Viacom: The Beating Will Continue Until Morale Improves

Late word from the New York Post, is that Viacom (VIA) flagship MTV will sack 500 poor souls, many of them executives. That would save the media company $250 million a year, but it still may not save the company’s share price.

A look at media company shares over the last year puts Viacom in the cellar. The company’s stock is down slightly over the last year. Time Warner (TWX), CBS (CBS), Disney (DIS), and News Corp (NWS) have all done much better.

Viacom king of all media Sumner Redstone has done little to unlock any value at the firm.

In the September 2006 quarter, Viacom’s revenue barely moved from the year before, $2.66 billion compared to $2.478 billion in 05. Net income dropped from $423 million to $357 million.

The company’s 10-Q indicates that the cable networks business grew faster than the company as a whole, up 10%. Revenue at Viacom’s film unit was up only 1%. And, while operating income at the networks rose 14%, the film unit had a loss.

But, MTV appears to be bearing most of the company’s cost cutting.

The real problem with the picture at Viacom is that Redstone and his hand-picked CEO Philippe Dauman can take costs out, they appear to have not a single clue about increasing the topline. The firm’s attempt to capture online revenue has been lame. Disney’s download deal with Apple and Time Warner’s attempt to resurrect AOL may not be home runs, but they are, at least, a start.

And, Redstone is rich and can afford to give the departed severance.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.