Results

Diluted EPS was $1.27; Adjusted Diluted EPS Grew in the Quarter, Increased 4% Year-to-Date

Paramount Pictures Turnaround Drove Increased Filmed Entertainment Profitability in the Quarter, with Adjusted Operating Income Up $160 Million Year-to-Date

Media Networks Delivered Sequential Improvement in Domestic Affiliate Revenue Growth, Strong Gains in Year-Over-Year Ancillary Revenues and Benefits of Cost Transformation



NEW YORK - Viacom Inc. (NASDAQ: VIAB, VIA) today reported financial results for the third quarter of fiscal 2018 ended June 30, 2018.

Bob Bakish, President and Chief Executive Officer, said, “Viacom produced another quarter of strong progress, with clear evidence that our turnaround is delivering results and that our evolution into a truly global, multiplatform, brand- and IP-driven entertainment company is well underway. Paramount Pictures is revitalized, with outstanding box office performance and growing television production revenues driving substantial gains in profitability. Our Media Networks brands posted significant gains in both linear flagship share and digital consumption, in addition to sequential improvements in domestic affiliate revenue growth.

“In the quarter, Viacom concluded a strong advertising upfront that combined robust price increases, as well as improved packaging that included increased demand for our advanced marketing solutions. Additionally, we continued to diversify our business with growth in worldwide live event attendance and the expansion of a cross-company studio production initiative that leverages our sizable creative assets and global capabilities to drive incremental opportunities.

“This improvement in operating performance -- combined with meaningful actions over the past 18 months to de-lever our balance sheet -- have resulted in a stronger credit profile to help support Viacom’s return to long-term sustainable growth. We remain focused on building this momentum with an even stronger September quarter as we continue to position Viacom for the future.”



Revenues in the third fiscal quarter decreased 4% to $3.24 billion. Operating income grew 1% to $752 million, principally driven by a restructuring charge in the prior year quarter and improvement in Filmed Entertainment operating results. Adjusted operating income decreased 5% to $767 million in the quarter. Net earnings from continuing operations attributable to Viacom declined to $511 million, primarily due to the gain on sale of an investment in EPIX in the prior year quarter. Adjusted net earnings from continuing operations attributable to Viacom increased 1% to $475 million in the quarter. Diluted earnings per share decreased $0.42 to $1.27 in the quarter, and adjusted diluted earnings per share increased $0.01 to $1.18.

MEDIA NETWORKS

Media Networks increased its momentum with growth in television share, significant gains in digital consumption and live event attendance, sequential improvement in domestic affiliate revenue growth and savings from cost transformation initiatives.

Media Networks revenues decreased 2% to $2.50 billion in the quarter, as a 17% increase in worldwide ancillary revenues to $158 million was more than offset by a 4% decrease in worldwide advertising revenues to $1.19 billion and a 3% decrease in worldwide affiliate revenues to $1.15 billion. Domestic and international revenues each declined 2% in the quarter to $1.99 billion and $509 million, respectively. Excluding a 2-percentage point unfavorable impact from foreign exchange, international revenues were flat in the quarter.


Viacom has delivered sequential improvement in domestic affiliate revenue growth through fiscal 2018. (Credit: Viacom)

Domestic advertising revenues decreased 3% to $922 million, reflecting lower linear impressions, partially offset by higher pricing and growth in Advanced Marketing Solutions revenues, which increased 33%. International advertising revenues decreased 4% to $269 million, driven by an unfavorable impact from foreign exchange. Excluding a 5-percentage point unfavorable impact from foreign exchange, international advertising revenues increased 1% in the quarter.

Domestic affiliate revenues decreased 3% to $978 million, a sequential improvement of 100-basis points from the prior quarter. Excluding the impact of SVOD revenues in the quarter, domestic affiliate revenues were flat. International affiliate revenues declined 2% to $175 million in the quarter.

Domestic ancillary revenues increased 31% to $93 million, driven by revenues from live events and consumer products, while international ancillary revenues increased 2% to $65 million.

Benefits from cost transformation initiatives helped drive a 2% decrease in SG&A expenses for the quarter.

Adjusted operating income for Media Networks decreased 8% to $799 million in the quarter, primarily reflecting lower segment revenues.


Viacom brands continue to increase audience share -- up 8% year-over-year in the third quarter of fiscal 2018. (Credit: Viacom)

Performance highlights:

-- Viacom flagship brands grew year-over-year audience share for the fifth consecutive quarter, and Viacom continues to hold the top share of basic U.S. cable viewing among key demos, including Adults 18-34, African Americans 18-49 and Kids 2-11, among others.

- MTV was the fastest growing network in primetime among the top 50 broadcast and cable channels in the Adults 18-34 demo for the quarter. It has increased year-over-year primetime ratings for four straight quarters -- its best streak in seven years -- and, collectively with VH1, held nine of the top 10 unscripted cable series this year. The second season premiere of Floribama Shore in July 2018 brought in nearly 1 million viewers, with ratings up double-digits from its series debut.

- BET posted its highest-rated third quarter since 2014 -- up 24% in C3 among Adults 18-49 -- culminating in the 2018 BET Awards, cable’s #1 awards show for the fourth straight year.

- Comedy Central produced its biggest year-over-year primetime ratings gain for a quarter since fiscal 2014. The network continued to broaden its audience base, growing year-over-year ratings among women 18-49 for seven consecutive months as of July 2018.

- The premiere week of Nickelodeon’s Double Dare averaged 1.4 million viewers, making it the most-watched series debut on kids’ TV so far in 2018.

- Paramount Network’s Yellowstone is the most watched scripted cable series of 2018 after The Walking Dead, with an average audience of approximately 4.4 million viewers in Live+3.

- VH1 has delivered 12 consecutive quarters of year-over-year share growth. Franchise favorite RuPaul’s Drag Race garnered 12 Emmy nominations in 2018 -- the most for any unscripted series on TV.

-- Viacom Digital Studios continues to drive tremendous growth in digital consumption of its content, increasing quarterly total video views and watch-time 112% and 104% year-over-year, respectively. Since the third quarter of fiscal 2016, the company has tripled its total digital video streams across O&O and social platforms to 7.0 billion in the quarter. Additionally, Nick’s Noggin app has flourished on Amazon Prime Video Channels, with strong subscriber growth since its launch on the platform in May 2018.

-- The company secured distribution of leading Viacom brands on the new AT&T Watch entertainment-only skinny bundle service. The partnership expands the broad representation of Viacom networks across the AT&T subscriber footprint through a new, differentiated platform that targets mobile users.

-- Viacom’s Media Networks is quickly executing on the company’s studio production strategy to create and license content for digital and linear partners. Viacom International Studios launched in the quarter, uniting the extensive production capabilities of Telefe and majority-owned Brazilian comedy brand Porta dos Fundos with those of Viacom’s Latin American brands. VIS is already producing shows for Netflix, Amazon, Telemundo and Fox, among others. In the U.S., Nickelodeon delivered its first title under a multi-year agreement with Netflix to produce and license animated series Pinky Malinky. And MTV Studios, launched in June, will capitalize on one of the TV industry’s largest libraries of youth-focused and music-related IP in the world that -- up until now -- has been largely untapped.

-- Accelerating the growth of Viacom’s live events business, Bellator formed a nine-figure, multi-year distribution partnership with global sports streaming service DAZN that positions the league to become an even more significant player in MMA. The sixth annual BET Experience attracted 165,000 attendees, and cable’s #1 comedy brand also continued to build success in live events, with more than 45,000 fans attending Comedy Central’s second annual Clusterfest in June 2018.

FILMED ENTERTAINMENT


Paramount Pictures continues to improve adjusted operating income, and was profitable in the second and third quarters of fiscal 2018. (Credit: Viacom)

Paramount Pictures is delivering on its turnaround, with strong current quarter releases driving domestic theatrical revenues up 58%, continuing growth in television production and increasing profitability.

