Earnings up 14% in first quarter
CBS halted a string of downbeat headlines Tuesday, posting a 14% increase in profits for the first quarter.
A boost in syndication revenue, largely via new global distribution deals for “CSI,” pushed profits to $244.3 million in the period ended March 31, up from $213.5 million in the year-earlier frame. Free cash flow hit $938 million, up 25% from $738.9 million.
Total revenue remained flat at $3.65 billion.
CBS chief Leslie Moonves offered a reminder of the tough comparisons in the quarter given that the Super Bowl and the first part of college basketball’s Final Four aired on CBS in the first quarter of 2007. He also struck an upbeat note about SAG talks and Showtime’s fortunes in the wake of Viacom’s joint-venture pay TV announcement.
Aided by the strong quarter, CBS shares closed up 3% at $23.20. CBS declined to address reports Tuesday that the company was in final bidding for the Weather Channel, or earlier speculation that it may be in the running for Rainbow Media or Scripps Networks. Moonves would say only that CBS execs “look at everything.”
The quarterly results were a nice change of pace for Moonves, who has been contending with grim headlines about Katie Couric, his own pay package and a Viacom pay TV venture that could have long-term implications for CBS’ feevee outlet Showtime. The actual impact of those items on the company’s financials is arguably minimal, but it hasn’t been an easy time from a PR standpoint.
In a conference call with analysts, Moonves offered a different spin on Showtime’s loss of Paramount, MGM and Lionsgate movies and the threat of a competing premium channel run by corporate sibling Viacom.
The new channel “will make available to us $300 million to invest in programming going forward,” Moonves said.
Showtime’s focus will be original programming, Moonves added, “and, of course, movies are still important to us as well.”
As to what happens after 2010, when current product flow runs out, he said, “We are continuously in the process of licensing compelling new films at more favorable terms.” And some new titles will come from the soon-to-launch CBS Films, which aims to start releasing four to six pics a year.
In a follow-up question from an analyst, Moonves called it an “exciting time” for the company. “We have already spoken to major suppliers, movie companies, as well as TV companies. There is a large amount of product that is out there, top-quality product. We are confident that we can make these deals and that Showtime won’t miss a beat.”
Sumner Redstone, chairman of both CBS and Viacom, addressed a question from Merrill Lynch media analyst Jessica Reif Cohen about the decision to launch the channel.
“I think the Street to a certain extent and a large part of the press has missed the point,” Redstone said. “Les talks to me every day about his strategies, and Philippe (Dauman, Viacom CEO) talks to me every day about his strategies, and I supported both. … I think that Les’ strategy, Showtime’s strategy, will work for CBS, and I think that Philippe’s strategy will work for Viacom. It is not true that success between these two companies is mutually exclusive.”
Moonves was also sanguine on the subject of a possible SAG strike.
“The tone of these negotiations seems to be in a much more cordial, positive fashion,” he said. “We’re optimistic that before this contract runs out, June 30, that there will be no strike.”
If there was a blemish in the quarterly results, it was radio, whose revenues slipped 9% in the quarter, with operating net falling 27% to $115 million.
Execs asserted their confidence in the unit Tuesday. A roadshow is targeting media buyers in L.A., Chi and Gotham, trying to make the case that radio should be rethought as a medium. Given ratings trends and Internet capabilities, CBS says, radio is an efficient ad vehicle, especially in recessionary times.
CBS will hold its network upfront May 14 at Carnegie Hall. Moonves noted that “tens of millions” in expenses have been trimmed in terms of pilot production — a move hastened by the 100-day writers strike.
Moonves said his history as a network exec helps him grasp, even from a few scenes, the potential of a new show.