Viacom profit plunged 65 percent to $212 million in the latest quarter due to a charge related to the sale of Harmonix, the company that makes the "Rock Band" video game.
In the fourth quarter from October to December, the owner of Paramount Pictures, MTV and Comedy Central earned 38 cents per share, down from $610 million, or $1 per share, in the same quarter of the previous year.
The stock was down roughly 4 percent in early trading Thursday, selling for $50.91 per share as of 10:05 a.m. ET.
The company took a one-time charge of $379 million to cover an arbitration award for Harmonix shareholders, but noted in a conference call Thursday that it is contesting it. (The Harmonix charge was not detailed in Viacom's earnings statement Thursday morning, but was expected to be included in a filing later in the day.)
Net earnings from continuing operations, which excluded the Harmonix charge, were $591 million, down 5 percent, and $1.06 per share, a penny more than analysts had expected.
Quarterly revenues increased 3 percent to $3.95 billion from $3.83 billion in the prior year. Higher media networks revenues of $2.45 billion (up 3 percent) resulted from an increase in affiliate fee revenues, partially offset by a decrease in advertising and ancillary revenues, the company said. Domestic and worldwide affiliate fees each increased 16 percent, reflecting higher revenues from digital distribution deals and rate increases.
Advertising revenue decreased 3 percent domestically and worldwide, due to lower ratings and "softness" in the U.S. advertising market in the second half of the quarter. The company said the ad market seemed to be improving.
Philippe Dauman, president and CEO of Viacom, said advertising revenue would have been up for the quarter if not for Nickelodeon's ratings woes.
"If we hadn't had the Nickelodeon ratings issues, our advertising sales would have been a growth for the quarter," he said.
He said the network was moving aggressively into new programming to improve ratings, and predicted they would rise. But he also said, as he has said before, that Viacom's own data do not reflect the declines recorded by Nielsen.
Filmed entertainment revenues increased 4 percent, to $1.56 billion, driven by higher theatrical revenues. They were partially offset by lower ancillary revenues due to the prior year benefit from selling distribution rights to two future Marvel films and lower home entertainment revenues.
"In the first quarter of 2012, Viacom proved that it has the creative capability, operational resolve and financial strength to deliver for shareholders despite short term economic headwinds. Our proven strategy of continuing to invest in creative content is fueling momentum across our properties," Daumann said in a statement.
He also said the company was off to a strong start this year thanks to strong theatrical performances by "Paranormal Activity 3" and "Mission: Impossible -- Ghost Protocol," which have earned roughly approximately $575 million. He noted that "The Devil Inside," which he called another potential franchise, had earned more than $50 million.
Viacom purchased Harmonix in 2006, but was unable to turn a profit on it largely due to the high costs of making and shipping its drum- and guitar-shaped controllers. It sold the company in December 2010.
Its original shareholders then sued over past payments, and were awarded $383 million in arbitration in December 2011. The $379 million that Viacom set aside for the judgement would go back to Viacom if it prevails in arbitration.