Filmed Entertainment revenues decreased 9% to $772 million in the quarter, as a 20% increase in domestic revenues to $464 million was more than offset by a 33% decline in international revenues to $308 million. Theatrical revenues were down 21% to $208 million principally due to lower carryover revenues. Domestic theatrical revenues grew 58%, driven by the strong performance of current quarter releases A Quiet Place and Book Club, while international theatrical revenues decreased 58%, reflecting comparisons against the release of Transformers: The Last Knight and Ghost in the Shell in the prior year quarter. Licensing revenues increased 35% to $404 million in the quarter, primarily due to the release of Paramount Television product, including the second season of 13 Reasons Why. Domestic licensing revenues were up 122%, while international licensing decreased 8%. Home entertainment revenues declined 45% to $119 million, reflecting the mix and number of titles in release. Domestic and international home entertainment revenues decreased 47% and 41%, respectively. Ancillary revenues decreased 38% to $41 million, with domestic and international ancillary revenues down 40% and 27%, respectively.

Filmed Entertainment reported adjusted operating income of $44 million in the quarter compared to $9 million in the prior year quarter, an improvement of $35 million that reflects lower operating expenses and higher domestic revenues driven by the strong performance of current quarter releases and television production.

Performance highlights:

- Paramount Pictures has improved adjusted operating income in six consecutive quarters, and was profitable in the second and third quarters of fiscal 2018.

- A Quiet Place has grossed more than $188 million domestically to date, making it the second highest grossing horror film in the U.S. over the past decade. The film has so far earned more than $332 million at the worldwide box office at a production cost of approximately $20 million.
Released in May 2018, Book Club has gone on earn more than $68 million to date at the domestic box office -- more than six times its acquisition cost of $10 million.

- The fourth quarter release of Mission: Impossible - Fallout grossed nearly $330 million globally in its first two weekends -- the biggest opening ever for the franchise. The film has received universal acclaim, with critics hailing it as the best in the series.

- Looking ahead to the fall, Paramount Players and BET will release Tyler Perry’s Nobody’s Fool -- starring Tiffany Haddish and Tika Sumpter -- followed by the studio’s November 2018 release of World War II horror film Overlord, produced by J.J. Abrams. Including the recently announced live-action adaptation of the iconic Nickelodeon series Rugrats, Paramount Players has already slated at least five branded feature films with Viacom’s leading media networks.

- In all, Paramount’s fiscal 2019 slate will nearly double the number of worldwide theatrical releases compared to fiscal 2018.

- Paramount Television has continued to drive substantial growth in licensing revenues from hit series, including the second season of 13 Reasons Why. The Alienist, which Paramount produced for TNT, received six Emmy nominations, including Outstanding Limited Series. And Amazon ordered a second season of Tom Clancy’s Jack Ryan well before the series premieres in August 2018. Paramount TV is expected to double its production output in 2019, and currently has 19 series ordered or in production.

BALANCE SHEET AND LIQUIDITY


In two years, Viacom has tripled digital video streams across owned & operated and social platforms -- to 7 billion in the third quarter of fiscal 2018. (Credit: Viacom)

Continued progress in operating performance over the last 18 months, including increased Filmed Entertainment profitability, sequential improvement in domestic affiliate revenue growth and strong gains in Viacom International Media Networks, combined with de-levering actions taken, are driving an improved credit outlook.

The Company’s cash balance was $929 million at June 30, 2018, a decrease from $1.39 billion at September 30, 2017. In the nine months, net cash provided by operating activities increased $343 million, or 52%, to $997 million, free cash flow increased $380 million, or 74%, to $895 million and operating free cash flow increased $347 million, or 63%, to $895 million.

At June 30, 2018, total debt outstanding was $10.09 billion, compared with $11.12 billion at September 30, 2017, a reduction of $1.03 billion.

About Viacom

Viacom is home to premier global media brands that create compelling entertainment content - including television programs, motion pictures, short-form content, games, consumer products, podcasts, live events and social media experiences - for audiences in 183 countries. Viacom’s media networks, including Nickelodeon, Nick Jr., MTV, BET, Comedy Central, Paramount Network, VH1, TV Land, CMT, Logo, Channel 5 (UK), Telefe (Argentina), Colors (India) and Paramount Channel, reach approximately 4.3 billion cumulative television subscribers worldwide. Paramount Pictures is a major global producer and distributor of filmed entertainment. Paramount Television develops, finances and produces original programming for television and digital platforms.

For more information about Viacom and its businesses, visit www.viacom.com. Viacom may also use social media channels to communicate with its investors and the public about the company, its brands and other matters, and those communications could be deemed to be material information. Investors and others are encouraged to review posts on Viacom’s company blog (blog.viacom.com), Twitter feed (twitter.com/viacom) and Facebook page (facebook.com/viacom).

Cautionary Statement Concerning Forward-Looking Statements

This news release contains both historical and forward-looking statements. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements reflect our current expectations concerning future results, objectives, plans and goals, and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause future results, performance or achievements to differ. These risks, uncertainties and other factors include, among others: the public acceptance of our brands, programs, motion pictures and other entertainment content on the various platforms on which they are distributed; technological developments, alternative content offerings and their effects in our markets and on consumer behavior; the potential for loss of carriage or other reduction in the distribution of our content; significant changes in our senior leadership and the ability of our strategic initiatives to achieve their operating objectives; economic fluctuations in advertising and retail markets, and economic conditions generally; evolving cybersecurity and similar risks; the impact of piracy; increased costs for programming, motion pictures and other rights; the loss of key talent; competition for content, audiences, advertising and distribution; fluctuations in our results due to the timing, mix, number and availability of our motion pictures and other programming; other domestic and global economic, political, business, competitive and/or regulatory factors affecting our businesses generally; changes in the Federal communications or other laws and regulations; and other factors described in our news releases and filings with the Securities and Exchange Commission, including but not limited to our 2017 Annual Report on Form 10-K and reports on Form 10-Q and Form 8-K. The forward-looking statements included in this document are made only as of the date of this document, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. If applicable, reconciliations for any non-GAAP financial information contained in this news release are included in this news release or available on our website at www.viacom.com.

You can read Viacom's press release featuring the company's 3rd Quarter 2018 report in full, including tables of Viacom's statements and balance sheets, here on BusinessWire.com.

Via the official Viacom Corporate Blog:

Viacom’s Q3 2018 Earnings Demonstrate Turnaround, Evolution Into Global Multi-Platform Entertainment Company

Viacom released its third quarter 2018 financial results today, articulating progress on its turnaround and detailing Viacom’s evolution beyond its linear roots and into a global multiplatform company.

“Viacom produced another quarter of strong progress, with clear evidence that our turnaround is delivering results and that our evolution into a truly global, multiplatform, brand- and IP-driven entertainment company is well underway,” said Viacom President and Chief Executive Officer Bob Bakish.

Viacom’s core media networks business continues to increase share, Paramount Pictures is surging and profitable, domestic affiliate revenues are up sequentially, and new initiatives are helping to build ad sales strength. Even as these traditional business drivers stabilize, Viacom continues to transform itself by feeding booming digital consumption, growing its Advanced Marketing Solutions (AMS) portfolio, increasing its number of live events, and establishing a burgeoning cross-portfolio studio model that opens significant opportunities for third-party production.

A RESURGENT BUSINESS

Over the past several quarters, Viacom has revitalized four core elements of its business – Paramount Pictures, media networks’ audience share, ad sales, and its domestic affiliate business – while continuing to strengthen its balance sheet and improve its credit rating.

“This improvement in operating performance – combined with meaningful actions over the past 18 months to de-lever our balance sheet – have resulted in a stronger credit profile to help support Viacom’s return to long-term sustainable growth,” said Bakish. “We remain focused on building this momentum with an even stronger September quarter as we continue to position Viacom for the future.”

