CBS Results: Higher Q3 Revenue, Q4 TV Scatter Pricing

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Although CBS Corp. recorded some slightly lower advertising results during the third quarter, current TV scatter market business is up by double-digit percent price increases from upfront pricing set in June.

CBS advertising results were down during the period -- 3% -- partly due to lower advertising sales for CBS Radio and the impact of foreign exchange rates.

CBS TV advertising sales also suffered because of lower-rated summer programming against the highly rated 2012 Summer Olympics on NBC. In addition, there were prime-time pre-emptions from Republican and Democratic national conventions on six nights of the CBS Television Network's prime-time schedule, which took some advertising prime-time inventory out of sale. 

Still, revenues grew -- somewhat slowly -- 2% to $3.43 billion with net income 16% higher to $391 million. The company posted higher revenue and net profits mostly coming from content licensing and distribution revenues.

CBS and other networks have suffered from lower initial season rating comparisons to a year ago. CBS points to a big relaunch of "Two and a Half Men" startup a year ago with Ashton Kutcher, which garnered big viewership.

Still, Les Moonves, president and chief executive officer of CBS Corp., noted that time-shifted viewing continues to grow -- as much as 30% over a seven-day period for many CBS prime-time shows (and three to four million viewer growth after three days of time-shifted viewing). While CBS and other networks only get paid by advertisers for live and three days of time-shifted viewing, Moonves says the company is pursuing other alternatives to monetize more time-shifting. 

"People have to stop looking at overnight ratings," says Moonves, in speaking to Wall Street analysts. "We will make it a priority to get paid for all our viewing." 

Moonves says better TV numbers are coming in the first quarter of 2013 -- mostly from big events such as the NFL's AFC Championship, The Grammys, and the Super Bowl, which will pull in 170 million incremental viewers. 

He notes that 30-second commercials on the CBS network for the Super Bowl have gone for more than $4 million. In addition, for the first time, CBS' New York outlet WCBS recorded a $1 million sale for a local TV commercial for the big NFL game.

CBS, which has been viewed as a big TV advertising barometer, says advertising sales as a share of total revenue continue to drop. Ad sales now represent 56% of total revenue; they have been as high as 70%. Moonves says current TV scatter pricing has seen mid-teens percentage growth over upfront pricing set in June.

Moonves says there are major growth areas in selling previous-season shows to subscription video on-demand services (SVOD) like Netflix -- of which CBS has made deals for its CBS and CW prime-time programming. 

CBS has only made deals of this type amount to just 7% of its TV library. "The sky is the limit," says Moonves. He added: "It could mean ten of millions of dollars," like traditional U.S. and international syndication business.

CBS says its major financial growth during the third-quarter period was led by an 8% climb in content licensing and distribution revenues to $931 million. More rapid growth came from affiliate and subscription fee revenues, which climbed 12% to $496 million -- as a result of higher retransmission revenues from CBS Network affiliated television stations, and cable network subscribers' fees.

Revenues from the sale of CBS TV content have grown 3% to $1.68 billion from $1.63 billion. Overall cable revenues were 4% up to $436 million from $420 million for Showtime Networks, CBS Sports Network, and Smithsonian Networks. 

Local broadcasting -- TV and radio -- was slightly more than even with the same period a year ago -- 1% higher at $661 million from $656 million. TV stations recorded 7% higher advertising sales as a result of political advertising.

CBS' Simon & Schuster publishing unit was down 5% to $210 million from $220 million in the same period a year before. The company noted that digital book sales climbed 20% during the period.

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