Paramount Pictures Corp., the film division business of Viacom Inc (VIAB - Analyst Report), recently dismissed litigation in the U.S. District Court in New York regarding the publication of the latest installment of Mario Puzo’s famous novel “The Godfather”.
Puzo expired in 1999 but his family published two more novels named "The Godfather's Revenge," and "The Family Corleone" posthumously without Paramount’s consent, for which the company sued his family. In return, Puzo’s family countersued the company for a $10 million fine and also requested before the court to dismiss rights of the company to the original novel “The Godfather”.
Earlier, in 2004, Paramount gave permission to Puzo’s family to release a sequel to the novel Godfather despite gaining copy rights to any sequel to the novel Godfather. However, the court case regarding the issue has been settled.
Viacom reported dismal film division business in the recently concluded quarter, with revenue dipping 39% year over year, mainly hurt by the lack of popular movie releases and lower home entertainment title releases.
However, the scenario is expected to change in fiscal 2013 where Paramount Pictures has a number of movies lined up for release. Movies like G.I.Joe: Retaliation and World War 2, slated to release in 2013, will certainly drive the Film division business of the company going forward.
We believe that Viacom is well positioned for long-term growth as it continues to benefit from its predominately cable networks-based business model, strong affiliate fee revenue growth, global brands, strong share repurchase plan, multi-platform content, and is one of the fastest growing traditional ad media. Moreover, continued success of movies during this holiday season will drive box-office revenues going forward.
However, stiff competitions from other media companies like News Corp. (NWSA - Analyst Report) and Time Warner Inc. (TWX - Analyst Report) along with slow economic recovery may act as headwinds for the stock going forward.
We, thus, maintain our long-term Neutral recommendation for Viacom. Currently, Viacom has a Zacks #3 Rank, implying a short-term Hold rating on the stock.