Here’s a look at how Viacom’s core business elements demonstrated a resurgence in the latest quarter:

Paramount Pictures continues profitability on theatrical hits, television production strength

Paramount’s new management team kicked off their slate with a pair of hits: A Quiet Place brought in $188 million domestically (and another $144 million internationally), on a $20 million budget, while Book Club, acquired for $10 million, raked in $68 million. After growing operating income for six consecutive quarters, Paramount Pictures reached profitability over the past two, with domestic revenue surging 58 percent year-over-year (YOY) in Q3. This trend is expected to continue during the fourth quarter on the strength of the well-reviewed Mission: Impossible – Fallout, which has earned more than $330 million globally – a record open for the franchise – since its July 27 debut.

The studio’s Paramount Television production arm continued to show strong growth, and is aiming for $400 million in revenues for fiscal 2018 behind licensing income from acclaimed series such as the second season of Netflix’s 13 Reasons Why and The Alienist, which earned six Emmy nominations.

With deepened and expanded distribution deals, affiliate revenue is headed back toward growth

As Viacom has renewed or closed major affiliate renewals, the company has often broadened the agreements’ scope to include advanced advertising and co-production elements. Viacom has also captured new distribution, returning in full to Charter and Suddenlink and establishing carriage on vMVPD bundles, such as AT&T Watch. Domestic affiliate revenue has improved sequentially throughout fiscal 2018, and Viacom anticipates growth of one percent in the fourth quarter.

Viacom’s flagship media networks continue to grow audience share behind ratings strength

For the fifth consecutive quarter, Viacom’s flagship brands achieved YOY share growth as a unit. MTV is the fastest-growing network in primetime among the top 50 cable and broadcast channels in its target demo of adults 18 to 34, and the network has recorded YOY primetime ratings gains for four consecutive quarters. Combined, VH1 and MTV own nine of the quarter’s top 10 unscripted cable series. BET (up 23 percent in live-plus same day ratings among adults 18 to 49), and Comedy Central (recording its largest YOY primetime quarterly ratings gain since 2014), also delivered strong quarters.

Viacom’s move into premium content with the Paramount Network also showed momentum, with Western drama Yellowstone compiling an average of approximately 4.4 million live-plus-three-day viewers, good for the year’s most-watched scripted cable series after The Walking Dead.

Advertising Sales are gaining momentum behind Viacom’s Advanced Marketing Solutions portfolio

Strengthened brands and Viacom’s AMS portfolio – which includes branded content, advanced advertising technologies, and experiential offerings – helped drive the company’s best Upfront pricing in five years. AMS revenue grew 33 percent for the quarter, driving projections of a $300 million haul for the year and a return to growth for ad sales in fiscal 2019. Fox is also licensing Viacom’s ad-targeting Vantage product, an additional incremental revenue stream that validates AMS’ sophistication and value.

EVOLVING INTO A MULTI-PLATFORM, GLOBAL, BRAND- AND IP-DRIVEN ENTERTAINMENT COMPANY

As Viacom transforms elements of its core business, the company has also been evolving to thrive in a digital and mobile landscape. Here’s a closer look at the three key initiatives – expanding the digital footprint, establishing a broader studio production business, and growing live events and adjacent businesses – that are driving the company’s evolution:

Digital consumption explodes under the Viacom Digital Studios umbrella

Behind the fast-growing Viacom Digital Studios, Viacom tripled its total digital streams since Q3 2016 to approximately 7 billion in this quarter, while recording YOY jumps in video views and watch time of 112 and 104 percent, respectively. The acquisition of Gen Z-focused digital video producer Awesomeness should further drive Viacom’s momentum in this space.

Viacom is building a cross-portfolio studio production operation that is aiming to be a $1 billion global, episodic content production business by 2020

From its launch in 2013, Paramount Television grew into a $400 million business, and Viacom is now expanding this studio production model across its portfolio. With deep vaults of intellectual property to feed the insatiable global demand for content, Viacom’s brands are ideally situated to feed this pipeline: Nickelodeon has already forged a deal to produce two seasons of Pinky Malinky for Netflix, while MTV Studios will leverage assets like The Real World, Daria, Made and others from its enormous and largely untapped youth-focused IP library. More deals are on the way, and other Viacom brands will soon launch their own studio models. Meanwhile, the newly formed Viacom International Studios is already producing Spanish- and Portuguese-language shows for Netflix, Amazon, Telemundo, Fox and others.

Live events attendance is becoming a substantial business driver

Demonstrating the power of its brands to transcend screens and translate across a variety of experiences, Viacom drew millions of fans to 65 branded live events – including Comedy Central Clusterfest, the BET Experience and Viacom’s first Vidcon – in the first three quarters of fiscal 2018. At the cross-section of live events and digital platforms, Bellator inked a nine-figure, multi-year distribution deal with global sports streaming service DAZN that will double Bellator’s revenue and make the organization profitable. Live events helped Viacom drive ancillary domestic revenues up 31 percent YOY during the quarter, to $93 million.

Viacom will wrap up its fourth quarter and full fiscal year in September. To see what Viacom will debut in the months ahead, scroll through the timeline below, or click here to view the full-screen version.



--Ends--

Below is Viacom's Q3 2018 Results Earnings Call Transcript, in which Viacom Management discusses the company's Q3 2018 Results, featuring the bits about Nickelodeon, from The Motley Fool:

James Bombassei -- Senior Vice President of Investor Relations and Treasurer: [...] And now I'll turn the call over to Bob.

Robert Bakish -- President and Chief Executive Officer

Thanks, Jim, and good morning, everyone. Thank you so much for joining us. I'm pleased to update you on our progress to grow Viacom and position it for the future. When you look at what we achieved in Q3 and our momentum in Q4, I think you will clearly see that the Viacom turnaround is delivering demonstrable and measurable results. And you will also see how quickly we are evolving to be much more than a U.S. pay TV network company. In fact, through this combination of turnaround and evolution, we're setting Viacom up for success as a truly multiplatform, global, brand and IP-driven entertainment company.

Before we take you through a whole set of facts supporting this statement, let me first touch on some high-level financials. Q3 represents our second consecutive quarter of adjusted diluted EPS growth and, year-to-date, adjusted diluted EPS is up 4%. Underlying that, we are reporting compelling improvements in domestic affiliate sales and worldwide ancillary revenues and strong profitability improvement at Paramount. Looking to the September quarter, we now project strong adjusted OI growth and double digit growth in EPS.

Wade will take you through the numbers in detail, but before he does, let's focus on our operations, where we've continued to execute on both the turnaround and the evolution of this company. As I speak to this, I'd encourage you to refer to our earnings presentation on our website, which tracks the discussion.

I'll start with four key areas that were clearly challenged when this management team took over. Notably, U.S. distribution, the audience performance of our networks, the trajectory of U.S. ad sales, and the state of Paramount Pictures. And in each, I'll highlight just how dramatically the picture has changed for the better.

First, our domestic affiliate business, a critical area that was considered a significant uncertainty 18 months ago but now is a key turnaround story. By rebuilding and expanding our relationships with distribution partners, we closed major renewals, secured incremental carriage, and broadened the scope of our partnerships to include advanced advertising and coproduction deal. At the same time, we laid the groundwork for new areas of growth, including most recently securing carriage in the AT&T Watch entertainment-only mobile bundle. We also participated in a funding round that ensures Philo, an entertainment-only OTT skinny bundle, has the resources to drive its next leg of growth.

Importantly, we also see improvement in Viacom pay TV subscriber trends, with our sub-declines now moderating to the mid-1% range. This, driven by the full return of Viacom networks to Charter and Suddenlink systems and continued vMVPD growth. All of these efforts delivered sequential domestic affiliate revenue improvement throughout fiscal '18, including in Q3, and we now anticipate domestic affiliate revenue growth of 1% in Q4, compelling evidence of just how far our turnaround has come in this critical area.

The second area of turnaround is viewership on our domestic media networks. Here we have another strong story of continued improvement. In fact, Viacom flagship brands have now produced five straight quarters of year-over-year share growth, with particular strength at MTV, BET, and Comedy Central.

Eighteen months ago, MTV was deemed by many to be a network in decline and at risk of becoming culturally irrelevant. Well, times have changed. If you haven't been following this turnaround closely, here are a few key facts. Since last summer, the network has had four consecutive quarters of year-over-year primetime ratings growth, its best streak in seven years, while dramatically increasing its digital consumption.

In fact, in Q3, MTV is the fastest growing network in prime across cable and broadcast in its 18-34 target demo. And in 2018, it has launched five of the Top 10 unscripted cable series, with a mix of franchise IP, like Jersey Shore, international IP, like Ex on the Beach, and new IP, like Siesta Key and Floribama Shore. Add VH1 and we have nine out of the top 10 unscripted series on cable this year and it's the top nine, all while reducing cost by an average of 30% per episode. As you can see, there is depth and breadth to their success and, based on the slate that's coming for 2019, the team is truly just getting started.

BET also continues to deliver. Cable's No. 1 destination for Black entertainment and culture has now grown share and ratings by double digits year-over-year in three of the four quarters, including this last one, its highest rated Q3 since 2014.

And at Comedy Central, here, too, the story is strong. Q3 saw the network's largest year-over-year primetime ratings increases since fiscal '14. And Comedy just closed out an even bigger July, growing double digits in both total day and primetime, driven by continued gains among women 18-49, a key component of its go-forward strategy to broaden the network.

And we're building on strength outside the U.S., too, where our International Networks business continues to perform and is expected to deliver a record earnings year. In particular, we've had success programming our largest free-to-air broadcast networks overseas: Telefe in Argentina and Channel 5 in the UK. For example, in Argentina, we're the No. 1 broadcast network, which has four hit shows that have an audience share of over 45%.

That said, we do have ratings softness at Nickelodeon and Paramount Network in the U.S. that has slowed our return to growth in domestic ad revenue. But we've made a series of changes, including with Nick management, and put strategies in place to address those challenges and the early signs are encouraging.

At Nick, we are in the late stages of a thorough search for new permanent leadership but we have not been waiting to act. Our interim management team has been aggressively implementing change, while simultaneously working on a new go-forward plan, and their work is already starting to produce results. In fact, Nickelodeon has reduced its ratings declines so far in the fourth quarter, with ratings improving from minus 20+ to minus 12 and minus 2 over the last two weeks. And Nick recently delivered its highest total day weekly rating in over six months. This is a function of a series of scheduling changes, as well as new programming, like Double Dare, which debuted as the most viewed kids series this year.

As for Paramount Network, its growth will come as its programming slate builds. And the good news is our originals are working. The channel's most recent scripted series, Yellowstone, delivered on our very high expectations, with the latest episode delivering the highest live plus three waiting on people 18-49 to date. The show is averaging nearly 4.4 million viewers in live plus three and is now the year's most watched scripted series on cable after The Walking Dead.

Moving to ad sales, as I mentioned, some ratings softness prevented sequential improvement in the quarter. But, very importantly, in Q3, we continued to set the foundation for growing and evolving this area of our business. The stabilization in Nick's ratings that we have recently seen will benefit ad sales. But the bigger point is the strength of the upfront. We drove our strongest upfront pricing in five years, with mid- to high single digit growth across all our cable networks, reflecting the improved strength of our brands and greater share of viewership across our portfolio.

Beyond linear pricing, the upfront also reflected the power and demand for our Advanced Marketing Solutions portfolio. As a reminder, AMS includes our branded content, advanced advertising, and experiential offerings. In Q3, our AMS portfolio delivered revenue growth of 33% year-over-year. As a result of our continued progress, we remain on track to deliver AMS revenue of approximately $300 million in the full year, setting up a return to overall ad sales growth in 2019.

Lastly, on AMS, I'm pleased to announce that Fox has agreed to license the powerful data science platform behind Viacom Vantage, our ad targeting product. Fox will be the first media partner to use the Vantage engine to power its linear optimization service across its networks. This is a powerful validation of our leadership in the space. As we work to secure additional licensing partnerships with publishers, we're excited by the potential of this new business to accelerate the ecosystem and evolve into an incremental revenue stream.

Fourth in the turnaround story is Paramount Pictures, another area which, much like MTV, many had written off but where we're now seeing a very different picture. The resurgence of Paramount is evident in its continuing box office success, thriving TV production business, and now six straight quarters of OI improvement. As a reminder, our theatrical release strategy is two-fold: make targeted films for somebody or broad films for everybody, with price points to match.

That strategy is paying off, as illustrated by our three most recent hits. Our more targeted releases of A Quiet Place and Book Club together saw a domestic box office of over $250 million at a combined production and acquisition cost of $30 million. The pair clearly demonstrates the strength in the new management team, their ability to make and market great movies, and to creatively and efficiently manage distribution and costs. Of course, the latest broad hit is Mission Impossible: Fallout, which had the most successful opening of the franchise and is a global blockbuster by every measure. Coming out of the second weekend of its run, the film has generated already just short of $330 million at the global box office, with many key markets, including China, still to come.

And we're very excited about the pipeline. Up next this fall is Nobody's Fool, starring Tiffany Haddish. This is Tyler Perry's first feature for BET and Paramount Players under our cross-house deal. In all, Paramount's fiscal 2019 slate will nearly double the number of worldwide theatrical releases compared to 2018 and, consistent with the flagship strategy we unveiled last year, it includes at least five films from Paramount Players that will bring our TV brands to life on the big screen.

And speaking of TV, Paramount TV continues its great run. In just a few years, Paramount TV has grown revenues from $0.00 to more than $400 million expected in fiscal 2018. While we recently have made a management change, we have a strong senior team and a deep bench in place to continue our momentum. With season renewals ordered for hits like 13 Reasons Why and The Alienist and the upcoming Jack Ryan series even before it airs, along with an increasing number of new show pickups, like Catch-22 for Hulu and Maniac for Netflix, this business will grow substantially in 2019. Step back and I think you can see the Paramount turnaround is firing on all cylinders. And know that, as in Q3, the business is expected to be profitable in Q4 and that Paramount is on track to deliver well over $200 million in OI improvement for the full year.

But in today's media marketplace, a turnaround is not enough. Viacom must also evolve to access new opportunities and new revenue streams. This is at the core of our strategy. And here, too, we are seeing signs of success. To that end, let me take you through three really exciting opportunity areas that we are in the early stages of unlocking.

First, digital. This is really a multifaceted area, which starts with the hard work at Viacom Digital Studios. Viacom's total digital video streams have grown sequentially every quarter and are now at 7 billion across O&O and social platforms. This is three times what they were in Q3 of 2016. By the way, we also delivered a 104% increase in watch time year-over-year in the quarter.

And all of this is before we see the full impact of an additional 600 hours of new original digital content we've already commissioned and before the impact of the recent acquisition of Awesomeness, a leading digital-first destination for original programming, serving global Gen Z audiences. This acquisition enhances our footprint across leading digital and social platforms and complements our studio production efforts, a growing area of opportunity we're focused that I'll talk more about in a moment. All of this digital activity is key to feeding our audience consumption and Advanced Marketing Solutions offerings.

At the same time, we continue to make progress establishing our presence on next-generation distribution platforms. Beyond the domestic affiliate area, we continue to expand our footprint internationally through partnerships with OTT and mobile providers. Just last month, for example, we completed a deal that will bring Nick Japan and Japan's MTV Mix onto Amazon Prime video channels, a platform that allows our international content to reach incremental audiences in Japan. We also expect to close two additional deals with mobile carriers in Europe which will be announced shortly. And we continue to talk to U.S. mobile providers about a range of opportunities.

