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Tickers in this Article: VIA, NYSE:VIA-B, TWX, DIS, CMCSA
Entertainment content giant Viacom (NYSE:VIA) is finally seeing a boost from a stronger advertising market. This improvement should continue along with the overall economy. Overall, its businesses are volatile due to the economy and fickle consumer tastes, but may be worth it given its high profit potential during upswings in its operations.

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Second Quarter Sales Review
Total revenues were flat at $3.3 billion as a strong 6% growth in the media networks segment, which includes advertising and related revenue from original programming on networks including MTV, Nickelodeon, and Comedy Central channels, was offset by a 10% decline in the filmed entertainment unit that consists primarily of Paramount Pictures. Media networks accounted for the majority of revenues at just over 63%. (For more on investing in the entertainment industry, read Your Retirement Savior: Entertainment.)

Viacom specifically detailed that "growth in affiliate, theatrical and advertising revenues offset lower home entertainment revenues," as well as improvements in the economically-sensitive advertising market. Domestic ad sales grew 4% while movie trends struggle on lower DVD and related home entertainment sales.

Profit Recap
The improved advertising environment boosted total company operating income 28% to $794 million, or a very healthy 24% of sales. Media accounted for nearly all of profits, though the movie unit was profitable after a loss in last year's quarter and contributed a modest $69 million to operating income.

Net income came in at $420 million, or 69 cents per diluted share. This beat analyst projections.

Outlook
For the full year, analysts expect sales of $13.7 billion, which would be about flat from last year. Earnings expectations are $2.83 per share, which would represent about 8% year-over-year growth.

Bottom Line
Shares of Viacom are trading at a very reasonable forward P/E ratio of 12. There are some drawbacks to the business model as advertising is cyclical, its television shows and movies are hit-driven and subject to similar volatility, and its fortunes are driven by cable television that must compete with a secular shift toward online content distribution.

Viacom is in the same boat with peers that include Time Warner (NYSE:TWX) and Disney (NYSE:DIS). It stands out for its focus on younger individuals. And despite the threats to cable, sales stayed stable throughout the current recession and the migration to the internet has been slower than anticipated, which is good news for Viacom and Comcast (Nasdaq:CMCSA). (For more, check out Make Money On The Movies.)

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