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CBS 3Q Profit Rises as Company Drives More Revenue From Retrans, Affiliate Fees

CBS Corp. said third quarter profit rose as the company saw increases in revenue from retransmssion and affiliate agreements and content licensing , even as ad revenue at its flagship operation, the CBS broadcast network, fell 2%.

The New York operator of the Showtime cable network said revenue in the period rose  4% to $3.4 billion, compared with $3.26 billion in the year-earlier period. CBS said the broadcast netork generated a 32% lift in retransmission revenue and fees from affiliate stations, while content licensing and distribution revenue rose 6%.  Advertising revenues overall fell slightly owing to what the company said was ten hours of primetime preemption for Democratic and Republican conventions and the first Presidential debate as well as competition from NBCUniversal’s U.S. broadcast of the 2016 Olympic Games from Rio.

Net income from continuing operations rose to e $478 million, or $1.07 per share, up from $426 million, or 89 cents a share a year ago, marking an increase of 12.2% in net income for the period.

CBS said its entertainment operations, its largest unit, revenue came to $1.95 billion, up 1% from $1.93 billion in the year-earlier period. The company cited a 39% increase in affiliate and subscription fees, driven by higher station affiliation fees and subscription growth for the company’s new broadband service, “CBS All Access.” The company’s cable networks saw revenue rise 14% to $598 million, compared with $526 million for the same prior-year period. CBS cited higher revenues from the domestic licensing of Showtime original series, including “Penny Dreadful,” and growth from Showtime Networks’ broadband streaming service.

Revenue from the company’s publishing operations rose 11% to $226 million, compared with $203 million from the year-earlier period. The increase was led by growth in both print and digital book sales, including”Born to Run” by Bruce Springsteen and “The Girl with the Lower Back Tattoo” by Amy Schumer. Digital revenues represented 23% of the unit’s total revenues for the third quarter of 2016.

Revenue from local media rose 9% to $409 million, compared with $376 million in the year-earlier quarter, owing to increases in retransmission revenues and higher political advertising sales from upcoming federal and state elections. Revenue at the company’s CBS Radio unit came to $319 million,  compared with $318 million from the year-earlier quarter, owing to higher national ad sales.

During a call with investors, CBS Chairman and Chief Executive Leslie Moonves suggested the company was weathering recent declines in NFL football viewing well, and had issued no makegoods to advertisers due to any ratings shortfalls. Moonves also suggested the company was mulling ways to package its Showtime and “CBS All Access” services together and was considering a possible “price point” that would make such an offering attractive.

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