Black Eye At Black Rock, CBS Sees Red Ink

arrow down CBS witnessed massive advertising declines among its television, radio and outdoor in the fourth quarter, which contributed to a 52% drop in net profits and a slashing of its quarterly dividend.

Fourth-quarter 2008 net earnings went to $136.1 million and revenues slipped 6% to $3.53 billion from $3.76 billion. Analysts were expecting much of this--especially when it comes to the advertising sales picture. Analysts have long worried that CBS has been too heavily dependent on ad revenues.

But CBS chief executive Les Moonves says the company has steadily changed this financial equation, noting that now one-third of the company's revenue comes from non-advertising-related activities such as Showtime, syndication, DVD, publishing and retransmission fees.

CBS said TV revenues for the fourth quarter of 2008 decreased 8% to $2.21 billion from $2.40 billion.



This stemmed from network time sales, such as the time-period sale that presidential candidate Barack Obama made before the election, which took normal prime-time advertising inventory out of the period. CBS says this caused prime-time network ad sales to drop 13% during the period. In addition, ad sales at CBS' TV station continued to suffer, as a result of dramatically slower auto advertising.

In regard to current TV ad sales activity, Moonves says: "Second-quarter options are fairly normal... [and] we are getting the lion's share of the scatter market." He adds that pricing is up for scatter, but at lower-than-normal sales volume.

Moonves notes that pharmaceutical advertising is doing well--but that retail and financial categories are down somewhat. For the year, CBS says all advertising revenues dropped 8% versus 2007.

No matter what happens to the economy, Moonves says CBS will do better in the second half of the year than the first half--in part because of syndication sales--advertising and license fee revenues--as well as an improving financial picture at the network.

Radio revenues decreased 18% to $366.7 million from $447.1 million because of weakness in the advertising market and the impact of radio station sales.

Outdoor revenues slowed 15% to $526.3 million from $618.6 million. A weak advertising market had an impact on the unfavorable foreign exchange rates as the U.S. dollar strengthened. Revenues in North America were down 14%, primarily due to a revenue decline in U.S. businesses.

CBS created an interactive division around its big acquisition of CNET. Interactive revenues for the fourth quarter of 2008 rose $186.3 million from $58.6 million for the same quarter last year. That includes the acquisition of CNET, better mobile revenues and advertising sales. By itself, CNET's interactive revenues increased 1% from the fourth quarter of 2007.

Publishing revenues improved a bit--1% to $245.1 million. Top-selling books in the period include "YOU: Being Beautiful" by Michael F. Roizen and Mehmet C. Oz, "The Purpose of Christmas" by Rick Warren and "Just After Sunset" by Stephen King.

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