On the direct-to-consumer front, we're taking a multidimensional approach to ensure that we're making the most out of our assets and capabilities and to quickly capture opportunities in the evolving ecosystem. The first is through a move toward launching a new D2C platform which we referenced previously. At the same time, we're pursuing a B2B2C strategy, creating targeted D2C products that are also distributed through our partners. Nickelodeon's Noggin is a great example. Since its launch on Amazon in May, we've seen rapid subscriber growth for the preschool programming product, demonstrating the continued consumer demand for our category-defining brands and content.

The last element of our D2C strategy is our cross-portfolio Viacom studio production initiative. This significantly expanded global episodic content production business is the second opportunity area I want to highlight. To be clear, this isn't about the wholesale licensing of our library product to SVOD players. This is about new first-run content for SVOD platforms and other third parties. Paramount TV's rapid revenue growth is clear evidence of the insatiable demand for premium episodic video content but we now see a much larger opportunity and have set our sights on building a studio production into a billion dollar business by 2020. That's why we've now established studio production units at Nickelodeon, MTV, and Viacom International Media networks. Comedy Central and BET will be launching shortly.

The mandate for these entities is to create new original content for third-party customers, levering existing and new IP, and it is already beginning to happen. In June, we announced that Nickelodeon is licensing the animated series Pinky Malinky to Netflix in a multiyear deal for 59 new episodes. At the same time, MTV Studios will capitalize on one of the TV industry's largest libraries of youth-focused and music-related IP in the world that, up until now, has been largely untapped.

But it's not just in the U.S. Launched in May, Viacom International Studios unites the extensive production capabilities of Telefe and our comedy brand Porta dos Fundos in Brazil with Viacom's Latin American brands and production capabilities. This creates a multilingual machine that accelerates our positioning as a leading global content creator and distributor of Spanish and Portuguese language content in the U.S., Latin America, and beyond. Here, we have already entered into deals with Netflix, Amazon, Telemundo, and Fox, among others, with a long list of prospects at various stages of development in the pipeline.

As we evolve our business, events and experiential are a third area of focus. We know our brands connect with consumers in the live space and we've seen that there is a business there. Millions of people around the world attended a total of 65 Viacom events in the first three quarters of 2018. In June alone, we held Viacom's first VidCon and Nickelodeon's first Slime Fest in the U.S., another huge BET experience, our second annual Comedy Central Clusterfest. And outside the U.S., we had a range of events, including our 16th Isle of MTV in Malta. In the quarter, events activity was a major driver of our double digit growth in ancillary revenues. And we're very excited about the partnership Bellator formed with streaming service DAZN in the quarter. The multiyear, nine-figure distribution deal will bring 20% more live bouts to global audiences in 2019, more than doubling Bellator revenue and making it profitable.

With that, let me hand it off to Wade for a deeper discussion on how our financial results underscore our turnaround efforts and our continued progress moving forward.

Wade Davis -- Executive Vice President and Chief Financial Officer

Thanks, Bob. As Bob mentioned, our progress in the June quarter translated to improvements in a number of key areas, including adjusted EPS, domestic affiliate revenue, Advanced Marketing Solutions revenue, Paramount profitability, and our credit outlook. In aggregate, this translated to a strong third quarter and sets us up for an even stronger quarter in September.

Now moving to the segment results, I'll start with Paramount, which is on Slide 13 of our earnings presentation. The new management team is delivering on its turnaround and has made progress, including significantly improving profitability in the quarter. For the quarter, the studio generated adjusted operating profit of $44 million, which was up $35 million year-over-year. The improvement was driven by the performance of A Quiet Place and Book Club as compared to the prior year releases, as well as the strength of the TV production business.

Filmed entertainment total revenues declined 9% compared to last year, driven by the comparison to last year's theatrical release of Transformers: The Last Knight and fewer home entertainment titles released in the quarter. The decline was partially offset by licensing revenues, which was up a strong 35%, driven by the continued success of the TV production business. Given the success of Mission Impossible: Fallout, which was released on July 27, we expect September quarter to be the third consecutive quarter of profitability for Paramount. Year-to-date, filmed entertainment adjusted operating income has improved by $160 million versus the prior year and is on track to deliver well over $200 million of improvement for the full year.

Now turning to Media Networks on Slide 14. In the quarter, we saw continued sequential improvement in domestic affiliate revenue, strong growth in AMS revenue and in our adjacent businesses, including CP, Wreck, and Live. Worldwide Media Networks revenue for the quarter were down 2% to $2.5 billion, driven by the declines in domestic advertising and worldwide SVOD licenses. This decline was partially offset by the growth in worldwide ancillary revenues and worldwide linear affiliate revenues.

Adjusted operating income declined 8%, driven by the decrease in revenue, investments in original programming, and cost-related to growth initiatives, which were partially offset by the benefits from our cost transformation.

Domestic advertising revenues declined 3%, which was flat sequentially, due to lower linear impression, partially offset by higher pricing and strong growth in our AMS business. AMS continues to be a source of strength for us and it is an increasingly important part of our business, with revenue up 33% in the quarter. We're on track to deliver AMS revenues of approximately $300 million as previously guided and we anticipate continued momentum in AMS in fiscal 2019.

As Bob mentioned, we're seeing lower linear impressions driven by Nick and Paramount Network ratings. As a result, for the September quarter, we anticipate domestic ad sales growth similar to the June quarter. However, we're optimistic for a return to growth in 2019, given our strong upfront, continued strong scatter pricing, our momentum in AMS, and the actions that we're taking at Nick which are showing early signs of improvement.

Now moving to domestic affiliate revenue. The 3% year-over-year decrease in revenue was ahead of our guidance and a 100 basis point sequential improvement from the prior quarter. The sequential improvement in the quarter reflects the lapping of rate resets from the prior year, improving subtrends, including the reinstated carriage at Charter, continued strong vMVPD growth, as well as contractual rate increases. Excluding library licensing to SVOD, linear revenue year-over-year was flat for the first time in five quarters, which is a strong reflection of our distribution strategy delivering results.

Looking forward to the fourth quarter, we now expect to deliver better performance than previously guided, with domestic affiliate revenue returning to growth, driven by the lapping of rate resets, as well as the benefit from our reinstated carriage on Charter and Suddenlink. For fiscal 2019, we continue to expect growth in domestic affiliate revenues, helped by rate escalators, sustained vMVPD growth, including the launch of new vMVPD services from traditional distributors, and revenue from mobile.

Now turning to International Media Networks on Slide 15, revenue was negatively impacted by foreign exchange headwinds, particularly in Argentina, and the timing of SVOD licensing. International affiliate revenues decreased 2%, driven by the timing of SVOD revenue which is now expected to benefit the September quarter. For the full year, we continue to expect double digit growth in international affiliate revenue. International advertising revenues declined 4%, driven by a 5 percentage point unfavorable impact from foreign exchange. Argentina's peso devalued by 45% in the quarter, weighing on Telefe's reported results. Excluding foreign exchange, Telefe's advertising revenue grew 25%.

On an organic basis, international ad sales were up 1%, which was comparable to the March quarter. Organic results were impacted by softness in rating share in the UK. For the September quarter, given continued negative currency impacts, we expect reported international advertising growth to be similar to the June quarter. From a bottom line perspective, our costs are largely naturally hedged, so we continue to expect a record year for international profitability.

As we look to 2019, we anticipate continued growth in International Media Networks across all lines of business. We also see our rapidly growing global studio production initiative benefiting from a cost perspective given the currency devaluation in Argentina.

Finally, we continue to make progress diversifying our business into adjacent revenue streams. This is reflected in our worldwide ancillary revenues, which were up 17% in the quarter, with domestic revenues up 31% and international revenues up 2%. The growth in worldwide ancillary revenue was driven by growth in live events and consumer products revenues.

Turning to Media Networks expenses, we continue to invest in our content and growth initiatives while transforming our cost base to drive efficiencies in SG&A. In the June quarter, programming expense increased 2%, reflecting our continued investment in original programming. Distribution and other expenses grew 6%, primarily driven by costs related to our growth initiatives. SG&A decreased by 2% in the quarter and included a 3 percentage point benefit related to the savings from our cost transformation.

