Viacom profit drops 65% on weak ad sales, Harmonix-related charge

Even Tom Cruise wasn’t enough for media company Viacom Inc. to pull off a nearly impossible mission: turning in crowd-pleasing first-quarter earnings.

The New York media company’s profit plummeted 65% amid lower advertising sales at its cable television networks for the quarter ended Dec. 31. Advertising woes were particularly nettlesome at children’s channel Nickelodeon, which has experienced a precipitous drop in ratings.

But the biggest dent in Viacom’s earnings came from a $383-million charge for payments to former shareholders of the company behind the Rock Band video game franchise, part of Viacom’s long-running legal dispute over payments to former owners of Harmonix Music Systems. The payout was the latest sour note in Viacom’s failed attempt to get into the video game business.

Net income dropped to $212 million, or 38 cents a share, compared with $610 million, or $1, during the same period a year earlier. The earnings, reported Thursday, slightly beat analysts’ forecasts. Viacom’s revenue increased 3% to $3.95 billion. Analysts, however, had expected slightly higher revenue.

Hollywood movie studio Paramount Pictures delivered an admirable box-office performance, boosted by the late-December release of “Mission: Impossible — Ghost Protocol,” starring Cruise and directed by Brad Bird. (The film has taken in $575 million worldwide, Viacom said.) “Paranormal Activity 3” and “Puss in Boots” also buoyed the century-old Melrose Avenue film studio. Its much-anticipated “The Adventures of Tintin,” however, underperformed.

Paramount generated $1.6 billion in revenue, an increase of 4%. Theatrical revenue was up 37% to $570 million. Home entertainment sales slid 6% to $598 million. Overall, the expense-laden studio reported a $31-million deficit for the quarter.

Viacom — which is controlled by 88-year-old billionaire Sumner Redstone — depends almost entirely on its cable channels, including MTV, Nickelodeon, BET, VH1 and Comedy Central, for its income. Most alarming to analysts was Viacom’s admission that advertising revenue was off 3% to $1.35 billion for the quarter.

The company’s Media Networks unit — its cable channel division — took in $2.44 billion, a 3% increase over the same quarter in 2010. Operating income for the media networks increased 7% to $1.1 billion.

“Despite some early head winds, Viacom is off to a strong start in 2012,” Chief Executive Philippe Dauman said during a conference call with analysts.

Dauman said the company would produce nearly 30% more hours of original TV programming this fiscal year to try to gain back lost ratings and boost advertising sales. The company expects to spend $3 billion on programming this fiscal year.

meg.james@latimes.com