CBS Exceeds Revenue Expectations Amid Cord-Cutting Concerns

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Leslie Moonves

Nevertheless, CBS shares have been crushed along with the rest of the media conglomerates, and the stock was falling after the closing bell despite solid financial results.

CBS on Thursday reported earning 92 cents per share in the fourth quarter on $3.9 billion revenue, results that met expectations on the bottom line and exceeded them on the top line.

CBS was expected to earn 92 cents per share on $3.79 billion in the quarter.

Advertising revenue grew just 1 percent in the quarter for the company overall, but network ad growth was 8 percent. Revenue grew in all four segments, except for local broadcasting.

Wall Street analysts and investors will pore over the CBS numbers looking for clues that the state of the TV industry isn't in the shambles that some think it is in.

The market has been very jittery about cord-cutting and competition from digital streamers such as Amazon.com and Hulu, but CBS is perceived to be at less risk from the phenomenon given its flagship network is broadcast free to consumers.

Nevertheless, CBS shares have been crushed along with the rest of the media conglomerates. They closed 2 percent higher on Thursday but remain 17 percent lower since August, when Wall Street was spooked about cord-cutting. Despite solid results, CBS shares were falling 4 percent in after-hours trading.

CEO Les Moonves began a conference call with analysts by thanking Sumner Redstone and Shari Redstone for his recent promotion to executive chairman, then he stressed that CBS will thrive in an unbundled world just as it has in a bundled world.

"We had a terrific fourth quarter and CBS is now in position to build strong momentum throughout 2016," Moonves said, citing Super Bowl 50 in the current quarter and tons of political spending to come.

In fact, the exec said political spending on advertising ramped up in the fourth quarter, helping the company to post strong results, and he said politics will give CBS "a huge lift" in the third and fourth quarter this year.

After the Iowa and New Hampshire primaries, it remains a wide open race, which means candidates will keep spending money on TV ads. "There is a lot of uncertainty, which is just the way we like it," said Moonves.

The CEO and recently named executive chairman also said retransmission consent and reverse compensation are set to hit $1 billion in revenue in 2016, a year earlier than expected, and should surpass $2 billion by 2020.

The largest segment at CBS is entertainment, and it posted revenue of $2.46 billion, up 9 percent over the same quarter last year.

Cable networks, which consists of Showtime, CBS Sports Network and Smithsonian Networks, saw revenue rise 13 percent to $562 million.

Publishing, consisting of Simon & Schuster, grew revenue by 8 percent to $233 million, with Donald Trump's Crippled America and Stephen King's The Bazaar of Bad Dreams both becoming best-sellers in the quarter.

Local broadcasting revenue was down 8 percent to $719 million, with an 11 percent decline for CBS Television Stations.

Moonves also expressed enthusiasm over a new Star Trek TV show that, after the first episode, will be available only on its digital service, CBS All Access, and he said there will be additional shows exclusive there in the future.

He also raved about the success of Billions, on Showtime, adding: "We own 100 percent of Billions, which has a nice ring to it."

In fact, Moonves said Showtime has "a murderers' row of original programming" that is set to add a new version of Twin Peaks next year.

He also said the scatter market for advertising is stronger than it has been in recent memory, so healthy upfronts are expected as well.

An analyst, in fact, asked Moonves to explain why advertising sales are so good for CBS but not for some competitors. He spoke of TV shows that attract 20 million viewers and compared them to YouTube videos; said that there are indications that digital advertising doesn't deliver the return on investment that broadcast television does; and concluded: "It's still the best bang for your buck."

Moonves said he is considering an ad-free version of CBS All Access that would cost $4 per month more than the current version, but noted that the ad-free version of Hulu "hasn't worked that well."

Email: Paul.Bond@THR.com

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