CBS more than doubles its second-quarter profit
CBS Corp.’s rich library of old television shows continues to pay dividends.
The broadcasting giant’s second-quarter profit more than doubled, helped in part by high-margin revenue that the company received through its program-licensing deal with Netflix Inc.
Nonetheless, the bulk of CBS earnings were driven by its core businesses — television, radio and billboard advertising — as well as the syndication sale of the Kelsey Grammer sitcom “Frasier” to the Hallmark and WE cable channels.
New York-based CBS, controlled by billionaire Sumner Redstone, also benefited from its arrangement to share coverage of the NCAA basketball tournament with Time Warner Inc.’s Turner Broadcasting. CBS restructured its NCAA deal last year to avoid losing money. Although the network now airs fewer games, thus taking in fewer advertising dollars, its production costs are lower, which means its profits are higher.
“Across every key financial metric, we turned in a stellar performance,” CBS Chief Executive Leslie Moonves told analysts during a conference call Tuesday. “At the heart of all this success is great content.”
CBS soundly beat analysts’ expectations by reporting earnings of $395 million, or 58 cents a share, for the quarter ended June 30. That compared to $150 million, or 22 cents a share, for the year-earlier period.
Revenue for the broadcasting giant was up 8% to $3.6 billion.
Analysts polled by Thomson Reuters had predicted that CBS would post earnings of 46 cents a share on revenue of $3.6 billion.
CBS’ strategy is to squeeze as much money as possible from its vault of TV shows that it produced or inherited over the years. The library includes shows made by Paramount Pictures and CBS, including “I Love Lucy,” “Star Trek,” “Cheers” and “Frasier.”
This year, CBS began negotiating deals for the streaming rights to many of its older titles with Netflix and Amazon.com Inc. Analysts believe the Netflix deal, announced in February, should generate $100 million a year for CBS over its two-year term.
CBS, however, does not make available to digital streaming services its current hit series such as “Hawaii Five-0” and “NCIS.” The company guards those programs to protect the ratings for their network runs and the all-important advertising revenue that those ratings bring.
CBS is profiting “without taking away from established revenue streams,” Moonves said.
During the quarter, the company’s entertainment division — which includes the CBS television network — saw its revenue jump 10% to $1.8 billion. The increase was fueled by higher network ad revenue, the cable syndication sale of “Frasier” and retransmission fees paid by cable operators.
Revenue for CBS’ cable division, which includes the Showtime premium channel, increased 12% to $413 million for the quarter. At Simon & Schuster book publishing, revenue was down 3% to $183 million. Advertising revenue at CBS’ local TV and radio stations was up 2% to $691 million. The outdoor advertising division turned in a stronger quarter, up 7% to $490 million.
CBS reported earnings after the markets closed. In a bad day on Wall Street, CBS closed down $1 to $26.28 a share. In after-hours trading, the stock ticked up.
