Sales of shows, higher subs overcome economy
CBS’ Leslie Moonves is the latest showbiz CEO to talk up the signs of a budding economic recovery.
In its third quarter earnings, the Eye swung to a profit of $208 million, fueled by syndication sales, rising subscription fees and an ad market that finally has a pulse again. Investors shared Moonves’ optimism, sending CBS’ stock up 7.48% to $12.79.
Moonves was grilled on the call about Internet-fueled rumors that Oprah Winfrey has decided to wrap up her CBS-distribbed syndie yakker at the end of the 2010-11 TV season. Moonves echoed the response from Winfrey’s reps, asserting that she has not made a final decision about whether she’ll continue, but will do so by year’s end.
“We are obviously in constant conversation with Oprah. She’s a legend and one of the great assets that we have,” Moonves said. “We fully hope she is coming back.”
He quickly added that any negative financial impact to the Eye from the loss of distribution fees from her top-rated talker wouldn’t hit CBS until 2012.
Moonves was bullish about the newfound momentum in the overall ad market, and CBS’ gains have been enhanced by the network’s strong ratings perf so far this season. Moonves’ comments followed an unexpectedly bullish outlook by News Corp. topper Rupert Murdoch on Wednesday during his conglom’s earnings call (Daily Variety, Nov. 5).
Moonves said he also expects CBS to take in “hundreds of millions of dollars” annually from retransmission consent deals with cable, satellite and telco companies. The push for broadcast networks to collect these fees, one that he spearheaded, will provide the dual revenue stream that’s helped cable nets weather tough economic times.
CBS’ total revenue for the third quarter ended in September was just a hair lower at $3.35 billion. The TV division — including the broadcast network and stations, CBS Television Studios and Distribution, Showtime, CBS Sports Network and the new CBS Films — saw revenue rise 9% to $2.3 billion. Television operating income jumped to $441 million from $367 million.
Total advertising sales were just more than $1 billion. Excluding political advertising, which was everywhere in 2008, ad revenue was actually up a tad year-on-year. But CBS O&O ad revenue fell 13.6%,
License fees jumped 36% to nearly $800 million, largely from domestic syndication sales including the first cycle of “Medium,” “Criminal Minds,” “Ghost Whisperer,” “Everybody Hates Chris” and “Numbers.”
Affiliate revenue rose 12% to $335 million due mostly to subscription and rate increases at Showtime and higher retransmission revenue.
Radio revenue for the quarter dropped 19% to $319 million. Operating income fell to $83 million from $131 million. The sector’s recovery is lagging television but ad sales are trending up in the current quarter, execs said.
Ditto with outdoor advertising, where revenue fell 23% to $425 million. The division swung to a $35 million loss from a $52 million profit the year before.
Book publisher Simon & Schuster saw revenue rise 2% to $230 million. Income nosed up to $27 million from $23 million.
The company’s interactive business saw revenue fall by 15% to $121 million on weakness in the display advertising market. Interactive losses widened to $16 million from $14 million.
Moonves noted that CBS has just secured a new $2 billion revolving credit facility that will continue “to provide certainty and stability into the future.”
And the company said starting with its fourth quarter earnings report, it will overhaul the way it breaks down its earnings.
It will report five divisions: entertainment, cable networks, publishing, local broadcasting and outdoor.
The entertainment arm will include the broadcast network, studios, distribution, film and CBS Interactive.
Moonves said the change will give investors “better visibility into our strategy,” and will show “how we’re running our businesses now.”