Viacom's Dauman: Epix Close to Carriage Deals

Ad Revenue Dips 4% in Third Quarter, an Improvement; Affiliate Fees Rise 10%

By by Mike Farrell

About a week into its launch, the Epix movie channel is closer to additional distribution deals, Viacom CEO Philippe Dauman said on a conference call with analysts Tuesday.

Epix, the joint venture movie channel between Viacom, MGM and Lions Gate Entertainment, officially launched on Oct. 30 with one distributor , Verizon's FiOS TV and Internet. The channel had hoped to have other deals under its belt as the year progressed.

On a conference call with analysts to discuss third quarter results, Dauman said that he had hoped to have another deal done by now, but said that negotiations continue.

"Epix is close to additional distribution announcements, which I had hoped to make around now," Dauman said on the call. "But the conclusion of these negotiations, whicle they are going well, is taking just a little longer."

Dauman did not elaborate but speculation is that the joint venture is close to a distribution deal with satellite TV provider Dish Network.

For the quarter, revenue at was down 3% to $3.3 billion and operating income rose 14% to $784 million in the period, driven mostly by its Media Networks and Filmed Entertainment divisions. Revenue at Media Networks, which includes MTV, Nickelodeon and Comedy Central, was flat, but operating income increased 2%.

Filmed entertainment revenue was down 6% overall, but the unit reported a positive operating income of $69 million, compared to an operating loss of $19 million in the prior year.

Domestic advertising revenue was down 4% in the period, an improvement over the 6% decline in the second quarter.

Dauman said there are continued signs that the ad market is improving.

"Over the course of the third quarter, we started to see the negative economic trends that we all have been dealing with begin to attenuate," Dauman said, adding that while the road is expected to be bumpy, the moves that Viacom has made in the past to keep costs in line has the media giant moving in the right direction.

Dauman said that one area for growth is affiliate fees. Affiliate revenue increased 10% for the period (11% domestically) and the company believes it could be a source of even greater growth.

"We are targeting continued growth in our affiliate fee rates," Dauman said. "We continue to work with our customers to maintain that."

Dauman also said that in spite of the recent rush to buy cable networks -- evident by pending deals for NBC Universal and Travel Channel -- Viacom is not interested in selling any of its cable holdings."We love the cable TV network business," Dauman said. "We think we have a great portfolio of brands. We do not intend to sell any of our networks."

But the CEO said that the company may be in the hunt as a buyer, albeit for smaller acquisitions like Nickelodeon's recent purchase of the Teenage Mutant Ninja Turtle franchise for about $60 million.

"We have our eye on a number of low-priced intellectual property opportunities, like the Teenage Mutant Ninja Turtles," Dauman said.

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