Moonves says Eye well-positioned as economy recovers
Leslie Moonves is champing at the bit to get on with this year’s upfront advertising sales market.
“It will be the strongest one in years,” the CBS Corp. chief confidently told investors Wednesday during a conference call to discuss the Eye’s first-quarter earnings report.
Moonves and CBS chief financial officer Joseph Ianniello said that all the signs are pointing in the right direction for CBS’ local and national TV sales, and even its radio group is starting to see strong signs of improvement for the first time in several years.
“Obviously we are in a much better operating environment” than last year, Moonves said, when the economic meltdown hammered the advertising market. “We are ideally positioned in the largest local markets as they rebound,” he said.
The strength of the national scatter ad sales market and continuing improvements in local markets bode well for continued growth for the Eye this year. The flood of political advertising that will hit in the summer and fall will also benefit CBS’ TV and radio stations.
Moonves touted the Eye’s cost-cutting measures and debt reduction measures over the past two years as strengthening the company’s overall position. Costs at its entertainment division are up as CBS’ TV production wing produces more of the programs that air on the Eye, but Moonves noted that CBS-produced shows like “NCIS: Los Angeles” and “The Good Wife” will pay off down the road in syndication and international sales.
And Moonves assured Wall Streeters that the Eye will remain vigilant on programming and development costs.
“The cost-cutting we did a year ago we have maintained,” he said. “It has not gone back to the same old profligate ways of (spending on) television programming.”
Another boost to the Eye is the windfall of retrans coin starting to come from CBS O&O stations. Moonves, who was among the first broadcast moguls to beat the drums for retrans coin, said CBS will realize more than $100 million in retrans fees from cable and satellite operators this year, in addition to fees paid by its affils.
“Retrans is a significant reality today,” he said. “The value of broadcast content is finally being recognized and paid for.”
CBS’ first-quarter numbers were buoyed by the Eye’s carriage of the Super Bowl and its NCAA basketball tourney coverage.
CBS’ net loss for the quarter ended in March narrowed from the year-ago period, to $26.2 million from $55.3 million, which was in line with analysts projections. Total revenue was up 12% year-over-year to $3.53 billion, which Moonves noted was the company’s first double-digit quarterly revenue gain since its split from Viacom in 2006. The Eye’s operating income climbed 43% year-over-year to $153.4 million.
The only Eye divison that didn’t log an uptick in revenue was the Simon & Schuster publishing unit, which the Eye attributed to the “continued soft retail market.” Advertising revenues for the CBS network were up 25% from first quarter 2009, while the CBS Interactive wing saw a 19% gain in display advertising revenues. Cable networks, including Showtime, College Sports TV and Smithsonian networks, delivered $100.9 million in operating income before depreciation and amortization.
Moonves was pressed during the conference call about reports that CBS is in talks for an extensive news sharing partnership with CNN. That chatter comes on the heels of the NCAA tourney deal struck by CBS and Turner Sports — a creatively crafted, 14-year deal allowed CBS to avoid hefty losses it would have otherwise absorbed under the remaining three years of its previous NCAA pact.
Time Warner CEO Jeffrey Bewkes acknowledged conversations with CBS and other networks regarding possible tie-ups with CNN during his earnings call on Wednesday. Moonves was noncommital, saying only “We’re in constant dialogue on how to make our businesses better.”
Moonves reiterated his commitment to CBS Films, despite the middling performance of its first two releases, “Extraordinary Measures” and “The Back-up Plan.”
“I like the idea of doing movies under $40 million,” he said, adding that CBS’ investment in the division’s next two releases — teen romance “Beastly” and thriller “Faster” — is under $20 million apiece. “I like this model. I think we can make it work,” he said.