CBS Profits Jump 20% in Fourth Quarter

CBS continued on its roll, reporting sharply higher profits and its highest ever revenues in the fourth quarter.

"Our record fourth-quarter and full-year results demonstrate CBS' stature as one of the world's foremost creators of premium content," said Leslie Moonves (pictured), president and CEO, in a statement. "In addition to the solid performance of our base business, our fast-growing, non-advertising revenue streams are playing a bigger and bigger role in our results, and they will continue to do so in the years to come."

CBS also announced an accelerated $1.5 billion stock buyback plan for the first quarter, bringing the total purchases of its own shares to $2 billion in the quarter.

On CBS's earning call with investors, Moonves was upbeat about the company's future, predicting bigger growth for retransmission payments, a strong advertising upfront market, and an increase in streaming rights payments, while cheering the company's new deal with the NFL. 

Even the chilly climate boosted Moonves' spirits and CBS's outlook. "We like bad weather because more people are home turning on their television sets," he said.

The only potential cloud on the horizon is a potential loss to Aereo in the Supreme Court was dismissed.

CBS has been forecasting that retransmission payments from distributors and reverse compensation payments from affiliates would reach $1 billion in 2017. On the call, Moonves provided a new target of $2 billion by 2020, adding that CBS has exceeded all of its past targets.

In response to a question from an analyst, Moonves said: "We will hit that number regardless of what happens with Aereo." He also noted that in CBS's contracts with cable operators and other distributors, they're barred from offering Aereo-like services.

Moonves said that if Aereo is allowed to continue its business model, CBS has alternatives. "We can adjust and thrive no matter how this situation unfolds," he said, adding that over the air broadcast remains the company's first option. "If that happens, we aren't going to be financially handicapped at all."

CBS was awarded a one year deal to air NFL games on Thursday nights. Moonves called the deal "a good short-term value and a good long-term value."

He said CBS made a "responsible bid" but that the NFL was less interested in the money than in establishing Thursday night.

"Obviously we ascertained what our network sales are going to be. In addition our local affiliates are contributing. Our station sales—remember we have an awful lot of O&Os that are in NFL markets—should be extremely high. Plus it's impossible to speak more highly of how it promotes everything on our fall schedule," he said. "Is it strategic? Absolutely. Do I hope we get it longer? Sure."

With the NFL deal, CBS won't be able to launch its normal Thursday night entertainment schedule till late October or early November. "We have some big shows, such as The Big Bang Theory, which lead off Thursday night, and we're not going to wait until November to launch that," Moonves said. "That's going to be on the air on some other night, which will grow the ratings and the [advertising] rates on some other night."  Another show that could move early in the season is Elementary.

"What it will mean is we'll have more original programming on throughout the year," he said. "This just tightens our schedule."

The NFL deal will help CBS in the upfront ad market, where Moonves predicted that CBS would lead the marketplace in pricing and volume. He refrained from citing specific numbers, but said: "It's going to be a great upfront for CBS."

Net earnings rose 20% to $470 million in the quarter, or 76 cents a share, from $393 million, or 60 cents a share, a year ago.

Revenues rose 6% to $3.91 billion, a record for the fourth quarter. Ad revenues were flat, with a 4% increase at CBS being offset by lower political advertising at the local stations.

Operating income before depreciation and amortization at CBS' Entertainment division—which includes the broadcast network, television studio, films, distribution, and interactive—was up 27% to $418 million in the quarter. Higher investment in television content partly offset an 11% increase in revenue to $2.21 billion. The company sold three shows—Hawaii Five-O, Blue Bloods and Elementary—into domestic syndication and began new streaming deals as well. On the earnings call, Moonves said that the Elementary deal, involving WGN America, Hulu Plus and local stations, adds up to CBS’s biggest syndication deal ever.

CBS’ cable network’s OIBDA was up $8 million to 199 million. Revenue was up 9% to $477 million, driven by licensing of Showtime original shows and higher affiliate revenues as rates and subscribers rose.

Local broadcasting revenues dropped 9% to $719 million in the quarter as a result of lower political advertising revenues than a year ago in the presidential election year. OIBDA for local broadcasting was down 19% to $263 million.

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.