Aaron Azpiazu's Business of Media Post

Honestly, this is more twitter-worthy than anything, but I don't believe in twitter so this is the only outlet I have. It all started with a 10-K...

1.) Viacom lists local natural disasters as a business risk? Transmission by satellites could hurt revenue if those satellites happen to be hit by an asteroid or are sucked into a black hole? that's as likely as

2.) Audience members of the View actually wanting the free copy of Beverly Hills Chihuahua they received today. I would be so upset if I went to the view and all I got was that waste of a DVD and plastic box. My grandfather-esque eye-rolling, sighing, judging spike in blood pressure could only be increased by one thing, named

3.) Dr. Phil. It took about 3 minutes until we got to the Rihanna talk. Dr. Phil to Chris Brown, "Theoretically, if she hit you first, run. Just run away." Before this though, we listened to an intellectual reflection on Octomom's disconnect from reality. Seriously, why can't I get away from her?! Oh, speaking of 'hers'

4.) RuPaul came on the view too... as a man. I'm not sure how I feel about it. It was much crazier to see him as a him, but if RuPaul dresses up but doesn't dress up in drag, is it still RuPaul? My segue for this is RuPaul +

5.) Elizabeth Hasselbeck =

6.) The first time I've been hoping NOT to get a commercial break on the View. She was being so nice! Unfortunately Whoopi sent us to commercial before the Ru could continue talking about family-based acceptance of everything LGBT. I wanted to see how lizzy reacted, if only facially.

7.) Now I'm going to go apply for jobs that don't exist, because local news and daytime television make me want to wash dishes or bust tables or walk dogs. Anything so long as I don't have to watch those dreadful dramatic pauses, interupted by dramatic pause-look down, dramatic pause-look left, and dramatic pause-look panicked. But before the soaps start,

8.) ABC 7 reports that a woman called 911 three times because McDonalds was out of McNuggets and they wouldn't give her a refund. I suppose I may have done the same, but wouldn't have expected a news crew to seek me out for an interview.

9.) So, why don't I watch live network tv? If numbers 2-8 weren't enough, Who Wants to Be a Millionaire is now on. Let's face it- this contestant did not come from the slums, and he's not pining for the beautiful Latika while trying to avoid death at the hands of all the bullies and gang lords. Millionaire will never be the same.

Insert Discovery Channel Here

All information found on hoovers.com, Viacom 10-K 2009.

Viacom is comprised of two reporting segments, Media Networks and Filmed Entertainment. They account for roughly 60 and 40 percent of Viacom’s revenues respectively, with 71 percent of total 2008 revenue stemming from domestic operations. This is a slight decrease from previous years, a change which reveals an extension in international reach. The conglomerate creates, acquires, and licenses programming and content across various platforms for both segments.

Under the Media Networks segment are 165 Viacom-owned channels and multiplatform properties. Via these channels, Viacom “derives revenues principally from advertising sales, affiliate fees and ancillary revenues” (54, 30 and 16 percent of the Media Networks revenue respectively). The segment is split into four groups which include Music and Logo, Kids and Family, Entertainment and International. They sell advertisements on program services and digital properties, collect affiliate fees from cable and satellite operators, mobile networks and other distributors. The ancillary revenues stem from the creation and publishing of video games, interactive products and home entertainment sales of programming in addition to the licensing of Viacom content to third parties, including for consumer products. The Viacom television networks strive to each reach a niche audience, though those niche audiences are large ones. They own a network for African Americans (BET), the LGBT community (LOGO), children (Nickelodeon), teens and young adults (MTV), and men (Comedy Central and Spike) just to name a few. To monopolize (my word, not theirs) such demographics, Viacom must expand the reach of its niche audience brands into other platforms, which is why there is a hefty network of Viacom sites, all of which offer television and/or internet/internet-only content. Digital revenue comes in the form of advertising and sponsorships on the 400 digital properties in the Media Networks segment. To monetize these ventures, the company aims to always drive traffic from on-air to digital platforms and vice versa. “Convergent, or cross platform advertising sales” is the strategy. Success with its brands on all platforms is assumed to increase potential revenue by increasing consumer demand and brand worth, thus warranting higher affiliate fees and ancillary revenues.

