Bloomberg News

CBS’s Quarterly Profit Surpasses Views on Programming Deals (1)

February 13, 2014

CBS Corp. (CBS:US), owner of the most-watched television network, reported quarterly profit that beat estimates, helped by programming deals, and accelerated its stock buybacks by $1.5 billion. The shares rose.

Net income rose 20 percent to $470 million, or 76 cents a share, from a year earlier, New York-based CBS said in a statement yesterday. Profit excluding some items was 78 cents a share, exceeding the 76-cent average of 27 analysts’ estimates, according to data compiled by Bloomberg.

CBS, home of police drama “NCIS,” the most watched show on television, is using its ratings dominance to wring money from distributors in so-called retransmission fees, which allow pay-TV services to provide the network’s signal to subscribers. The company is also licensing more shows to streaming services operated by Amazon.com Inc. and Hulu LLC.

“The beat was overall across segments,” Martin Pyykkonen, an analyst at Wedge Partners, wrote in an e-mail. “Syndication, including streaming, was a key part of revenue and margin growth.”

CBS, controlled by Chairman Sumner Redstone, rose 4.5 percent to $64.63 at 3 p.m. in New York. Before today, the stock had declined 3 percent this year.

Sales increased 5.8 percent to $3.91 billion in the quarter, beating the $3.82 billion average of analysts’ estimates.

Significant Increase

CBS said yesterday it will buy back a total of $2 billion shares in the current quarter. The amount spent in the first quarter is almost the same as the company spent on repurchases in 2013, CBS said.

A deal with Time Warner Cable Inc. (TWC:US), announced on Sept. 2 after a monthlong blackout, represented a significant increase in the monthly fee paid to CBS, almost double that of prior contracts, people with knowledge of the terms said at the time. Verizon Communications Inc. reached an accord with CBS in August for its FiOS pay-TV system under similar terms, according to Chief Executive Officer Leslie Moonves.

The company has set a target of $2 billion by 2020 in retransmission fees from pay-TV systems and compensation from TV stations the network doesn’t own, Moonves said on a conference call yesterday. He said the goal won’t be affected by court rulings on the legality of Aereo Inc.’s online television service, which uses dime-sized antennas to obtain broadcast signals without paying fees to networks.

Entertainment Division

Aereo, backed by Barry Diller, operates in New York and nine other U.S. cities, and has plans to expand. The Supreme Court agreed earlier this month to hear an appeal by media companies including CBS, Fox, Walt Disney Co.’s ABC and Comcast Corp.’s NBCUniversal, which contend Aereo violates their copyrights.

Operating profit at CBS’s entertainment division, which includes the broadcast network, increased 31 percent to $368 million as sales rose 11 percent to $2.21 billion.

“Entertainment did better than I expected,” Brian Wieser, an analyst at Pivotal Research Group, said in an e-mail. “Network advertising was exactly in line with my expectations, suggesting content licensing and distribution was very strong.”

Streaming Rights

During the last quarter, CBS agreed to provide Amazon with streaming rights to episodes of the second season of “Under the Dome.” In January it announced a deal to provide the online retailer with rights to its new sci-fi series from Steven Spielberg called “Extant,” featuring Halle Berry.

Earlier this month, CBS agreed to stream past seasons of crime and police dramas “Elementary” and “Blue Bloods” with Hulu.

The company’s local stations, including radio, produced a quarterly profit of $236 million, a drop of 20 percent from a year earlier when political advertising bolstered results. Revenue dropped 8.6 percent to $719 million.

The cable division, which includes Showtime, posted a profit of $193 million, a 9.7 percent increase, as sales rose 8.9 percent to $477 million.

Moonves said yesterday that CBS will lead the television industry in pricing and volume during the so-called upfront market, meetings held in May with the biggest advertisers to set ad rates for the next TV season.

NFL Thursdays

The company announced an agreement last week with the National Football League to simulcast eight national games on Thursday nights starting in September. The one-year deal can be extended by a year by the NFL, which will also carry the games on the league’s NFL Network cable channel. CBS paid $250 million to $300 million for the rights, according to an estimate by Michael Morris, an analyst at Guggenheim Securities in New York.

CBS will offer shares of its outdoor division, which owns billboards, later this quarter, Chief Operating Officer Joe Ianniello also said yesterday. It’s waiting for approval from the U.S. Internal Revenue Service to split off the unit into a separately traded company, he said. CBS has already sold its outdoor operation in Europe and Asia.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • CBS
    (CBS Corp)
    • $59.4 USD
    • -1.03
    • -1.73%
  • TWC
    (Time Warner Cable Inc)
    • $149.15 USD
    • 2.70
    • 1.81%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus