CBS Corp. Delivers Strong Second Quarter Earnings as Viacom Merger Talks Proceed

CBS Corp. delivered strong second quarter earnings on Thursday, posting top and bottom line growth as the company prepares for the transformation of a merger with its corporate sibling Viacom.

CBS reported what it described as record second quarter revenue of $3.81 billion, up 10% from the comparable quarter last year. Operating income was up 5% to $695 million. Net earnings climbed 10% to $440 million while adjusted earnings per share hit $1.16, up 4%. CBS’ numbers met or beat Wall Street analysts expectations for the quarter.

Digital content licensing and subscriber gains for CBS’ streaming platforms, CBS All Access and Showtime, were the biggest drivers for the quarter. CBS cited a library content licensing agreement for an outside digital platform as a big contributor to the 13% gain in content licensing and distribution for the quarter.

Ianniello disclosed during CBS’ conference call with analysts that CBS All Access will launch a kids programming section later this year with 1,000 hours of programming. The offering will include new seasons of animated series “Cloudy With a Chance of Meatballs” and “Danger Mouse.” Ianniello said the goal was to make CBS All Access more valuable to subscribers with children and to reduce the churn factor. Or as Ianniello put it: “More things for more people.”

CBS’ board of directors has been in negotiations with Viacom to pull off a long-gestating merger agreement. There’s been much speculation that the deal would be done to coincide with today’s earnings announcements from both CBS and Viacom. Sources say any completion of a deal is likely to be at least a few days awa. It’s understood that work on the merger slowed down considerably this week as both companies focused on earnings reports and CBS finalized a carriage deal to end its three-week contract standoff with AT&T’s DirecTV and U-verse platforms.

Ianniello and CBS chief financial officer Christina Spade were not asked about the status of Viacom talks. Investor relations chief Anthony DiClemente warned participants at the start of the call that executives would not respond to any queries about M&A matters.

Ianniello emphasized the importance of CBS’ investment in high-end content to driving future growth. He noted that the CBS Television Studios production arm is fielding some 89 shows this year, up from 70 at the same time last year. CBS is balancing a focus on owning most the content that runs on CBS, CBS All Access, Showtime and other platforms while at the same time producing shows for non-CBS outlets such as Netflix (“Dead to Me”), Fox (“BH90210”) and ABC (“Kids Say the Darndest Things”). Original production for Showtime is up 40% this year over last year.

“We are operating at a sweet spot in the industry and setting ourselves up for continued long-term growth,” Ianniello said.

Ianniello said CBS All Access and the stand-alone Showtime are on track to deliver a total of 25 million subscribers by 2022. Total subscribers grew a whopping 75% year-over-year, marking an acceleration of subscriber growth posted in Q1, Ianniello said.

CBS’ Entertainment unit encompassing the CBS network and CBS Television Studios delivered $2.7 billion in revenue for the quarter, up 14% with help from a 9% gain in advertising revenue. CBS network ad revenue inched up 3% from the prior year quarter. Content licensing and distribution revenues grew 18% thanks in part to shows produced for outside networks. Operating income for the entertainment unit was up 16% to $426 million.

Cable networks hit $562 million in revenue while operating income fell 24% to $185 million. CBS chalked up the dent to higher programming costs at Showtime tied to the launch of dramas “City on a Hill” and “The Loudest Voice” in the quarter.

CBS’ local media division contributed revenue of $423 million, up 1%, and operating income of $130 million, up 2%. The Simon & Schuster publishing arm delivered $218 million in revenue (up 5%) and $33 million in operating income (up 6%).

Ianniello also emphasized CBS’ bullish forecast for CBS All Access growth. The length of time that users spend on the service grew by 60% year over year, thanks to the appeal of original series. CBS has high hopes for upcoming originals “Why Women Kill” and “Picard,” the latest “Star Trek” series.

Jo Ann Ross, CBS’ longtime advertising sales chief, was also on the call, talking up CBS’ sales prowess in the upfront. The combination of CBS’ growing digital inventory with the heightened advertiser demand for traditional TV spots made for a potent sales pitch to Madison Avenue.

“We have a greater share of (advertisers’) premium video budgets than ever before,” Ross said. 

Popular on Variety

More TV

  • George RR Martin

    George R.R. Martin Says HBO's 'Game of Thrones' Ending Won't Influence Future Novels

    Geroge R.R. Martin is sticking to his original plan when it comes to the future of “Game of Thrones.” In an interview with The Observer, Martin claimed that HBO’s controversial ending for the series would have no affect on the endings of the last two novels. “No, it doesn’t. It doesn’t change anything at all,” [...]

  • Listen: 'Pennyworth' Producer Talks Delving into

    Listen: 'Pennyworth' Executive Producer Talks Delving into Alfred's Backstory

    Bruno Heller may have served as an executive producer on the Batman-inspired series “Gotham” for the past five years, but it’s actually real-life people (not superheroes) that intrigue the producer the most. It’s for that exact reason that Heller’s newest series finds him exploring the origin stories of Batman’s butler Alfred in the Epix drama [...]

  • "Trust Issues" - Dylan and Lizzie

    'Instinct' Canceled After Two Seasons

    CBS has canceled “Instinct” after two seasons. Series creator Michael Rauch announced the cancellation Friday on Twitter, writing, “I’m very sad to relay the news that @instinctcbs won’t be renewed for a 3rd season. We will double up this Sunday and our season/series finale will be Aug 25.” Rauch also thanked series stars Alan Cumming [...]

  • Maisel Day

    My Mostly OK Maisel Day (Column)

    When Amazon announced its first-ever Maisel Day, I was intrigued. For one day, Aug. 15, “The Marvelous Mrs. Maisel” fans and Angelenos (fangelenos?) could hit up various restaurants, theaters and retailers throughout Los Angeles for special deals, all at 1959 prices. Among the gems: $2.50 makeovers, $0.99 pastrami sandwiches and $0.30 for a gallon of [...]

  • Nordisk Film & TV Fond Announces

    Nordisk Film & TV Fond Backs Joachim Trier, Ole Bornedal, Yellow Bird

    Nordisk Film & TV Fond has announced three features, two series and a documentary set to receive $1.4m in financing, as well as distribution, dubbing and cultural initiative support recipients. Doing so, it highlights some of the key titles moving forward in the Nordic region. Already backed by the Danish Film Institute’s largest ever grant [...]

  • TV News Roundup: 'Silicon Valley' Final

    TV News Roundup: 'Silicon Valley's' Final Season Sets October Premiere Date

    In today’s roundup, “Silicon Valley” returns to HBO on Oct. 27 and Quibi greenlights a new cooking competition show “Dismantled.” DATES The fifth season of Netflix‘s “Peaky Blinders” will premiere on the streamer Oct. 4. The newest season will continue to follow one gangster family in the lawless streets of Birmingham, UK during the midst [...]

  • Peter Fonda Dead: 'Easy Rider' Star

    Peter Fonda, Star of 'Easy Rider,' Dies at 79

    Two-time Oscar nominee Peter Fonda, who became a counterculture icon when he co-wrote, produced and starred in seminal 1969 road movie “Easy Rider,” then showed Hollywood he could act about three decades later in “Ulee’s Gold,” died on Friday from lung cancer at his home in Los Angeles. He was 79. His sister Jane Fonda [...]

More From Our Brands

Access exclusive content