Viacom Inc. (VIA,VIAB) expects its September launch of "The Beatles: Rock Band" to be a magical tour, but the company's prospects for driving profits from its foray into music videogaming remains a mystery.

Second-quarter sales of "Rock Band" fell flat again amid a broader downturn in the videogame business, and losses from the venture weighed on margins at the company's media networks as they struggle through an ad downturn and a ratings slump at MTV.

The company also said it was forced to take a write-down of an undisclosed amount on the value of its "Rock Band" inventory after it cut prices on the game to spur sales. UBS estimates the charge at $50 million.

The setbacks come after Viacom Chief Financial Officer Tom Dooley said last summer that "Rock Band" profit margins would reach the "mid to low single digits" in 2008 and possibly double annually over the next few years - a prediction that has proved too optimistic as the stock market and the U.S. economy sank and game sales disappointed.

Dooley said Tuesday that the new installment of Rock Band, which will feature many famous songs from the Fab Four, will be a "mid-to high-teen margin business when it's up and running."

Viacom CEO Philippe Dauman said he remains confident in the long-term value of the Rock Band franchise for Viacom, and he views The Beatles launch as an event that could turn the tide.

But some analysts are growing wary of the company's enthusiasm for the venture, especially because it likely paid a hefty price for the rights to The Beatles' music, which will eat into margins.

A Viacom spokeswoman didn't respond to questions for this story.

UBS analyst Michael Morris questions whether a classic rock band beloved by retiring baby boomers will have the kind of allure for the younger demographic targeted by "Rock Band" that Viacom is banking on.

"We are unconvinced that the newest offering will help Rock Band turn a profit and now estimate operating losses for the game through 2010," Morris said. "At this point, it certainly feels like they've over-promised on Rock Band."

Viacom doesn't break out Rock Band's profitability, but Morris estimates the company lost $100 million on the game in 2008, and it's on a similar pace this year.

Natixis Bleichroeder analyst Alan Gould said Viacom over-promised but "is right to be in the videogame business" because of the targeted demographic.

Viacom, like most major media companies, has been struggling to find new growth businesses as the rise of the Internet has disrupted traditional advertising and content distribution models. The company's second-quarter operating profits declined by more than a quarter, and profits in its media networks division were off by 12% due to ad revenue declines and losses from Rock Band.

A year ago, impressive sales of Rock Band hardware - the toy guitars and drum sets that video rockers need to play the game - raised hopes that the company had found a new growth driver. But now, the slowdown in U.S. consumer spending has spread to once-hot videogame sales, and Rock Band has suffered. A recent analysis by the videogame Web site Gamasutra concluded that U.S. retail revenue for the Rock Band series was down 67% from February through June compared with last year.

Viacom faces tough competition from the leader in the space, "Guitar Hero," the rival game published by Activision Blizzard Inc. (ATVI), which has said that its music videogame was profitable in 2007 and its margins increased in 2008. A spokesman for the company declined to provide an updated measure of the game's profitability.

The company has said the profitability of "Rock Band" will take off as consumers own more of the game's pricey hardware and the business shifts to sales of high-margin music downloads. In June, Viacom showed its commitment to the area by hiring gaming veterans Scott Guthrie and David Cox to run its games business and improve its sales and marketing efforts.

-By Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com