Also included in Media Networks, are the interactive and videogame components of Viacom’s portfolio which includes Harmonix, a company connected to the hugely successful Rock Band. Such digital properties have lead to partnerships with Microsoft (MSN and Xbox) and Electronic Arts. These company distribute downloadable Rock Band content and do co-manufacturing/marketing/distribution of Rock band respectively. Other expansion into the gaming and online realms include addictinggames.com and shockwave.com. Due to all of these platform extensions, Viacom has subsidiaries that compete with everyone from TBS and Fox to MySpace and Hulu to Guitar Hero and American Idol.

The Filmed Entertainment segment of Viacom includes, as of the latest 10-K report, Paramount Pictures, Paramount Vantage, Paramount Classics, MTV Films and Nickelodeon Movies. Some of these companies have enjoyed partnerships with non-Viacom entities including DreamWorks Animation (with Nickelodeon for a TV series) and Marvel (part owner of Iron Man comic). In general, however, the filmed entertainment division produces, finances and distributes films under these companies in addition to acquiring other content for their libraries (i.e. Paramount has 3,500 film and a few television titles in its library).

Viacom uses these studios to make money through theatrical releases, home entertainment and associated products, and licensing fees by third parties. To maintain success, Viacom chooses films it thinks will “create a carefully balanced slate that represents a variety of genres, styles and levels of investment [with…] the goal to create entertainment for both niche audience and worldwide appeal.” This statement goes hand-in-hand with the efficiency mandate handed down by executives in late 2008. According to the 10-K, the Viacom studios plan to release 20 films in 2009, 16 of which should be produced or acquired by Paramount (or associated with Paramount via its distribution deals), with two to four produced by DreamWorks Animation and Marvel. Recent goals of the filmed entertainment segment include the franchising of films (think Transformers and Iron Man), expanding on acquired material, diversifying revenue streams and making its library available to own or rent. These strategies should lead to stronger earnings numbers.

In addition to the celluloid aspect of films, Viacom collets royalties based on licensing of its content for the sake of consumer produces, themed restaurants, live stage plays, film clips and theme parks. It is also expanding by acquiring companies such as Screenlife, the maker of movie trivia game Scene It. In a similar blurring of platform lines, Paramount releases between 1998 and 2007 were distributed on Showtime first because of an agreement between the CBS Corporation movie channel and the Viacom studio. In 2009, however, MGM, United Artists, Lionsgate and Paramount announced a joint venture, premium pay television channel and VOD service called “epix”. The studios plan to distribute their recent films and library holdings on the company-controlled pay station, the risks of which will be discussed later. Paramount is also striving to increase its level of self-distribution internationally by direct-distributing and acquiring material without the use of partner United International Pictures, with whom they usually work with.

In the fourth quarter of 2008, 890 positions were eliminated at several Viacom companies. The strategic review and restructuring left the conglomerate with 11,500 full time and part time workers worldwide, in addition to 500 freelancers. In addition to increasing efficiency, the company’s general goals are to: a.) expand and enhance brands worldwide by creating and acquiring hit content b.) strengthen relationships with advertising, cable, satellite, online and mobile partners for the sake of their audience, c.) expand and monetize online and mobile entertainments, d.) rationalize their motion picture slate in terms of number and type of films, focusing on franchise properties and giving attention to their marketing, as well as international and global digital opportunities and e.) continue operational discipline with the goal of the efficient and effective execution of said strategies.

Viacom sites global economic conditions as a business risk since both advertisers and consumers find themselves with less cash to spend. And while less money is readily available to be pumped into its companies, programming and production costs, particularly on tent-pole films, are rising. Continued audience acceptance of programming is also of concern, as both the content and the platforms on which it is distributed are never certain choices. If a film does poorly, it will affect everything from home video sales to licensing in the future. In the same line of thinking, if distribution platform preferences change, there could be periods of adjustment where revenue is unstable as well. The company mentioned piracy as a concern, but only briefly. Soon, affiliation agreements on pay-distribution platforms will expire, and the renewal of such deals is anything but clear. And with Paramount’s joint-studio venture into internet and pay-television distribution (epix), the studios could see a backlash from traditional home video outlets when negotiating distribution deals. In addition to these cable and satellite operator issues, the potential threat of a la carte or tiered-based cable stands to unbundled conglomerate packages, putting some of the Viacom entities at risk for harsh viewer and advertiser scrutiny, which could dramatically decrease ad revenue and even online trafficefor some companies.

