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CBS Posts Higher First Quarter Earnings

CBS posted higher first quarter earnings despite losing revenue it earned last year from the Super Bowl and March Madness.

Net earnings rose 6% to $468 million, or 78 cents a share, from $443 million, or 69 cents a share, a year ago.

Revenue slid 5% to $3.86 billion. The year-ago revenues included $280 million from broadcasting the Super Bowl.

“I’m very pleased to be reporting record first quarter profits, driven once again by our fast-growing, higher-margin revenue streams. Thanks to the strength of our base business, as well as new opportunities to monetize our content, our momentum continues to build. And we are confident we are still in the early innings of our terrific growth story,” CEO Leslie Moonves (pictured) said in a statement.

“As we continue to grow CBS as a content company, we also recently took a dramatic step forward when we successfully completed the IPO of CBS Outdoor, which subsequently obtained a favorable REIT ruling from the IRS. The separation of this business will bring us that much closer to achieving our goal of becoming a pure content company and, at current market prices, puts us on track to return about $6 billion of value to shareholders in 2014,” Moonves said. “Looking ahead, with even stronger programming to sell to advertisers, political spending heating up later this year, and new deals coming down the pike in retransmission consent and reverse compensation, we see the back half of 2014 even stronger than the first—and we are positioned for another record year.”

During CBS’ conference call with analysts, Moonves had comments on a number of issues affecting CBS and the TV industry.

  • On the upfront: I believe CBS will once again lead the marketplace in upfront pricing and volume next season. We have the ratings, the broad-based strength of schedule and the stability that agencies and our clients need going forward. (CBS COO Joe Ianniello added that at the CBS Television Network,  the network, “we see momentum building throughout the back half of 2014 with more summer original programming, Thursday Night Football starting this fall and higher ad rates from this year's upfront, which we expect will be strong for us. In addition, the backdrop of a solid macro environment should bode well for the advertising industry in general.)
  • On C7 vs C3 ratings: “We are monetizing commercials beyond 3 days as well. Just as we've said would be the case, more and more deals are and will be done in C7. Plus we're beginning to benefit from dynamic ad insertion, which allows us to resell inventory at a later date. If there are advertisers who don't want to pay beyond 3 days or beyond 7 days, we have a solution. We will simply sell that inventory to other advertisers on the fourth day and beyond. Viewing beyond 3 days or 7 days adds millions of viewers and represents a 9-digit opportunity for us.”
  • On Late Night: “The good news is we expect Dave's final year to do extremely well as we say goodbye to the man I think is the greatest ever in late-night comedy. Of course, Stephen Colbert is also as talented as they come, and we are extremely confident he can be the best of his generation as well.”
  • On Summertime: “This year, we're expanding to 90 hours of original programming in the summer, including four original dramas that we own 100%. . . [Advertisers] were not used to broadcast networks putting on summer programming. So the assumption was, it was going to be repeat theater or some crummy reality shows. I think we have changed that entire profile. .  . Our advertising rates are significantly higher than they were a year ago. And advertisers now view us as a 12-month a year programming machine.
  • On “the lovely” Aereo: “Aereo is theft. Pure and simple. Some are trying to shift the issue by erroneously suggesting it has to do with our prevention of the cloud or either future innovation. This couldn't be further from the truth. . .  We have long-term deals with our MVPD partners, and down the road, we'll distribute our programming in the ways that make the most sense to us financially, all of them attractive.  . . We don't think we're going to lose in the court. We don't think it's a viable product. And if it was, it won't be viable because it won't have our content.’
  • On the threat to TV station groups from FCC activity: “Remember, almost 90% of our people that watch CBS, watch it through satellite, through telcos or through cable. If an affiliate wasn't there, there's obviously a way to get our programming to those people. Having said that, we believe in localism. We believe in our affiliates. The CBS affiliate body is very strong, and we don't view this system as in jeopardy in any way, shape or form.”

CBS’ Entertainment division posted a 5% decrease in operating income to $457 million. The company said the drop reflected the absence of Super Bowl revenues, offset by higher profits from program licensing.

Entertainment revenues were down 9% to $2.30 billion. In addition to the Super Bowl, revenue was hurt by the shift of NCAA Men’s Basketball Tournament games to Turner Broadcasting. Those changes accounted for an 11% decline in revenues.

Content licensing and distribution revenues rose 6%.

CBS’ cable networks posted a 12% increase in operating income to $231 million. The networks grew their revenue by 12% to $537 million, but they also had higher programming costs.

Local broadcasting operating income was up 1% to $200 million. Revenues were down 2% to $626 million and were hurt by the Super Bowl and March Madness shifts. Gains in retransmission revenue boosted the stations. TV revenue was down 5%, with the sports items accounting for a negative 9 percentage point swing.