CBS Corp. Q4 Profit Rises Sharply Amid Higher Ad, Content Results

The company saw advertising revenue increase 12 percent overall as CEO Leslie Moonves predicted "very little change" will be necessary in the CBS fall schedule amid strong ratings.

NEW YORK – CBS Corp. on Wednesday reported a higher-than-expected fourth-quarter profit amid continued advertising gains and stronger content results, including broadcast retransmission fees from TV distributors. 

The company posted the better financials after its stock hit a new 52-week high of $22.25 during Wednesday's trading session before closing up 2.1 percent at $22.10.

CBS Corp. president and CEO Leslie Moonves on a conference call said the CBS network primetime schedule has performed so strongly, including new shows Hawaii Five-0 and Mike & Molly, that "very little change is necessary in our schedule because we have so many successful shows." That should bode well going into this spring's upfront presentations for the new fall TV season, Moonves said, adding that any new show must be "pretty extraordinary" to make the cut. Fewer new shows mean lower development and promotional costs, which will further help financial trends, he said.

Analysts on the CBS earnings call didn't ask about the future of Two and a Half Men and its star Charlie Sheen.

In the latest sign for his company's ad strength, Moonves said network ad prices in the scatter market have been running around 40 percent above last year's upfront levels. TV station ad revenue is looking to be unchanged over the year-ago period in the current first quarter despite a lack of the Super Bowl and political ads that had helped 2010 figures, CBS management also said Wednesday.

But oberservers took the latest results as more proof that CBS has successfully developed revenue streams beyond advertising. For example, Moonves said 2010 retrans revenue was well above the expected $100 million, and he said the company was on track to reach $250 million-plus in retrans revenue by the end of 2012.  He also said that he expects added revenue over the coming years from reverse compensation from TV station affiliates that get retrans payments, even though he didn't project specifics.

The media giant reported a quarterly profit of $283 million, up from $58.8 million in the year-ago period. Adjusted net profit of $319.4 million increased 78 percent from $179.2 million in the same period a year earlier. Adjusted operating income before depreciation and amortization of $770.1 million was up 32 percent.

Revenue rose 11 percent to $3.9 billion, led by a 21 jump in the firm’s local broadcasting business, including a 28 percent improvement at the firm's local TV stations and the highest radio ad gain in a long time (14 percent), as well as an 11 percent gain at its entertainment unit and 6 percent improvements each in the cable networks and outdoor units.

Total advertising sales rose 12 percent, with CBS network advertising up 8 percent. Content licensing and distribution revenue jumped 21 percent thanks to the second-cycle syndication sale of CSI: Crime Scene Investigation, as well as higher international syndication sales.

“CBS’s momentum accelerated throughout 2010, culminating in our best results of the year in the fourth quarter,” said Moonves. “Between the strength of our content, the way we’ve positioned our company for future growth and the ongoing improvement in the economic environment, we expect great things this year and beyond.”

CBS chairman and controlling shareholder Sumner Redstone called the full-year results "nothing less than sensational."

Moonves on Wednesday also briefly addressed the emerging CBS film business, highlighting that it has done well in recent weeks with The Mechanic, saying it will be profitable. He reiterated that CBS is taking its move into the movie business slowly, and "we like where we stand right now."

The CBS CEO also said Showtime's original programming continues to do well, and its movie product also remains solid. He highlighted that the premium TV network has a deal with the Weinstein Co., which means Showtime will show King's Speech, which Moonves said looks like it has a good shot at winning an Academy Award.

He also once again lauded the strong network TV business, highlighting that competitor Fox has also continued to do well with American Idol despite predictions of its demise.

Discussing the decision to share NCAA basketball tournament broadcast rights with Time Warner's Turner networks unit starting this year, CBS management said that this will reduce revenue from the tournament, but also boost profitability for the firm. And Moonves said ad sales for the NCAA have been going "extremely well."

CBS also said that it has reduced its exposure to Borders Group, the retailer selling books and other media and entertainment products that had filed for Chapter 11 bankruptcy earlier in the day. CBS, whose Simon & Schuster publishing unit is affected by the bankruptcy, stopped shipping product to the chain late last year and took an undisclosed writedown.
 

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