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CBS Brass Talk NFL Deal, Political Advertising Bonanza, Streaming Growth but Not Viacom

CBS is prepared to “do what is necessary” to hang on to its NFL rights. That was the message sent by CBS acting CEO Joe Ianniello and CBS Sports chief Sean McManus Thursday during CBS’ fourth-quarter earnings call.

Ianniello and McManus both talked up the virtues of having the NFL on broadcast TV, which remains ubiquitous even in a fragmented media landscape. CBS’ deal for its Sunday afternoon package of AFC games runs through 2022, and already there is much speculation in media and Wall Street circles about CBS and other broadcasters vying against digital behemoths in the next round of NFL rights talks.

McManus said he believes the NFL will continue to “strongly value and prioritize the reach of broadcast television” as it considers options for new rights deals. Big-ticket sports and event rights are seen as crucial to the survival of linear TV, which still has an advantage over on-demand streaming platforms in drawing crowds for must-see live broadcasts.

Ianniello noted that the NFL chose a traditional broadcaster last year in the auction for rights to its “Thursday Night Football” package, which went to Fox in a five-year deal. “They could have experimented with that. They could have gone to a streaming platform exclusively,” Ianniello said. “You don’t ever want to cut off your core audience.”

McManus predicted that substantive talks between major networks and the league will not begin until next year as the NFL first has to hammer out what is expected to be a tough new collective bargaining agreement with its players. CBS has had good relations with the league ever since it reacquired football rights in 1998, after being outmaneuvered by Fox in 1993.

“We’ve been successful three times in renewing our (NFL) rights and I would expect to do so again,” Ianniello said. CBS will “do what is necessary to make sure the NFL stays on CBS.”

Ianniello emphasized the growth in CBS’ direct-to-consumer platforms — CBS All Access and the standalone Showtime app — that has paced ahead of projections the company made in 2016. Together, CBS All Access and Showtime have surpassed 8 million subscribers, a benchmark that CBS originally projected it would hit in 2020. Ianniello said the company’s new growth target is for both to have 25 million by 2022.

“Our direct-to-consumer services are our future,” Ianniello said. He noted that CBS is ahead of the curve compared to competitors including Disney, WarnerMedia and NBCUniversal, which are just entering the streaming platform business. CBS is already “hitting our stride and poised to take significant leaps head,” Ianniello said.

CBS All Access is growing its roster of original series in part because subscribers are pushing for more content. There’s a chance that some of All Access’ original series could have a second-window run on the mothership CBS, which would help the company amortize production costs. “We’re discussing it as we speak,” he said, calling it “an efficient use of the IP or franchise.”

CBS’ fourth quarter earnings were buoyed by a windfall of political advertising dollars in local markets — more than $100 million, per CBS chief financial officer Christina Spade. “Political infighting is good for CBS,” she joked.

CBS is looking at achieving $100 million in operational savings by streamlining some operations and administrative functions at various divisions. Some of that could involve staff reductions although the focus is on reallocating resources to better position the company for new growth.

Ianniello was pressed on the big-picture question that has been hanging over CBS for some time — namely, whether it will soon be recombined with Viacom. Both companies share a controlling shareholder in Shari Redstone’s National Amusements, which has advocated for a merger in the past. Ianniello would not comment on something that he said would be the purview of CBS’ board of directors.

“The management team is focused on operating the company,” he said. “At a company that is over 90 years old, to be able to give guidance of multi-year revenue growth at a rate that is faster than the last three years is pretty impressive.”

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