Video games are a growing entity, but also a growing liability, as the platform is very prone to litigation which is always expensive and uncertain. Also in the legal realm are responsibilities and deals from the past in which Viacom may eventually have to become financially active. And rounding out legal concerns are political and union changes in the industry, as well as Viacom-CBS specific legal boundaries. For instance, the separation agreement between CBS Corporation and Viacom prohibits them from engaging in certain types of business, thus limiting the potential for cross-company resource sharing and inter-conglomerate, cross-company promotion, something which companies under the Viacom umbrella enjoy and take advantage of on occasion.

Universal has made a deal with Sony Computer Entertainment America to sell its movies and TV shows as downloads for the PS3 and PSP domestically. Universal was the last major to ink a deal with Sony, meaning the Playstation system is now capable of delivering 1,300 movies and 4,500 TV episodes from its library, more titles than rival Microsoft's Xbox 360. Film downloads, Blu-ray discs and video games can now all be enjoyed in the little black box.

http://www.videobusiness.com/article/CA6643397.html?desc=topstory

Box office revenues and admissions are up 13 and 10 percent respectively in 2009, and there are still several high-profile films to be released in March and April before the summer blockbusters. But why the high numbers, and how do studios maintain them? Recession-escape is a plausible reason, but another is that, "studios, flush with product from the days when hedge fund money flowed into Hollywood, just needed a place to put their movies," and thus put some really good films into odd release dates. Too many movies behooved the majors to rework the traditional Easter-summer-winter holiday weekends and adopt a more year-round calendar. The result - happy audiences and happy return numbers.

Now the bad news, which is that 2008 and 2009 productions are low in numbers thanks to the financial crunch and talent strikes, meaning fewer films in 2010 to release on this year-round, audience-satisfying, high grossing release calendar. So if Hollywood rides this wave the whole year long, they could run into a big fat rock that they put there themselves.

http://www.variety.com/article/VR1118000938.html?categoryid=13&cs=1

IFC is offering a VOD service where smaller, cheaper, generally digitally-shot films can be released for the first time. In an age when making a film can cost anywhere from $10,000 to $2 million, the service has the potential to provide a distribution outlet for those films that cannot meet the demands of the theatre circuit. Cheaper filmmaking has lead to a surplus of films, but expensive screen-grabbing films take up the majority of silver screens, so an in-home, on-demand release model could make filmmaking more like cheaper, more viable artistic ventures. One can make a film and display it without the need for a slumdog miracle. Sign me up!

http://www.nytimes.com/2009/03/16/business/media/16carr.html?_r=1&ref=media

Apple will soon offer permanent HD downloads for the movies it offers on iTunes. Currently, films are only available in HD for limited-time rental downloads, but Apple expects its customers to be excited about the permanent HD purchasing possibilities because of the positive consumer response toward HD television show downloads. Steve Jobs, discussing Apple's approach to going HD while skipping the plastic, referred to Blu-ray as "just a bag of hurt" due to the complexity and cost involved with material disc technologies. Due to the number of companies currently offering HD content via digital delivery, Steve Jobs, ruler of the earth, may just be right.

http://www.videobusiness.com/article/CA6645604.html?industryid=47213

The Motion Picture Association of America (MPAA) is underplaying the 2008 box office by not yet releasing it's annual entertainment industry report. The reason? Supposedly, the high-ups of the MPAA don't want to brag about good numbers during an economic crisis. Equally (and I bet more-so) they don't want to give Washington the wrong idea about their money matters. The senate recently stripped the stimulus bill of a studio-friendly tax provision worth $246 million after some senators questioned the reasoning behind throwing money at a thriving industry.

But stop the train! We've hit the rub! The box office is only one stream of revenue, and thus Washington greatly missed the bigger (bleaker) picture (pun?). The congloms that own the studios are wilting, jobs are withering and dying, and DVD sales have been on a downward slope similar to George W.'s popularity post 2005. The studios say that they'll keep trying to get the tax breaks despite the fact that AIG already claimed dibs. Champagne and caviar for everyone!

http://www.variety.com/article/VR1118001624.html?categoryid=13&cs=1

Bank of America/Merrill Lynch analyst Jessica Reif Cohen (an alleged big deal) expects media company earnings to be less bad this quarter versus the last one due to a decrease in the decreasing of DVD sales. She even expects some growth in home entertainment in 2011 as Blu-ray and digital formats spread their reach, even amongst the competition from videogames, Netflix and digitally distributed everything else.

Let's just hope she's right. I mean, big banks usually are.

http://www.videobusiness.com/article/CA6646555.html