CBS profit falls but network is No. 1 in viewers

CBS Corp. is building steam as it rolls into the all-important advertising sales season, which begins next week.

The CBS broadcast network is expected to finish the 2014-15 TV season in first place in number of viewers. It will mark the seventh consecutive year that CBS finishes the season as the nation’s most-watched TV network.

The strength is expected to help CBS negotiate increases in its commercial rates with advertisers for the upcoming TV season. CBS also will broadcast the 2016 NFL championship Super Bowl, another selling point.

“I’m very confident that we will lead the marketplace in pricing and volume,” CBS Corp. Chief Executive Leslie Moonves told Wall Street analysts Thursday during a conference call to discuss CBS first-quarter earnings.

Advertising continues to be a major driver of CBS earnings, but amid a shifting media landscape, the company has been taking steps to diversify.

The New York broadcasting giant plans to roll out a stand-alone Showtime streaming service in the coming months. The product will join a similar offering by rival HBO, which last month launched its HBO Now Internet service.

The move will make Showtime available to customers who currently do not subscribe to pay-TV packages, including those who live in the more than 10 million homes that have high-speed Internet service but not a pay-TV bundle.

Showtime is available in nearly 23 million homes.

For the quarter that ended March 31, CBS produced net earnings of $395 million, or 78 cents a share, compared with $468 million, or 78 cents a share, in the year-earlier period.

“CBS turned in a strong quarter once again,” Moonves said.

Revenue was down 2% to $3.5 billion.

Industrywide, major media companies have been grappling with declines in advertising revenue as marketers spread their ad allocations between traditional media, including TV networks, and Internet and mobile outlets.

CBS was no exception as its advertising sales fell 5% during its first quarter of 2015. Radio stations felt the biggest sting -- they were down 7%.

However, the CBS broadcast network bucked the trend as its advertising revenue increased 1% compared with the year-earlier period, Chief Operating Officer Joseph Ianniello said.

“There is a large underserved market here and we anticipate strong demand for this service,” Ianniello said.

CBS Entertainment division revenue slipped about 2% to $2.26 billion for the quarter. The company said CBS aired one fewer NFL playoff game in January compared with the year-earlier period. Higher retransmission fees helped to make up for a decline in content licensing revenue.

Revenue of cable networks, including Showtime, CBS Sports and Smithsonian, inched up slightly to $539 million for the quarter.

Local broadcasting, made up of TV and radio stations, had a tough quarter. Revenue was down 5% to $596 million for the quarter.

Simon & Schuster publishing house sold fewer books. Publishing revenue slipped 5% to $145 million.

Nonetheless, CBS shares perked up in after-hours trading as the company’s earnings and revenue surpassed Wall Street expectations. CBS ended the regular trading day at $61.22 a share.

Moonves touted CBS’ dominance even amid generational shifts in media consumption. The CEO predicted the company’s CBS network would be part of even “skinny” bundles of TV channels because of its popular content.

“In smaller bundles we will always get a bigger slice of the pie,” Moonves said. “Across all platforms, we have more viewers today than we did 11 years ago.”

Moonves also took a swipe at streaming service Netflix, which has distributed some buzz-worthy original series including “House of Cards,” “Orange Is the New Black” and “Daredevil,” which have helped fuel the company’s subscription sales.

However, Netflix has had some expensive flops, including “Marco Polo.”

“Great content is not so easy to produce,” Moonves said. “You need a great explorer like Marco Polo to find some of the actual audiences that is watching some of these programs.”

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