Viacom Warns of Slow Earnings Growth After Attacks

20 September 2001

US media group Viacom, owner of TV network CBS, warned that earnings would grow more slowly than expected because of the disruption to advertising following last week’s attacks.

Viacom expects a single-digit rise this year in EBITDA (earnings before interest, taxes, depreciation and amortization), compared to earlier double-digit forecasts.

Non-stop coverage of the attacks by CBS led to a significant fall in ad dollars – an estimated $320 million in advertising revenue was lost by the big networks last week – and incurred higher production costs than usual at CBS News. Most programming was cancelled and the launch of the new fall season was delayed a week, while some Viacom cable assets such as MTV suspended normal shows to cover the attacks.

Although the devastation’s long-term effects on ad expenditure are unclear, the already weak ad market is expected to suffer in the short term. Even before last Tuesday, adspend for 2001 was forecast to drop for the first time in a decade; now that decline is widely predicted to increase.

“Many of our advertisers have expressed uncertainty about their plans and are currently assessing various creative strategies to respond to the marketing challenges,” revealed Viacom chief operating officer Mel Karmazin. “Most companies we spoke with believe they will return to normal advertising levels but are uncertain about the timing.”

Karmazin added that this uncertainty made the imminent performance of media groups hard to predict. However, some of Viacom’s losses will be covered by business interruption insurance.

News source: Financial Times