Viacom's good/bad news

The second-quarter’s bottom line certainly looks good, with net income beating Wall Street estimates by a nickel a share, which is a lot. Viacom's movie business (Paramount) was the big story, jumping 35 percent because of blockbusters "Iron Man," "Kung Fu Panda" and the latest Indiana Jones installment. There's just one problem: Viacom is largely a TV-driven company - and ad revenues were waaaay weaker than expected. June was such a bad month, especially in retail, auto and consumer goods, that there's some concern about the upfront promises that advertisers were making in May. Remember, they're just promises to buy airtime in the fall. They’re not orders. "The question is whether advertisers follow through, or cancel them as they cut their marketing spending," posts Michael Learmonth at Silicon Alley Insider. Asked whether he believes the orders will materialize, CEO Philippe Dauman told analysts that there's more risk to the last-minute "scatter" ad market than to upfront commitments. "What we don't know is where the economy is going to be headed and how that will impact the scatter market," he said. Here are some of Learmonth's notes from today's conference call.

Chairman Sumner Redstone gives the preamble: He says the last few months have been challenging times. "I understand the frustration of shareholders." Yet, he says, there is opportunity even in difficult times. "Companies that have strong and enduring attributes--brands, global reach--will ultimately come out winners." (Redstone never tires of it: "content is king") Hands off to CEO Philippe Dauman ... says the economy really does suck, and in the short term will be difficult to predict performance. What happened in the ad market? Dauman says midway through the second quarter "scatter" adverting volume dropped off. Retail, automotive and consumer goods pulled back on-air spending. Low ratings at a few channels were also a problem. At the same time, audiences drifted away from broadcast TV to cable, benefiting TV Land and Nick at Night. These were older viewers and it did not help networks with younger audiences.