Retransmission revenue also contributes to successful Q3
CBS’ strong start to the fall season and the rising tide of advertising sales and retrans revenue buoyed the Eye to an impressive third-quarter earnings report.
Prexy-CEO Leslie Moonves’ enthusiasm for CBS’ perf and its outlook for the future was unrestrained during Thursday’s earnings call with Wall Streeters as he ran down the growth stats in ad sales for the Eye network, its local TV and radio stations and its outdoor group.
“Forgive me for being a little more bullish than usual today,” Moonves said.
Moonves noted that scatter ad sales for CBS in the quarter were up some 35% over the price of spots set during last summer’s upfront sales process. And because the CBS sked has performed so well, led by hot frosh drama “Hawaii Five-0,” the Eye has not had to give out make-good spots to advertisers, so all of its scatter biz is bringing in fresh revenue at top prices.
Moonves said retrans coin for the Eye’s TV stations is up 40% vs. the year-ago quarter. For the calendar year 2010, CBS is on track to bring in $100 million in retrans coin, execs said.
“Retrans is now a very significant and continuing part of our content value chain,” Moonves said.
Making an oblique reference to Fox’s recent retrans standoff with Cablevision, Moonves noted that the 10-year deal CBS signed last year with cable giant Comcast is starting to pay off big for the Eye.
“We are pleased that — without a fuss — the largest cable operator recognized the value of our content,” he said.
Overall, the Eye reported net earnings for the quarter of $317.3 million, up 52% from a year ago. Revenue dipped slightly to $3.3 billion. CBS said its perf was powered by a 10% year-over-year gain in ad sales across its businesses and a 15% gain in affiliate and subscription fees, including a healthy increase of 4 million subscribers for pay cabler Showtime.
Flush with earnings, CBS also announced a $1.5 billion share buyback program to further boost its stock price, which has rebounded from the beating it took last year. Although its earnings were released after the market closed, CBS shares gained 37¢ in trading Thursday to close at $17.66.
“In every area where we compete, the strength of our content is driving our results,” CBS chairman Sumner Redstone said during the call. Moonves also stressed that the cost-cutting implemented during the darkest days of the economic meltdown have improved CBS’ margins.
Ad sales at CBS TV station group gained 25% in quarter-to-quarter comparisons. The radio group is also climbing out of its long slump with a 20% gain.
Political advertising produced a windfall for many of CBS’ large-market TV and radio stations in the second and third quarters. The flood of buys also has the effect of forcing nonpolitical advertisers to delay their purchases until after Election Day, which bodes well for sales traction in the fourth quarter. Moonves noted that the demand in the local market is strong enough that the stations likely would have been able to sell much of that inventory to nonpolitical advertisers at higher rates. (By law political spots are sold at a station’s lowest rate for a given timeslot.)
On the network front, Moonves gushed about CBS’ five-week win streak at the start of the season — a feat no other network has pulled off since 1997. The Eye also gave full-season orders to all five of its frosh shows, another rarity.
“We have three midseason shows (ready) and our problem is where do we put them,” he said. Wall Streeters on the call couldn’t resist allowing Moonves to crow a bit about NBC’s recent move to persuade Madison Avenue to value older demographics.
CBS had long been chided by its Big Four competitors as the oldest-skewing of the major nets, and “now that we’re winning in 18-49, suddenly there’s a shift,” Moonves joked.
“For my money, a 50-year-old is more valuable than a 19-year-old in terms of purchasing power,” he said. “To us, a viewer is a viewer is a viewer. We like winning them all.”