Decline due to slump in advertising sales
CBS profits plummeted 96% last quarter as soft advertising continued to pound the broadcast biz, yet CEO Leslie Moonves sees a steady recovery and sounded positively elated at the strength of the scatter market and the network’s fall outlook.
“Advertisers have been coming back very strong in the third-quarter scatter market,” he said on a conference call — noting a robust 30% jump in scatter dollars at CBS compared with the same time a year ago.
As the upfronts wind down, he said, the Eye net is holding back about 65% of inventory in expectation of higher scatter prices.
And local advertising, an early casualty in the current economic downturn, appears to be among the first categories to rebound, Moonves said, particularly in large markets where CBS’ television and radio stations are clustered.
“Trends in our business are moving in the right direction. Improvement has been very steady and very real,” Moonves said in what was by far the most upbeat presentation of any media chief in the latest round of earnings.
If recovery is in the air, it can’t come a moment too soon, judging by CBS’ own numbers.
The company reported that net income plunged to $15 million for the three months ended in June from $408 million the year before. Excluding certain one-time items, CBS noted that earnings were $57.4 million, compared with $330 million the year before. Revenue fell to about $3 billion from $3.4 billion a year earlier.
The television business — including the network and stations, the television studio and distribution arms, CBS College Sports Network and Showtime — saw operating income dip to $264 million from $468 million.
TV revenue eased to $1.9 billion from $2.2 billion.
Breaking that down: Advertising sales slipped to $1.1 billion from $1.3 billion; license fees fell to $348 million from $369 million; and home entertainment revenue dropped to $44 million from $82 million.
Thanks to pay cable net Showtime, which boosted subscribers and fees in the quarter, affiliate revenues jumped to $329 million from about $300 million.
Latenight TV and syndication are two bright spots, execs said.
The television studio has a lucrative five-show slate of syndication titles in the pipeline for release between now and the end of the year, including “Criminal Minds” and “Ghost Whisperer.”
As for latenight, “Letterman is doing really, really well,” Moonves said, noting that “Late Show With David Letterman” recently won four consecutive weeks (in total viewers) against “The Tonight Show” for the first time since 1995. Since the bulk of latenight advertising comes from scatter, he expects to see an impact “fairly quickly.”
At CBS Radio, profits dropped to $86 million from $150 million. Revenue fell to $322 from $416 million on soft advertising. Moonves reiterated that the company is looking to trim some stations.
As for acquisitions, he said none are likely, but he’d focus on the growing Internet business or the new film studio.
CBS Films is shooting its third movie now, with two in the can.
“The Back-Up Plan,” a romantic comedy with Jennifer Lopez, comes out in January, followed by “Crowley,” with Harrison Ford, in March or April, he said. The third, teen movie “Beastly,” bows next summer.
“All three were in the low $40 million (cost range). In fact, one is below $25 million. We’re keeping with our game plan. … We’re anticipating a very good year for our film company,” he said.
Outdoor advertising, the company’s most international business, swung to a loss of $25 million from a $92 million profit the year before. Revenue fell to $434 million from $598 million. The company cited a soft worldwide ad market and unfavorable foreign exchange rates during the quarter.
Revenue in North America fell 22% to $278 million. International revenue fell 34% to $156 million.
Interactive losses narrowed to $14 million from $21 million. Revenue more than tripled to $126 million on the acquisition of CNET. On a comparable basis, revenue dipped 8%.
Book publisher Simon & Schuster saw profit fall to $6 million from $15 million on higher author royalties and restructuring costs. Sales dipped to $181 million from $186 million.
CBS announced its earnings after the market closed.
Shares of the company ended lower Thursday in a generally down market, but popped more than 8% in late trading to $9.25.