VIAB

Viacom Inc. (VIAB)

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Viacom Inc. (VIAB)

Deutsche Bank's DbAccess 21st Annual Media and Telecom Conference

March 04, 2013 12:45 pm ET

Executives

Philippe P. Dauman - Chief Executive Officer, President and Not Independent Director

Analysts

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Presentation

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

All right. So I hope everybody's enjoying their lunch. Now while you are all finishing up, we're going to get started with our next presentation. Very pleased to have with us today Philippe Dauman, President and CEO of Viacom. And very pleased to have Philippe with us today. And we're on the clock so we're going to jump right in.

Question-and-Answer Session

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Philippe, the question we've been starting off with this conference is how is management trying to create value at their companies? And when you think about Viacom and your leadership there, how are you trying to drive value at Viacom?

Philippe P. Dauman

Well, first of all, Doug, it's great to be here. We drive value at Viacom in the same way we've been doing for the last several years. We focus first and foremost on creating more and more great content, increasingly more and more original content. We continue to drive our main revenue sources, affiliate revenues. We -- as our ratings are improving, we're going to drive ad revenues in a much stronger way than we did last -- in the past year. We're going to expand our international footprint and grow international profitability as we're investing in more and more networks around the world. We're going to invest in multiplatform deployment of our content, and we're excited about all those possibilities. And we're creating some original content for new platforms and mobile, in particular, I think, is an exciting avenue for the future. We are driving expansion of other revenues like consumer products revenues, and that's why we are creating more and more animation content. Paramount has been very steady-state for us, and we're using Paramount to create asset value in different ways like the Paramount Channels we're launching around the world, like EPIX and the animation effort at Paramount will help us drive consumer products. And all the while, we're doing that while maintaining a strong balance sheet, driving free cash flow and returning capital to shareholders in a very strong way, a very accretive way for our shareholders. And as we go forward, I'm very excited about the prospects we have.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

So as your stock has moved higher, has there been any reconsideration of the stock buyback, perhaps refocusing resources more on acquiring growth versus repurchasing shares?

Philippe P. Dauman

Well, we're investing for growth. We are investing in international networks. We are investing in more content. We are investing in animation. We're investing in multiplatform distribution. So we're making all the investments we need to make, and we still have a lot of money left over. So I would say today, we are still -- even though our stock has done well relative to the S&P, we still have a ways to go, and I would say we're priced to imperfection. We're not priced to perfection; we're priced to imperfection. So the buyback for us is very accretive. And if anything, as our operating results look to improve, I would say the pace of that will pick up as we get into next fiscal year.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

So I think we'll circle back to each of the operating items you started with, but I did want to walk through a few questions [indiscernible] ecosystem [ph]. You've been consistently indicating the full year revenue growth, high-single to low-double digits. You've been saying that for a couple of years now. Can you maintain that pace as we look forward to next few years?

Philippe P. Dauman

Yes. We have a -- we've been -- if you look back over the last many years, we've been growing affiliate revenues on a compounded basis at double digits. We're pretty enough [ph] getting high-single digits to low double digits. We -- it's predictable, given the fact that we have a well spaced out series of renewals. So we have a lot of existing deals that go forward into the next several years. So we're very comfortable with that continuing for the foreseeable future.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

So a little topical, right? Cablevision recently filed a lawsuit against Viacom. I think they alleged antitrust violations for tying channels together in a bundle. I'd expect investors would be interested in any comments you might have on that?

Philippe P. Dauman

Well, you won't be surprised to hear me say that the lawsuit Cablevision filed is ill-advised and frivolous. Just a few points on it. We negotiated a new multiyear affiliate agreement 2 months ago with Cablevision. It was the result of a vigorous negotiation in which we made a number of concessions. We lowered the price from the ask. We offered a lot of additional terms relating to TV Everywhere and other consumer-friendly concessions to Cablevision to help drive its business. We even gave them more term than we offered on this deal that they now say they don't like. They wanted a longer term than we offered, and we gave them additional term. So as a result of the negotiation, which, as always, we give a discount for taking our networks -- and by the way, Cablevision is now carrying the exact same networks they carried under the prior deal that it agreed to years ago. So we don't have one single additional network being distributed by Cablevision as a result of this deal. So having done this deal, I guess the theory is -- their theory would be, "Okay, we got the discount. We got the 3 suits for the price of 2, but now we want just one suit for the same price". It doesn't happen in our business. It doesn't -- in any industry. That's the nature of providing a discount for getting all these services. And then one last point. Our networks in the aggregate, based on Nielsen information, has roughly 20% of all viewing on ad-supported cable in Cablevision. The percentage of programming spent we represent for Cablevision is in the single digits. So we provide great value. In fact, 11 of our networks have higher ratings than MSG network in 2012 on a year round basis. 11. That includes TeenNick, which is in the suite that they're complaining about. TeenNick has higher ratings than MSG. Nick Jr. has vastly higher ratings. But the MSG family of networks charges a lot more than all of our networks combined. And it's common practice for networks, families of networks, to provide a discount if you carry their networks. For example, AMC presumably provides a discount for people to carry along with AMC, WE channel, IFC and IP Film. Presumably, MSG offers a discount for people to carry MSG2, MSG Plus and Fuse. So the bottom line is, I guess the lawyers will get rich on this, and the tens of millions of dollars that Cablevision will spend over the next many years, if they pursue this lawsuit, would be better spent to provide better customer service for Cablevision customers.

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