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Affiliate Fees, Ad Revenue Buoy CBS Q2

CBS Corp. said two closely watched measures of media success – advertising revenue and fees from affiliates and retransmission – increased during its second quarter, boosting overall revenue and adjusted profit. But a noncash charge related to its sale of its CBS Radio unit weighed on overall net income.

The New York owner of the CBS broadcast network and cable’s Showtime said second quarter profit from continuing operations came to $397 million, marking a 6.4% increase from the $373 million it reported in the year-earlier period. Those figures do not take into consideration a $365 million charge on CBS Radio, as well as a $7 million charge for restructuring. CBS in February agreed to merge its radio unit with Entercom.

CBS said revenue for the period rose 9.4% to $3.26 billion, compared with $2.98 billion last year. The company said affiliate and subscription fees were up 16%, owing largely to a 25% increase in retransmission revenues and fees from CBS Television Network affiliated stations, and growth from the company’s digital subscription services. Advertising revenues were up 4%, due in part to the broadcast of the semifinals and finals of the NCAA Division I Men’s Basketball Championship (“NCAA Tournament”) on the CBS.

Revenue at the company’s entertainment unit – its largest – rose 12%, up from $1.95 billion from the year-earlier period. CBS said the rise was due largely to 38% growth in affiliate and subscription fees, which were driven by station affiliation fees and subscriber growth at “CBS All Access,” its subscription-on-demand video service.  Advertising revenues increased 6%.

At the company’s cable networks, revenue increased 7%, up from $536 million in the year-earlier period. CBS said the increase was driven largely by higher affiliate and subscription fees, and growth of the Showtime’s SVOD service.

During a call with investors, CBS Corp. CEO Leslie Moonves offered hints of new business ventures, noting that CBS expected to launch a 24/7 live-streaming sports outlet that would operate much like CBSN, a stand-alone OTT news stream it has operated for some time. The idea is “in the very preliminary stages of formation, but CBS is a big player in the sports world,”said Moonves. “We are going to look to differentiate ourselves from the ESPNs and Fox Sports, and, well, we think we have a good opportunity for success. Like CBSN, we can keep costs relatively minimal, because we already have a great infrastructure for sports like we did with news. The chance of profitability early on are very good.”

Moonves also said CBS intended to expand “All Access” to overseas markets – starting with Canada – in the first half of next year. The company reiterated that it plans three new “All Access” series in the months to come.

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