CBS, Ahead of Upfronts, Has Strong 1st Quarter
Published: May 02, 2012
New revenue from syndication, online streaming services and subscription fees helped the CBS Corporation to report an 80 percent increase in profits on Tuesday, its strongest such first-quarter gains since it was spun off from Viacom six years ago.
The company's net earnings for the quarter were $363 million, or 54 cents a share, up from $202 million, or 29 cents a share, in the same quarter a year ago. Wall Street analysts had predicted earnings of 44 cents a share. "They are clocking it in every category," said David W. Miller, a managing director covering media and entertainment at the investment bank Caris & Company, calling the CBS earnings "outstanding."
Leslie Moonves, the CBS chief executive, said the first-quarter earnings foreshadowed a "record 2012" for the broadcaster, which is preparing to present its 2012-13 network television schedule to advertisers. The presentation on May 14 will kick off a period of so-called upfront advertising sales.
"We led the upfront last year, and we guarantee we will lead it again this year," Mr. Moonves said on a conference call with investors.
The company is benefiting from the CBS network's long-standing status as the most-watched among total viewers in the United States. CBS has fewer holes to fill on its television schedule than its competitors do, "meaning that we'll be much more selective than our competitors will have to be," Mr. Moonves said Tuesday.
Heading into the upfront period, "we're feeling a lot of strength from the ad market," he added.
But Mr. Moonves and other CBS executives pointed out that the company - traditionally the most reliant on ad revenue of any of the major media companies - is continuing to come up with more nonad revenue.
Of CBS Corporation's $3.92 billion in total revenue in the first quarter, 39 percent originated from nonadvertising sources, according to the company, up from 35 percent in the first quarter of 2011.
"Syndication, retrans and online streaming are having a huge impact on our numbers and are not directly tied to the economy," Mr. Moonves said, abbreviating the word retransmission, which refers to fees paid by distributors and affiliates for the rights to CBS programming. "Many of these revenue sources did not even exist just a few short years ago," he noted.
A 12 percent gain in total revenue for the quarter - from $3.51 billion in the same quarter last year - was attributed in part to digital licensing deals. CBS already licenses some of its old shows to Netflix and Amazon's streaming services, and it is in talks with other such online video distributors.
In the conference call, Mr. Moonves seemed to let slip the name of at least one of them, Intel, which has reportedly been in negotiations with channel owners about selling a virtual cable subscription via the Internet. CBS, he said, was talking to "the Intels of the world" as well as existing cable operators like Comcast. New digital deals will be made "over the next number of months," he said.
CBS revenue also grew thanks to traditional syndication deals, including a new one with the AMC network for "CSI: Miami," and increases in subscriptions to Showtime Networks, its pay cable arm.
Its local broadcasting businesses were flat for the quarter. Joseph Ianniello, the CBS chief financial officer, said at the company's television and radio stations, local ad sales outpaced national ad sales, which is significant because local businesses can be a "leading indicator" of an economic rebound.
The automotive and retail sectors were the bright spots for local ad sales.
Speaking to investors on Tuesday, Mr. Moonves also singled out the company's news division, CBS News, for praise. The "CBS Evening News," which has languished in third place among the network newscasts for years, is the only one of the three to be up year-over-year, he said.