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Digital Sky Is Not Falling on Sunny CBS

CBS CEO Les Moonves was upbeat on the company's first quarter earnings call on Thursday.

While his media company counterparts fret about the future of advertising, and are cautiously optimistic about over-the-top, Moonves sees dollars signs and he smiles.

When asked about the efficacy of traditional TV commercials, 21st Century Fox's Chase Carey and Walt Disney Co.'s Bob Iger talked about the need for new forms of advertising to combat the flow of marketing dollars going to digital.

Moonves, on the other hand, pointed to data from CBS research guru David Poltrack on high consumer engagement and return on investment for CBS advertising clients.

"May I also add, our ratings are – when you look at viewers overall – they're considerably higher than Fox," Moonves said. "And our advertising, we think, is more effective from the engagement that we have in the kind of shows that we do."

"Yes, there is a lot written, to Bob Iger's point, about the shifting marketplace into the digital," Moonves added. "Obviously, we have a number of digital assets, and we are seeing a rise in those. As I said, we do not see it affecting the broader-based television advertising platform. "

Moonves repeated his assertion that the folks getting hurt by digital advertising are the niche cable networks. "Those who have more basic cable assets – like Bob does – maybe they are seeing a shift there in digital. We are not seeing the shift out of network. We're seeing scatter pricing being up, and we're looking forward to the upfront where we expect volume and pricing both could be up fairly significantly."

And while buyers and other observers predict a tough upfront for the networks, Moonves can't wait for negotiations to start.

"The scatter market is very strong. It's up double digits right now. As I said earlier, we're really pleased. Normally, at this time of the year, we have lot more repeats than we do, but we've got a much larger percentage of original programming, and our schedule remains very strong," Moonves said. "We're very pleased with what we're seeing, and that demand has increased since the beginning of the year. "

Put it this way, Moonves went on. "There are certain networks that have done very well this year and certain networks that haven't done so well. I'm not going to go into great detail, but you could figure that out yourselves. So we are up, and we expect it to be a good marketplace."

Over-the-top is another money-making opportunity for CBS.

While analysts worry about networks that get excluded from the new skinny bundles being rolled out by over-the-top distributors, Moonves exhibits no such worry.

"The good news for us is that in every bundle, from what exists now to the new ones that will come along, CBS will have to be a major part of every service that wants to succeed," said Moonves, hinting at a deal with Apple TV. "And in smaller bundles, we will always get a bigger slice of the pie, and that means higher fees for CBS."

CBS has also jumped into over-the-top with its CBS All Access service and is about to launch a direct to consumer product for Showtime.

"We are going to deal with our existing partners and new partners, but there is going to be an easier way to just check the box and get Showtime," Moonves said. " We will make more money on each Showtime sub than we currently do in the existing universe. We're not going to get specific now because those numbers are continuing to be worked out. And once again, in a smaller bundle, some of you that offer 20 channels at a lower price point, we're going to be a more important part of that bundle. So whether it's Apple or Sony or anyone else, the amount of money we're getting per sub once again goes up a lot. And as you said, just a couple of million more subs in each one of these categories is a huge amount of revenue and profit for us."

Moonves didn't share numbers on CBS All Access, but says the product has met early success.

"Obviously, what really excited us is the $6 price point," added chief operating officer Joe Ianniello. "The take rate on the $6 price point really gives us a lot of confidence. When we go talk to our distribution partners at selling it at a discount to that, we have proof in the marketplace that this is fair market value."

Speaking of retrans, Moonves says CBS is ever more confident about reaching its goal of $2 billion in retrans and reverse comp payments from cable and broadcast affiliates.

"We're even more confident than before of the $2 billion. We think we're going to get beyond that," he said. "Yes, there are new entrants, as everybody knows. In addition, the price of poker has gone up. With every succeeding deal, we have said we're going to get more money, and there is now other rights that are available and other products that [are] available. So yes, that $2 billion, we consider to be a conservative number at this point in time."