Brad Grey’s Paramount Pictures was a huge bright spot for Viacom last quarter.
Spillover revenue from the surprise hit “Paranormal Activity,” which Grey calls his “miracle movie,” and stronger-than-expected DVD sales led Paramount to earn a stunning $298 million in the fourth quarter. That was nearly $130 million above Wall Street’s estimate, and up 255 percent from the $84 million earned in the year-ago quarter.
Reversing the trend of declining DVD sales, Paramount posted a 12 percent rise in home-entertainment revenue to $1.15 billion on the back of three franchise films, “Transformers 2: Revenge of the Fallen,” “Star Trek,” and “G.I. Joe: The Rise of Cobra,” moving to the DVD window.
Paramount’s performance validates Grey’s strategy of producing fewer films, with a greater emphasis on those anchored by franchises. It also vindicates Grey against critics who said the former agent didn’t know how to run a studio and wouldn’t survive for long under Viacom Chairman Sumner Redstone.
Indeed, rumors of Grey’s imminent dismissal, which were rampant during his first two years on the job, have disappeared completely. He signed a contract extension through 2014 last year and is understood to have a close, cordial relationship with both Redstone and Viacom CEO Philippe Dauman.
For the fourth quarter, Viacom, whose stable of cable networks includes MTV, VH1, and Comedy Central, reported a 3 percent decline in revenue to $4.1 billion. But earnings rose 43 percent to $663 million, or $1.09 per share excluding one-time items, due to cost-cutting measures. Analysts projected earnings of 88 cents per share.
Full-year revenue came in at $13.6 billion, a 7 percent drop from 2008 results. Earnings amounted to $1.56 billion, or $2.56 per share, an increase of 5 percent over 2008.
Separately, Viacom said that its debt load increased by $400 million as a result of acquiring billionaire George Soros’ 51 percent stake of the DreamWorks film library. The library, which includes Academy Award winners “Gladiator” and “Saving Private Ryan,” and 57 other films, was valued at $900 million when Soros bought his position in March 2006 from Viacom.
Viacom shares closed trading yesterday down 22 cents to $28.33.