For the full year, we now expect programming expense to be flat versus the prior year, as we invest in original programming at our flagship networks while benefiting from the mix shift to unscripted programming and leveraging our content globally. In terms of our cost base reinvention, we are on track with fiscal year 2018 savings of over $100 million and continue to expect to achieve more than $300 million in run rate savings in 2019 and beyond and for these savings to largely drop to the bottom line.

As previously guided, we took a $15 million charge in the quarter and anticipate taking a charge of approximately $20 million in the fourth quarter, principally related to third-party professional fees.

Turning to taxes and free cash flow, the year-to-date adjusted effective tax rate was 24% as we continue to benefit from the new tax legislation. For the full year, we now expect an adjusted effective tax rate of 24%, which compares to 30% last year.

Turning to cash flow, the components of which are broken out on Slide 16 of the earnings presentation. Year-to-date, we generated $895 million of operating free cash flow, which is up from $548 million in the prior year. The increase was driven by lower cash taxes related to domestic tax reform and lower cash interest due to our de-levering actions. As Bob mentioned, Paramount's 2019 slate will nearly double the number of releases as compared to the 2018 slate. This working capital impact is largely being incurred this year. Despite this, we anticipate free cash flow in fiscal 2018 in line with last year.

Turning to the balance sheet, as we've said since we took over, one of our key initiatives has been to de-lever and strengthen our balance sheet. We took swift and deliberate actions over the past 18 months from both an operational and financial perspective to achieve that objective, including the reduction of our gross debt by approximately $3 billion. And in early July, S&P reaffirmed our investment grade status and removed us from negative credit watch, recognizing our operating progress and the steps we took to de-lever.

In terms of debt, at quarter-end, we had $10.1 billion total debt outstanding and cash of $929 million. Our debt was principally fixed rate, with a weighted average cost of just under 5%. If you take into consideration the equity credit we received from S&P and Fitch on our hybrid securities, our adjusted gross debt at quarter-end was $9.4 billion. We plan to continue to pursue opportunities to de-lever, including using our excess free cash flow to redeem debt.

Turning to our consolidated results on Slide 17, while total revenues and adjusted operating income declined in the quarter, the composition of the underlying drivers provides a window into why we're optimistic about our future growth. In Media Networks, AMS continues to deliver strong double digit growth and is becoming a more meaningful contributor to overall domestic ad sales. Our domestic affiliate revenue trajectory has improved in the past two quarters and will now return to growth in the September quarter, marking the first time since the June quarter of 2017. And on the cost side, we're managing SG&A lower as we drive operational efficiency throughout the organization, while focusing our investments on original content and other growth initiatives that will drive future top and bottom line results.

On the studio side, while the decline in international theatrical revenues and worldwide home video revenues reduced overall revenue performance in the quarter, this was due to the mix and number of titles in release. While revenues were lower year-over-year, our current quarter releases were more profitable than the prior year's releases, which is indicative of the types of films that the new management team is developing: films aimed at either a broad or targeted audience but with a financial profile to match. And in a short period of time, Paramount TV has become a meaningful contributor to top and bottom line. We expect to continue to realize the benefits of this momentum in 2019, as we make progress toward our goal of returning the studio to historical levels of full-year profitability.

So we're extremely optimistic as we look ahead. The financial impact of the turnaround will be more significant in the September quarter, as we anticipate year-over-year growth in total company revenue, adjusted operating income, and mid- to high teens growth in adjusted diluted EPS.

With that, I'd like to turn it back over to Bob to wrap up.

Robert Bakish -- President and Chief Executive Officer

Thanks, Wade. So, to recap, seven quarters in, we've stabilized and turned around four critical parts of the business that were under serious pressure 18 months ago: our domestic affiliate business, audience viewership, our path to domestic ad sales growth, and, of course, Paramount Pictures. As we executed on all this, we strengthened our financial position, where operating and financial momentum has improved our credit profile.

But it's just the beginning. Viacom is a story of a company broadening its participation in the media landscape. We see that in the growth of our digital footprint, in the early success of our expanded studio production business, and in our growing live events and adjacent businesses. Taken together, we delivered EPS growth in the quarter and are on track to deliver accelerated EPS growth in Q4.

So it is an exciting time at Viacom and we remain focused on accelerating this momentum as we close out the year and grow the company for the future. Thank you for joining us today and now we look forward to taking your questions.

Questions and Answers:

[...]

Alexia Quadrani -- JP Morgan -- Analyst

Hi, thank you. Just a couple questions. When you think about the success that you had in the upfront, in terms of the domestic advertising outlook, I guess when should we see sort of notable improvement? I think you suggested better growth in 2019. I'm just wondering how much, if at all, you have made goods from Nick or Paramount that may offset some of that strong pricing gains that you've gotten.

And my second question is to sort of follow-up on Wade's comments about the positive affiliate growth in fiscal Q4. Any SVOD sales in there or is that sort of 1% growth kind of a good run rate when we look further out?

Robert Bakish -- President and Chief Executive Officer

Yeah, Alexia, so let's start with your question on the upfront. Let me start by reiterating that we're very happy with this upfront. Look, as I said in our last call, our strategy was to use scarcity to drive aggressive pricing and packaging, including AMS, and that's exactly what we did. We drove the strongest price increases in five years, with, as we said, CPM growth in the mid- to high single digits. And, look, this is critically important to setting us up for growth in a supply constrained world. And this pricing is more than offsetting the current rate of universe declines. And if I compare that to our upfront last year, that was not the case.

On volume, we were down low single digits, but this was by design. We aggressively tiered our lower paying business because we wanted to ensure we have inventory to monetize and scatter. The scarcity we're seeing will create a seller's market and scatter premiums will elevate the already strong upfront pricing. Importantly, we also saw excellent demand for our AMS portfolio. That allowed for effective packaging with other kinds of inventory. And it's part of our growing position as solution providers. So all this is a really excellent foundation for ad sales growth as we transition to fiscal '19.

And the last thing I would say, because you talked about Nick specifically in the upfront, importantly, we talk about mid- to high single digit CPM growth across all the networks. But if you look at Nickelodeon in particular in the hard nine, which is where the bulk of the money is, there we had strong double digit CPM increases. So very well-positioned to monetize Nickelodeon, particularly as we start to see these early signs of a ratings rebound.

And then, finally, related to that, your questions of ADUs. We'll be well-positioned to burn any accumulation off. So feel good about this upfront as a critical step in our transition.

Wade, you want to take the affiliate one?

Wade Davis -- Executive Vice President and Chief Financial Officer

Actually, just on the ADU point, Alexia, just a little bit more specifics there. So, in the aggregate, our ADUs are actually down significantly. Nick was the only place that we incurred any sort of growth in ADUs and even that was only up less than $10 million.

With respect to affiliate, can you repeat your question, Alexia?

Alexia Quadrani -- JP Morgan -- Analyst

The question was just on your guide for the 1% domestic affiliate growth in the fiscal fourth quarter, is that a good run rate going forward longer term or is there some SVOD sales or some other sales that are bumping up that number for Q4?

Wade Davis -- Executive Vice President and Chief Financial Officer

Well, SVOD, as we said, was a headwind for us in this quarter, both domestically and internationally. When you think about the guide and the return to growth, we're not yet going to provide any details with respect to '19 overall other than to say that we're confident in overall affiliate growth for the full year. We are returning to a place where pricing, contractual pricing increases are more than offsetting subscriber declines. The benefit from Charter and Suddenlink reinstatement came online in this quarter and is also going to impact, to a lesser extent, next quarter. We're continuing to see strong virtual MVPD contribution, both from a volume and pricing standpoint. And then obviously in the virtual MVPD line, that's a good contributor to our AMS business, as much of the virtual MVPD subscribers carry addressable units with them for us. And so that's contributing to the addressable AMS inventory volume. So we're confident about continued growth in domestic affiliate going into 2019.

