CBS has strong second quarter and CEO Moonves talks tough about second revenue streams
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CBS Corp. Chief Executive Leslie Moonves, fresh from cutting a new distribution deal for its broadcast and cable channels with cable giant Comcast Corp., will now turn up the heat on its network affiliates to pay more to the network for its shows.
Speaking to Wall Street analysts about its second quarter results, Moonves said CBS has struck some deals already and will make more down the road. ‘That is part of the new way of doing business,’ Moonves said.
Traditionally, local stations that are affiliated with a broadcast network give up the majority of their commercial inventory in return for programming. The networks used to pay them compensation for the ad inventory but that was phased out years ago.
Now networks want advertising inventory and money from their affiliates in return for programming.
The push is part of the effort broadcast networks are making to better compete with cable. While cable channels get money from both subscribers and advertisers, broadcasters have traditionally only had an advertising revenue stream.
On Tuesday, CBS announced it had struck a ten-year deal with Comcast for the cable giant to pay the broadcaster to carry its CBS television stations as well as its cable networks. Although no price tag was put on the contract, Wall Street analysts have put the initial price for the CBS stations at about 50 cents per subscriber. Moonves has said that by 2012, CBS expects to generate over $250 million annually in revenue from distributors in return for access to CBS content.
Moonves expressed continued optimism about the economy, citing a strong advertising market as the primary driver of CBS’ strong second quarter results. The company posted earnings of $150.1 million, or 22 cents a share, compared to $15.4 million, or two cents a share in the second quarter of 2009. Revenues at CBS were up 11% to $3.3 billion, largely due to a continued turnaround at CBS’s local television stations.
‘It’s not slowing down,’ Moonves told analysts of the local advertising market. CBS Chairman Sumner Redstone was so pleased with the results he seemed to want to create new phrases to describe the numbers. CBS, he said, had a ‘super excellent’ quarter and has ‘momentous momentum’ heading into the second half of the year. CBS Entertainment, which includes the CBS network and its television and movie studios, had revenues of $1.67 billion, a 10% gain from the same quarter a year ago. International sales for the CBS hits ‘NCIS: Los Angeles’ and ‘The Good Wife’ as well as ad sales for the network’s coverage of the NCAA basketball tournament.
On the television station front, CBS said revenue at its 28 stations were up 31% to $337.9 million. CBS radio, usually one of the sore spots for CBS, saw revenues grow by 6% to $340.9 million for the quarter.
With almost $900 million in cash, Moonves indicated the company may pay down more of its $6.5 billion in long-term debt, increase its dividends or initiate a share repurchase plan.
-- Joe Flint