CBS Retrans Fees Expected to Double in 2010

Retransmission fees in 2010 are expected to nearly double what they were in 2009 based on contracts already in place, according to CBS Corp. CEO Leslie Moonves, sounding more bullish than he’s been in some time on a third quarter earnings call with analysts.

The company has already signed retransmission deals with Verizon, Dish, Time Warner Cable and Cablevision, “We see it contributing hundreds of millions of dollars,” he said, adding that broadcast networks are evolving into a one with a dual revenue stream and that the TV Everywhere initiative could potentially create a third. The industry’s TV Everywhere initiative is aimed at preserving the TV business model and transferring advertising to online and mobile platforms. CBS has signed deals to be part of authenticated online services of both Time Warner Cable and Comcast.

Moonves is pressing for non-owned and operated CBS stations to share their retransmission dollars with the network. Both networks and their station partners have been chasing distribution dollars from partners such as cable companies, but around the business there’s been a debate about who should get what share of that money. Moonves said, “As each new affiliate agreement comes up, there will be a sharing of the retransmission fees; it’s in the very early stages. There’s a realization that if they’re [affiliates] getting paid retransmission fees, they’re getting it because of network providing NFL, 60 Minutes and Letterman. We are working with the affiliates right now and most understand the situation and they’re talking to us about how we do this in the best possible way together.”

It’s also likely that with network reverse compensation (what the TV stations pay the network for the programming) that there will be little transparency in what ultimately transpires. Trying to figure out what translates precisely as “retransmission dollars” might be a murky endeavor though affiliate revenue increases will be the proof of the pudding.

On the earnings call, CBS also said it would realign its businesses into five distinct segments; an entertainment unit that includes TV, production, distribution, CBS Films and CBS Interactive; a cable networks unit that houses Showtime and CBS College Sports; a Publishing group and a Local Group embracing local TV, radio and outdoor businesses.

CBS reported that costs at the network are down 12% while advertising revenue is beginning to look more positive. Scatter pricing is running 25% above upfront levels when the network took prices down a point or two. Scatter dollars pacing is up 100% over year ago levels, said Moonves, who took the opportunity to point out that some ad agencies had said they were sorry their clients hadn’t listened to them and spent more in the cheaper May upfront market. Moonves said the network is now replacing many show promos with advertising avails in order to accommodate demand.

The company offered no real updates on talks with Oprah Winfrey whose syndicated show is distributed by CBS. Deadline Hollywood’s Nikki Finke today reported that Winfrey has already decided to move the show to her new cable channel joint venture with Discovery Communications, though there’s been no official word on that decision this evening (November 5). Moonves said if Winfrey decides to moves off broadcast, it wouldn’t affect CBS until 2012.

CBS Television segment revenue grew 9% on last year’s third quarter to $2.27 billion thanks to higher TV license fees and affiliate revenue. Advertising revenue fell 5%, in part because of lower political ad sales. TV Advertising sales were $1 billion in the quarter, down from $1.06 billion in the prior period, though one positive is that CBS is less reliant on advertising than it was at the same time last year.

Third quarter ad sales were 51% of TV segment revenue during the third quarter 2008, for the period to September 30, it’s just 44%. Affiliate revenue increased 11% thanks to higher retransmission revenue and a growth in subscriptions at Showtime Networks and CBS College Sports Network.

CBS Corp. third quarter revenue was $3.35 billion, down from last year’s quarter because of lower ad revenue. Net earnings were $207.6 million versus a net loss of $12.46 billion in the quarter last year when the company took a $14 billion impairment charge. Adjusted net earnings, excluding the write-down, were $265.9 million.

Operating income before depreciation and amortization (OIBDA) was $565.6 million.  The company said in a statement, November 5, that it expects its full year OIBDA outlook to be in the range of $1.725 billion to $1.925 billion.