Strong full-year numbers but Q4 results shy of Wall St. expectations
Is May nearly here? CBS topper Leslie Moonves, barraged with upfront questions on an earnings call Thursday was, not surprisingly, coy on his expectations this early in the game.
“My sales department would kill me. Last year, I said double digits and we only had 9%. The year before, I said double digits and we had 12%-13%,” he said. He did point out that Eye ratings have been big in recent weeks, its scatter prices up in the teens from a year ago and, while the net has ordered “a few more pilots than we usually do, my guess is that not many new shows will get on the schedule.”
CBS’ fourth-quarter earnings rose 6% to $393 million last quarter. Revenue nosed up 2% to $3.7 billion. The Eye’s full-year numbers were strong but the fourth quarter results were a little shy of Wall Street’s expectations, which pushed its stock price down in after-market trading. CBS shares have been on a big run-up since mid-November, closing Thursday at $42.94.
The financials followed news that CBS had acquired an unspecified stake in AXS.TV, a music-focused live-event channel owned by Mark Cuban, AEG, CAA and Ryan Seacrest Media. Moonves said CBS, home of the Grammys, would contribute “shoulder programming.”
“We have an awful lot of live programming,” he said, backstage at the Grammys, “pre-shows, post shows, tributes.” He called the pact an “exciting opportunity” for CBS and said, “It’s great to be in business with Mark Cuban and Tim Leiweke,” CEO of AEG.
AXS, he said, won’t formally be lumped in with CBS’ family while negotiating with affiliates but, “Sure, we’ll be able to increase affiliate fees. We’ll help out. We’ll join in when possible.”
At CBS last quarter, advertising revenue rose 3%. Affiliate and subscription fees rose 9%, driven by Showtime, higher retransmission revenue and compensation from CBS affiliates. Content licensing and distribution revenue fell 7% on tough comps from the timing of streaming deals.
Execs focused on momentum in 2013 with growing ad sales and new streaming pacts, retrans and reverse comp deals as well as ongoing muscle in U.S. and international syndication sales.
The international marketplace topped $1.1 billion in revenue last year and will exceed that in 2013, Moonves said.
At the entertainment arm, which includes the CBS Television Network, Studios, Global Distribution Group, CBS Films and CBS Interactive, revenue just shy of $2 billion for the fourth quarter was flat year on year. Higher advertising revenues and affiliate fees were offset by lower television license fees as the 2011 quarter had two major deals, including the initial streaming sale of CW content. Network advertising revenues increased despite the impact of pre-emptions for presidential debates and election night coverage.
Entertainment operating income rose 3% to $328 million.
Moonves acknowledged the rocky start to the current broadcast season. “The ratings this fall were a little more difficult to read. The preemptions. The season started late, and the amount of watching live was only about 60%. … And there was the normal sampling of new stuff. Yet we said, ‘Hang on, we’re going to be fine.’ And we are fine.”
Cable networks, led by juggernaut Showtime and including CBS Sports and Smithsonian, saw revenue up 11% to $438 million on higher affiliate fees and licensing of Showtime original series.
Cable profit rose 6% to $185 million.
The CBS television and radio stations, which are grouped together under local broadcasting, saw revenue increase 9% to $787 million on higher political advertising — of about $180 million — and retransmission coin. Revenue at the TV stations jumped 17% while radio was about flat.
Local broadcast profit rose 22% to $325 million.
Publisher Simon & Schuster saw revenue dip 6% to $215 million as strong growth in digital book sales was more than offset by lower print book sales. Digital book sales increased 24% from the same prior-year period and repped 24% of the total.
Publishing profit increased $3 million to $31 million.
CBS’ giant billboard business has been split in two, with the European and Asian operations now on the block and attracting lots of interest, according to Moonves. The Americas piece is in the process of being converted into a Real Estate Investment Trust, or REIT.
It’s now called Outdoor Americas, and revenues for the fourth quarter dipped by $2 million to $340 million. Profit fell 13% to $94 million. Investors like the REIT idea, but the conversion is complex. CBS said it’s planning to file the necessary paperwork with the IRS within the next few months.
That always leaves time for a bidder to move.
“If a superior transaction comes along, we’ll certainly consider it,” said CEO Joseph Ianniello.