• by Wayne Friedman , September 20, 2011

Despite overall U.S. economic malaise, current fourth-quarter advertising business is healthy for CBS. There have only been a few last-minute cutbacks on season-long TV advertising deals made in June.

"I know the world wants us to say, 'Gee, the economy is down and advertising is down,' but that's not the case," says Les Moonves, president/CEO of CBS Corp., speaking at the Goldman Sachs Communacopia Conference. "The advertising climate is very strong."

Plus, Moonves says there have been little in the way of upfront advertising cutbacks that can occur before the start of the season. Between the upfront selling period in June and the start of the season in September, TV advertisers can make last-second adjustments -- mostly cutbacks -- to their proposed season-long broadcast deals.

"There have been very very little cancellations, [in terms of upfront] holds-to-orders," he says, "basically matching that of a year ago and a year before that." Moonves added that advertising is strong for all TV, radio, and outdoor businesses.

Although advertising still commands the bulk of CBS revenues -- more than 60% -- other revenue is growing in share, such as international program sales, helping to smooth out possible sharp changes in its ad revenue.

"The international marketplace is burgeoning," he says, noting that revenue has doubled from a few years ago. Overall, CBS can sell a TV show internationally for a collective $2 million an episode -- a very profitable business.

"We have changed; we are not a cyclical company." says Moonves. CBS owns 70% of the programming it airs. "The guy with the most good content wins. We have the biggest library in the world."

Moonves reiterated his concern over Hulu in the U.S: "I don't like joint ventures with competitors," he says. "My content is really the family jewels."

He says domestic Hulu deals are not only exclusive; TV media owners only get 70 cents on the dollar for their TV shows that run on the premium digital video site. Also, Hulu in the U.S. offers up a broader exposure of shows -- which can devalue programming. "We don't want our content out so much," explains Moonves.

While CBS will not sell programming to Hulu, it has no problem making international cash deals with the company. In the future, CBS would consider Hulu Plus, which in theory offers the possibility of giving media companies more money for its TV shows.

In order of programming revenue priority, Moonves says, the No. 1 place for CBS shows is advertising on the CBS network. Next, CBS counts on revenue from international and domestic syndication.

After that, the network turns to Netflix and Amazon. Of the Netflix deal, Moonves says CBS has sold only 7% of its library to the DVD-mail order/streaming TV service, but not much in the way of recent TV episodes or shows. "Netflix wanted everything we had on the air," he says.

Retrans fees continue to grow for CBS, where CBS stations will get fees from cable/satellite/telco operators, as well as a piece from CBS affiliates for their deals. This could account for "hundreds of millions of dollars a year," says Moonves.

CBS still keeps its eye on programming costs -- which only grow a couple of percentage points a year. A couple of seasons ago, Moonves says CBS cancelled "Without a Trace," a co-production of CBS and Warner Bros., because costs escalated to $4 million an episode. It was replaced by "The Good Wife," which cost $1.6 million an episode.