New CBS Mired By Old Medium: Radio

Reporting results of its second quarter as a free-standing company, CBS Corp. emphasized its expansion into new media and distribution platforms, but it was traditional media like TV and outdoor that appear to be propelling its growth, while another, radio, is proving a drag.

"Radio has struggled as the marketplace continues to face challenges," President-CEO Leslie Moonves conceded after releasing the company's second quarter and first half results. While CBS Radio is showing the promise of some programming changes, the radio marketplace remains mired due to weak advertising demand, and challenges from new media, and CBS is currently focused on selling many of its stations in smaller markets.

CBS' revenues, in fact, declined 1 percent to $3.48 billion from $3.51 billion in the second quarter of 2005 when it was still part of an integrated Viacom. The drop was due in large part to a slowdown in its radio operations, as well as $24 million in costs associated with the shutdown of UPN television network.

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CBS Radio, the second largest radio broadcaster after Clear Channel Communications, saw sales decline 8 percent to $519.1 million during the second quarter, an indication that the radio ad marketplace is growing softer as the year progresses. Through the first six months of the year, CBS Radio's revenues were down 7 percent to $953.6 million.

The media company's bright spot continues to be its outdoor media division, which is riding high on an opposite advertising demand curve. Outdoor ad revenues jumped 7 percent to $534.4 million during the second quarter, an acceleration over the division's first half rate of growth of 6 percent.

TV revenues also declined 1 percent to $2.260 billion, due partly to a "relatively flat" TV advertising marketplace. CBS also experienced an 11 percent hike in affiliate fees.

Although the company's outlook remains tepid in the near-term - it told shareholders revenues are on track to deliver only low single-digit growth this year - both Moonves and Executive Chairman Sumner Redstone indicated long-term growth would come from an expansion into new media, something that was a large focus of CBS' discussions with advertisers and agencies during its 2006-07 upfront ad negotiations.

"We continue to test a great number of new media distribution methods and price points to determine which will attract the largest revenue opportunities," Moonves stated.

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