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Viacom: Recovery Signs?

3/21/2009 2:00 AM Eastern

Viacom CEO Philippe Dauman told an audience here last week that the advertising market is beginning to show signs of recovery despite a torrent of bad economic news.

Dauman, speaking at the McGraw-Hill Media Summit conference, was encouraged by a kids' upfront he said was “extremely well-received.”

“We're already cutting some very attractive deals,” Dauman said adding that CPMs were “still strong.”

Although he couched his remarks by saying that it was still early in the upfront schedule — kids is usually first out of the gate followed by cable and broadcast — he said Viacom's marquee brands like Nickelodeon, MTV and Comedy Central are must-have properties for advertisers.

“If you're launching a video game, you have to be on our air,” Dauman said. “The problem is when you have highly stressed companies that need to advertise but can't.”

But even in that scenario, Dauman said that Viacom's brands have an advantage because advertisers will be more selective in the outlets they choose.

“It is a lot more focused buy with marketers that want to be with brands they trust and the outlets they trust,” Dauman said. “We are fortunate in that we are not dependent on the automotive and financial-services companies. We are going to be impacted on the volume side, but we will be less impacted than these other broad categories of advertisers.”

Dauman also addressed recent battles with distributors — including the recent spat with Time Warner Cable. While he said that relations with distributors can sometimes get heated, he said that Viacom simply wants to get compensated for the value it provides to cable and satellite-TV companies. He estimated that Viacom's affiliate fee revenue is rising at a 10% clip.

But that's a bargain, given that Viacom networks account for about 20% of the viewership of ad-supported cable but their fees represent between 8% and 9% of the total affiliate fees paid by the average cable operator. And Viacom networks also account for about 35% to 40% of free video-on-demand streams, he said.

While that is mainly due to the fact that Viacom viewers tend to skew young and are more apt to use new technology, Dauman said that one thing those viewers aren't doing is watching cable programming exclusively online.

“We're not seeing it,” Dauman said of the so-called cord-cutting phenomenon. “And our subscriber base is growing. People tend to want to keep their TV connections.”

And as far as cable operators who fear programmers will put most of their content online for free while they still pay high carriage fees, Dauman said that Viacom is respectful of its distribution relationships.

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