Alexia Quadrani -- JP Morgan -- Analyst

Great. Thank you very much.

[...]

Douglas Mitchelson -- Credit Suisse -- Analyst

Thanks very much. I guess, for Bob and Wade, a couple questions. The first phase of the turnaround for ratings at your networks was done pretty cost-effectively. I think you've talked about the switch from scripted to unscripted. As you look forward to maintain the momentum and progress at MTV and others and revitalize Nick and invest in the digital studio, what's the right outlook for sort of programming cost growth? And a second question. You've talked about TV production quite a bit and how it's growing substantially. If you haven't said it, where would you expect margins to shake out at that TV production business once it's fully scaled for Paramount? Thanks.

Robert Bakish -- President and Chief Executive Officer

Yeah. So on the production business, that is a double digit margin business. And we would fully anticipate getting there pretty quickly. Again, we are not doing this in a kind of deficit financing model. We're doing this in a cost-plus model, which has a bunch of appeals certainly from a capital standpoint and has pretty predictable margin characteristics.

As far as the Media Networks programming side, we've been very focused on -- as part of the flagship strategy, that was clearly about prioritization and making sure that we were spending our money in the places where we had the best short- and long-term position. It was also about mix. We talked about -- you mentioned it, too -- unscripted as an example of that. And both of those things are clearly working. And we anticipate continuing to move in that direction. Our programming growth was probably in the 2% range this quarter of Q3. On a long-term basis, it's going to be higher than that. We're probably more mid-single digits. But that's how we see it playing out.

###

The Motley Fool's Viacom Q3 2018 Results Earnings Call Transcript can be read in full here on Yahoo.com!.

Also, from Broadcasting & Cable:

Fox Licensing Viacom’s Vantage Advertising System

Upfront volume down, CEO Bakish says

Viacom, which has touted its Vantage advanced advertising targeting system on Thursday announced that Fox has agreed to license the software.

“Fox will be the first media partner to use the Vantage engine to power its linear optimization services across its networks,” Viacom CEO Bob Bakish said during Viacom’s earnings call.

“This is a powerful validation of our leadership in the space. And as we work to secure additional licensing partnerships with publishers, we’re excited by the potential of this new business to accelerate the ecosystem and evolve into an incremental revenue stream.”

Viacom is in “late stage discussions with a number of other publishers,” added CFO Wade Davis. “We’re really excited about the possibility and upside for this business in 2019.”

With Vantage, launched in 2015, Viacom was one of the first programmers to try to sell commercials based on data identifying target audiences for a particular advertiser’s products. Along with Turner and NBCUniversal, Viacom has been seen as a leader in the advanced advertising arena.

Fox launched its own data-driven ad business, called Audience Insights Manager (AIM) in 2016.

Fox, Turner and Viacom all teamed up to form OpenAP in 2017, a consortium designed to make data-based advertising easier for advertising by standardizing target audience segments and providing third-party reports after campaigns air. NBCU joined OpenAP earlier this year.

As partners in OpenAP, the data scientists working on advertising at Fox and Viacom worked together closely.

With its traditional ratings and ad revenue shrinking, Viacom is counting on its investment in advanced advertising to boost its business.

On the earnings call, Viacom’s CFO Davis said the structure of the deal with Fox is a software license and a managed service agreement.

“There is a upfront license fee associated with the initial tech and implementation. And then there is a variable part of that that allows us to participate in the upside,” Davis said. “It is also important that this is a new line item in our AMS [Advanced Marketing Services] business.”

Viacom expects its AMS business, including Vantage, to generated $300 million in revenue in the fourth quarter and expects to see a 30% to 40% growth rate in 2019.

“Given the fact that it’s now at that level of materiality and contributing that level of growth. It’s really changing the dynamics of our domestic ad sales business,” Davis said.

Viacom reported that its ad revenue in its fiscal third quarter, covering April-June, were down 3% from a year ago, and it said it expected a similar result in the fourth quarter. But the company is telling Wall Street that ad revenue will start to grow in 2019.

During what seems to have been a strong upfront market for all programmers, Viacom increased ad rates on a cost-per-thousand (CPM) basis by mid-to-high single digit percentage rates, which Bakish said was the company’s strongest in five years. At Nickelodeon, where analysts are concerned that kids ratings continue to plummet, Bakish said that ad rates were up by double-digits during the key pre-Christmas holiday season.

But Viacom’s upfront sales dollar volume was down in a market where cable upfront volume was up 4.7%, according to an estimate by Media Dynamics.

Bakish said Viacom’s lower volume was part of the company’s strategy.

“On volume, we were down low single-digits, but this was by design,” he said. “We aggressively tiered our lower paying business, because we wanted to ensure we have inventory to monetizing scatter. The scarcity we're seeing will create a seller's market and scatter premiums will elevate the already strong upload pricing.”

###

Also, from Ad Age:

VIACOM AND FOX LOOK TO STIMULATE TV AD TARGETING WITH A NEW LICENSING DEAL

The cable-network giant Viacom has inked a deal to license its proprietary data-fueled ad product, Viacom Vantage, to Fox.

Speaking to investors during the company's third-quarter earnings call on Thursday, Viacom president and CEO Bob Bakish said Fox will use Vantage to help advertisers more precisely target viewers across its networks.

"This is a powerful validation of our leadership in the space, and as we work to secure additional licensing partnerships with publishers, we're excited about the potential of this new business to accelerate the ecosystem and evolve into an incremental revenue stream," Bakish said.

Viacom believes that licensing its Vantage ad-targeting technology, which is designed to identify programming where marketers' target consumers can be found, will go a long way toward hastening the adoption of advanced TV advertising. That would in turn help traditional TV networks compete on more level footing with the likes of Facebook and Google. Talks with other networks and publishers are ongoing.

Viacom chief financial officer Wade Davis went on to clarify some of the particulars of the deal. "The important thing to note is that we're not actually licensing data—this is a technology license," Davis said. "So we're licensing our Vantage targeting engine, which is software, and then there is a set of managed services agreements."

Along with the potential to help speed up the implementation of data-driven TV advertising, the Vantage licensing scheme is expected to serve as a tidy new revenue stream for Viacom's Advanced Marketing Services division. According to Bakish, revenue at the data unit—which includes branded content, advanced advertising and experiential offerings—soared 33 percent in the quarter, and is on pace to rake in some $300 million over the course of the calendar year.

Vantage isn't the only data-powered ad product in circulation; NBC Universal, Discovery and AT&T's newly-acquired Turner all boast their own in-house divisions designed to help advertisers make smarter ad buys by way of precision audience targeting. But for Discovery, the aforementioned network groups also have joined forces on the OpenAP consortium.

MTV revival
Viacom once again faced headwinds in the quarter, as domestic advertising revenue fell 3 percent to $922 million. In a note to clients Thursday, MoffettNathanson analyst Michael Nathanson said Viacom's domestic ad sales have been "negative in six of the past seven years."

Much of Viacom's ad woes are a function of a long stretch of under-deliveries at its top networks. Per Nielsen C3 data, total-day ratings for Nickelodeon's target demo (kids 2 to 11) were down 26 percent compared to the year-ago quarter, while the revamped Paramount Network, formerly known as Spike TV, was down 22 percent in the 18-to-49 demo. In the aggregate, Viacom's total-day C3 ratings were down 7 percent across the portfolio in the target demos, while prime-time C3 deliveries among the 18-to-49 set were down 5 percent year-over-year.

On the positive side of the ledger, MTV is showing a much-needed resurgence with significant gains in the 18-to-34 demo, while BET's targeted deliveries were up 18 percent in C3, a metric that approximates audiences for commercials over three days of viewing. MTV was given a boost by unscripted series like "Jersey Shore: Family Vacation" and "Floribama Shore," while BET has been putting up solid numbers with a blend of scripted fare and docu-series.

