CBS sees Q4 drop in radio, TV

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CBS Corp. reported mixed fourth-quarter results Tuesday and predicted low- to mid-single-digit percentage growth in profits for 2008 despite economic concerns on Wall Street.

Countering growing fears that the economy is starting to affect the ad-supported media that makes up the bulk of the revenue of companies like CBS, company president and CEO Leslie Moonves pointed to Fox's averaging $2.7 million for 30-second spots during this year's Super Bowl.

"That doesn't tell me that there's something drastically wrong with the economy, when guys will pay that much for those spots," said Moonves, adding that he expects network TV to remain a core ad buy in a possible recession. "The last thing you want to do is pull back from network television," he told investors and analysts.

With that in mind, CBS expects operating income before depreciation and amortization and operating profit to each grow 3%-5% this year when excluding stock-based compensation expense. For 2007, those metrics hit $3.18 billion and $2.73 billion, respectively.

Fourth-quarter results showed strength in the firm's outdoor unit but lower TV and radio results.

Quarterly profit fell 15% to $286.2 million, and profit from continuing operations on an adjusted basis fell to $366.7 million. The company cited a higher income tax rate, the absence of UPN and TV and radio station sales.

Revenue of $3.76 billion for the fourth quarter meant a 3% decline over the year-ago period, but operating income before depreciation and amortization rose 4% to $824 million. For the full year, these metrics ended down 2% and up 1%, respectively.

"We finished 2007 with our businesses well poised to increase revenue and profits in 2008 and beyond," Moonves said.

Television revenue for the fourth quarter decreased 4% to $2.5 billion because of a 7% decline in advertising revenue, reflecting lower political advertising sales, which had set a record in the fourth quarter of 2006. TV station divestitures also affected results. Television OIBDA before impairment charges decreased 6% to $501.6 million.

Radio revenue on a "same station" basis, excluding divested stations, fell 7%, and reported revenue dropped 10%. Weakness in advertising sales and the impact of the station divestitures in 10 markets were the culprits. Radio OIBDA for the fourth quarter decreased 21% to $167.4 million. Moonves said he expects the radio unit to grow revenue this year.

Moonves said the company is open to various deals to retransmit its programming via cable operators, including the kind of arrangement that ABC stations made with Cox Communications this week. Under that deal, ad-supported programming is provided on demand, with Cox disabling fast-forwarding functions. Moonves emphasized though that he still mainly expects cash for retrans rights.

Goldman Sachs analyst Ingrid Chung said, "CBS will have to manage costs aggressively in 2008 if it expects to achieve (cash flow) growth guidance as we estimate a revenue decline in 2008 even with the benefit of record political advertising, reflecting continued negative secular trends exacerbated by a slowing economy."

Paul J. Gough contributed to this report.
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