Moonves Details Digital Strategy For CBS

by Gavin O'Malley, Feb 27, 2008, 7:15 AM

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While Web-related financials were typically sparse, CBS head Leslie Moonves did provide key insights into the company's digital dealings during Tuesday's fourth-quarter earnings call.

Illustrating his belief that an "Internet audience is additive to our core audience," CBS Corp.'s president and chief executive pointed to the network's cross-platform coverage of the NCAA March Madness college basketball tournament.

"To this year's tournament, next month, we're projecting more than $21 million in total revenue," Moonves told analysts. (That number is up significantly from $9 million in 2007, and about $4 million in 2006.) "Meanwhile, our [TV] tournament ratings are as strong as ever, and our associated television revenues are growing."

CBS's ad-supported March Madness on Demand business is all the more compelling, added Moonves, because its growth has required virtually no additional investment.

"Our costs remain exactly the same as they were the first year," Moonves said. "The great majority of that $21 million will drop to the bottom line, contributing to the hundreds of millions in interactive revenue across the company."

Moonves also discussed how CBS has been financing various digital initiatives.

"We've pruned our asset mix to shed some of our lower-growth businesses like certain small-market TV and radio stations," he said. "We've used a portion of the proceeds to invest in other higher-growth areas like Last.fm."

Late last month, through deals with Universal Music Group, Sony/BMG, Warner Music Group, and EMI Group, CBS proclaimed Last.fm to be the biggest free, ad-supported music service online--and the future of the global music business.

Since then, Last.fm has "posted a 92% increase in U.S. listening," Moonves said. "And we're beginning to monetize those results now."

Still, the core message repeated by Moonves on Tuesday was his unflagging confidence in quality content to lead CBS through any challenges in the future.

"It is the content that is the engine driving us forward into the digital interactive future," Moonves said. "What is not really recognized yet is that the content on network TV is also defining success online and on all of the emerging platforms now available to consumers."

"Whether it's over the air or on the Internet, it's about content, and online it's our strategy to reach people wherever they are and bring our content to them," he said. "That's why we created the CBS audience network, which has more than 300 affiliated Web sites."

According to Moonves, the CBS audience network now delivers news, sports and entertainment content to more than 190 million Internet users.

"We are using our established businesses as content engines that fuel the Internet and all of the new platforms afforded by technology," Moonves added. "Few companies in our space have the resources at their fingertips in this marketplace to be able to act as we can on opportunities in these areas."

CBS's broader financial picture was less than rosy, however, as fourth-quarter earnings fell 14.6% to $286.2 million--or 42 cents a share--compared with a profit of $335 million, or 43 cents a share, in the final three months of 2006. Revenue fell 3% to $3.76 billion.

Moonves insisted that CBS is not seeing signs of a recession in its day-to-day operations, as ad sales and rates remained strong in the first quarter.

"The hardest-hit sectors like home building and real estate are not significant advertisers on our air," Moonves told analysts, while he did concede it was "too early in the year to make a determination on the spending of any one category."

Moonves also maintained that the Writers Guild of America strike had no financial impact on CBS.

"Our financial picture was not affected negatively by the strike in any shape or form," he said. "It lasted longer than any of us would have liked, but the good news is the network business is back."

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