Profits hit by steep drop in ad sales
CBS Corp. capped several weeks of mostly dour financial results at media companies, swinging to a loss of $55.3 million last quarter from a $244 million profit the year before.
Revenue eased to $3.16 billion from $3.65 billion. And the soft numbers, driven in part by a weak ad market, hit even as the CBS network is having its best season in years.
However, CBS chief Leslie Moonves sees some sunshine breaking through the gloom. During Thursday’s earnings conference call, he echoed remarks made Wednesday by News Corp. topper Rupert Murdoch and by other media execs in recent weeks. Amid the bleak numbers from the first quarter, top brass are accentuating the positive signs of an uptick in ad spending as the Big Four nets prep for their upfront fall sked presentations to Madison Avenue later this month.
“Fortunately, we feel it’s starting to turn,” Moonves said of the ad market. “We are seeing early signs of improvement in the advertising marketplace, both locally and nationally … (although) it’s premature to call it a recovery,” he said.
With its 29 TV stations and 134 radio stations, CBS is particularly exposed to local advertising, which has been among the hardest-hit ad sectors.
Moonves noted that year-on-year comparisons for CBS Corp. overall were particularly difficult last quarter given a number of factors that buoyed results the year before: record political ad spending; the writers strike, which lowered production costs; and a nice bump when CBS took over international distribution of the “CSI” franchise from the now-defunct Alliance Atlantis.
As a result, the first quarter will likely be the low point of the year for CBS, he said.
Moonves and chief financial officer Fred Reynolds promised an uptick in the second half, driven in part by a strong slate of shows heading into syndication, including dramas “Ghost Whisperer” and “Criminal Minds,” the effect of cost reductions made last year and the early signs of an improving ad market.
They predicted that full-year operating income would be in the range of $1.725 billion to $1.925 billion.
CBS shares closed up 1% Thursday at $8.06. But they were down in after-hours trading following the financial results, which were announced after the market closed.
Television revenues for the first quarter of 2009 decreased 12% to $2.23 billion. Ad sales fell 15%.
Operating income for the division — which includes the Eye network, the CBS television stations, studios and distribution, Showtime Networks and CBS College Sports Network — fell 54% to $185 million. Affiliate fees rose 9%.
Home entertainment revenue surged nearly 70% to $62.7 million. Moonves said the home market appears to be holding up better for TV shows than for feature films.
CBS Radio revenues were down 29% to $260 million. Profit plunged to $44 million from $115 million.
Outdoor revenues decreased 24% to $380 million. The division swung to a loss of $38 million from a profit of $44 million the year before.
At CBS Interactive, revenue rose to $134 million from $53 million, reflecting the acquisition of CNET. Losses widened to $11.6 million from $2.7 million.
Simon & Schuster revenues dropped 20% to $161.7 million. The publisher lost $2.1 million vs. a profit of $14.6 million the year before.