The significance of MTV's revival isn't lost on Bakish, who noted that "18 months ago, MTV was deemed by many, to be a network in decline and at risk of becoming culturally irrelevant. Well, times have changed."

Fewer commercials

According to MoffettNathanson analysis, Viacom was one of just two cable network groups to have slimmed down its ad load during the quarter. That said, Viacom still has the most onerous commercial-to-programming ratio on TV. Total-day commercial minutes per hour for all Viacom nets averaged out to 14.2 minutes out of every 60, and while that marked a 2 percent decline compared to the year-ago 14.5 minutes, it is still represents quite a high concentration of spots when compared to Disney (10.1 minutes), Fox (10.7), Discovery (11.4), NBC Universal (11.9) and Turner (12.2).

Domestic affiliate revenue fell 3 percent on the quarter to $978 million. Bakish said Viacom anticipates a return to growth on the carriage fees front beginning this quarter.

"We think there's a clear and demonstrable fact that this company is making material progress in a whole set of areas," Bakish said toward the end of the call before electing to punt on a question about the much-discussed reunion of Viacom and CBS. "We're not going to comment on any specific M&A related to Viacom. We're focused on operating the company and continuing to move the ball down the field."

###

Also, from a.list:

Viacom Bets On Advanced Marketing Solutions Platform

Viacom reported a drop in its Q3 2018 earnings, with revenues in the quarter decreasing by 4 percent to $3.24 billion. Losses were seen across both the company’s media networks and filmed entertainment divisions despite the buyout of its EPIX investment the previous quarter, gains in domestic box office sales and the continued revitalization of its struggling media networks.

Viacom CEO Bob Bakish highlighted the company’s continued evolution during the earnings call, particularly with the increased performance of Paramount and MTV. He also sought to reassure investors that growth would continue as it expands its services and partnerships with OTT platforms, driven further with the recent acquisition of AwesomenessTV.

Viacom’s broadcast networks, which include MTV, BET, Nickelodeon, The Paramount Network and more, collectively saw revenues decrease by 2 percent in the quarter to $2.50 billion. The company reported a 17 percent increase in worldwide ancillary revenues to $158 million, but this was offset by a 4 percent decrease in worldwide advertising earnings to $1.19 billion and a 3 percent decrease in worldwide affiliate revenues to $1.15 billion. However, Bakish emphasizes the strength of the upfront.

“We drove our strongest upfront in five years, with mid-to-high single-digit growth across all our cable networks,” Bakish said. “Reflecting the improved strength of our brands and greater share of viewership across our portfolio.”

The growth in upfront pricing also demonstrates the strength of its Advanced Marketing Solutions (AMS) portfolio, which includes its branded content, advanced advertising and experiential offerings. The company expects that AMS will grow to deliver about $300 million in revenue by the end of the year, setting up a return to overall ad sales growth in 2019.

Additionally, Bakish announced that Fox has agreed to license the AMS data science platform behind Viacom Vantage ad targeting product. With this deal, Fox will be the first media partner to use the technology to power the linear optimization service across its networks, a deal that also accounts for Fox’s acquisition by Disney.

Viacom will add another 600 hours of content to its digital offerings, which doesn’t take into account the acquisition of AwesomenessTV, a digital network with strong Gen Z appeal. The company is also establishing a stronger presence on digital platforms such as Amazon Prime and Netflix around the world, the launch of a direct-to-consumer platform and a B2B-C strategy that brings targeted B2C products that are distributed through partners. For example, Nickelodeon’s Noggin channel is available on Amazon Prime Video, and the preschool entertainment channel has seen substantial subscriber growth.

The company plans to leverage brands such as MTV, Comedy Central and BET to create original content for third-party partners. MTV in particular will be using its extensive library of youth-focused and music IPs, which has remained largely untapped.

Viacom delivered a strong revitalization message for Paramount, with both its film and television channels. Paramount Television helped drive a 35 percent increase in licensing revenues, which brought in $404 million in the quarter.

“We’ve stabilized and turned around four critical parts of the business that were under serious pressure 18 months ago,” said Bakish in closing, referring to its domestic affiliates business, audience viewership, domestic ad sales growth and Paramount Pictures. “Viacom is a story of a company broadening its participation in the media landscape.”

###

Also, from Kidscreen:

Viacom revenue falls despite Paramount, digital growth

The company's uneven Q3 includes 58% growth in domestic theatrical revenues and a 112% lift in total video views for Viacom Digital Studios, while revenue fell 4%.

Viacom’s Q3 revenue fell 4% to US$3.24 billion, despite a Paramount turnaround that drove higher Filmed Entertainment profitability and big gains in digital consumption.

The media giant’s operating income increased 1% to US$752 million, primarily driven by a US$35 million improvement to US$44 million in Filmed Entertainment operating income. The lift was the result of lower operating expenses and higher domestic revenues, which were driven by the strong box office performance of Paramount Pictures’ Q3 releases, and higher television production revenues.

Although Viacom’s domestic theatrical revenues grew 58%, mostly due to strong performances from adult-skewing films A Quiet Place and Book Club, global Filmed Entertainment revenues slipped 9% to US$772 million. And while the division’s overall domestic revenues grew 20% to US$464 million, the result was offset by a 33% drop in international revenues to US$308 million.

Looking ahead to 2019 and 2020, Viacom’s revitalization of Paramount Pictures will rely more heavily on upcoming kids and family films including next March’s Wonder Park (formerly Amusement Park) from Paramount Animation. Film adaptations of Nick series The Loud House and Henry Danger are also in the works, as is the third movie installment of SpongeBob SquarePants, which is being overseen by the studio’s newly-hired EVP, ex-DreamWorks producer Ramsey Naito.

In addition, Paramount Players is also developing a live-action/CGI-animated Rugrats movie slated to premiere on November 13, 2020. Based on Nick’s iconic TV property (pictured) from the ’90s, the movie marks the seventh film Paramount and Viacom Networks have partnered on and will be written by Family Guy‘s David Goodman.

On the digital front, Viacom’s new Digital Studios division saw its total video views and watch time increase 112% and 104% year-over-year, respectively, for the quarter. According to Viacom, Nick’s Noggin preschool app in particular has performed well on Amazon Prime Video Channels with strong subscriber growth since launching on the platform in May. Prior to its debut on Amazon Prime, Nick bolstered the app’s content portfolio with the addition of PAW Patrol seasons one and two, as well as a new science and reading hub featuring original short-form content to promote STEM fields and social-emotional skills.

Viacom’s digital growth follows its recent acquisition of Gen-Z-focused digital media company Awesomeness from NBCUniversal. The move is aimed to strengthen Viacom Digital Studios expanding portfolio, which includes a significant amount of kids programming. At Viacom’s first-ever Newfront presentation held in April, four digital originals were announced for Nickelodeon’s YouTube platform featuring popular stars such as JoJo Siwa (Lip Sync Battle Shorties) and Jace Norman (Henry Danger), as well as Super League Gaming eSports content and a series centered around Nick’s first multi-player virtual reality experience, SlimeZone.

As for Viacom’s Q3 television performance, the company’s flagship brands grew year-over-year audience share for the fifth consecutive quarter, with Viacom continuing to hold the top share of basic US cable viewing among the kids two-to-11 demographic. Nickelodeon’s newly-revived kids game show Double Dare was a big winner in the quarter averaging 1.4 million viewers for its premiere week, making it the most-watched series debut on kids’ TV so far in 2018, according to the company.

During Q3, Nickelodeon also delivered its first title under a multi-year deal with Netflix to produce and license its animated comedy series Pinky Malinky. The deal stems from Viacom’s new studio model of producing and licensing new eps of its own original content to third-party digital or linear platforms.

Finally, Viacom’s domestic ancillary revenues increased 31% to US$93 million in Q3, driven by revenues from live events and consumer products.

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More Nick: Nickelodeon Entertainment Lab Developing New AR/VR Animated Series 'Meet the Voxels'!

Originally published: Thursday, August 09, 2018.
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