Viacom's decision to cut 7% of its work force was cast as an attempt to get ahead of the recession. But it may say as much about the performance of some Viacom businesses.As the owner of cable-television networks like MTV and Nickelodeon, Viacom isn't as exposed to the economy as broadcasters like CBS, Viacom's sibling in the Sumner Redstone empire. Unlike broadcasters, which are dependent on advertising, cable-TV networks get a big chunk of their revenue from fees paid by cable and satellite operators.
Indeed, Viacom's earnings per share is projected to rise 6% this year and dip just 1% next year, according to Sanford C. Bernstein. In contrast, Bernstein predicts CBS's EPS will dive 19% this year and a further 30% next year (excluding certain items).
Still, Viacom has been underperforming some of its peers this year. While Time Warner's networks, which include TNT, CNN and TBS, increased ad revenues 9% in the third quarter, Viacom's network ad revenues fell 2%.
Part of the weakness is MTV, which has been losing viewers at an increasing rate. For the first 11 months of the year, MTV's viewers aged 12 to 34 fell 12%, according to Nielsen. For October and November, the decline was 22%.
It makes sense for any company to cut costs in a recession. But Viacom also faces the challenge of reviving key networks like MTV.
