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Super Bowl Keys 10% Q1 Rise in CBS Revenue

Super Bowl 50 in February keyed a 10% rise in CBS Corp. revenue to $3.85 billion in the first quarter and pushed operating income up 14% to a company-record $821 million. But it shouldn’t be viewed as a singular event, company execs emphasize.

The broadcast network in particular enters the upfront market in a “very enviable position,” Chairman and CEO Leslie Moonves said. Underlying ad revenues not counting the Super Bowl rose 12% in the quarter thanks to strong scatter and a projected CBS-record haul of political ads in a presidential year. Plus, Moonves signaled a likely across-the-board ratings win for CBS when the 2015-2016 season wraps later this month. And speaking of May, COO Joseph Ianniello said CBS has a good shot at fetching double-digit increases in the upfront ad market thanks to its momentum. (The network makes its pitch to media buyers on May 18 at Carnegie Hall.)

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Even as uncertainty swirls around the future governance of the company given the drama around chairman emeritus Sumner Redstone and, on a less cosmic level, the uncertainty around the planned disposition of radio stations, nearly every quarterly number backed up execs’ booming optimism.

On a per-share basis, earnings reached $1.02, the first time in company history they surpassed a dollar. Overall ad revenue grew 31% overall and 49% at the broadcast network, counting the Super Bowl.

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CBS is poised to take its 13th total-viewership ratings crown in the last 14 seasons and is on track to win in 18-to-49-year-olds as well, which would knock repeat current champ NBC off that pedestal. The network, long knocked for older-skewing fare, is even poised to capture 18-to-34—“and you can’t get much younger than that,” Moonves said.

Digital platforms offer ways to stay young, in theory. The reboot of Star Trek will go onto CBS All Access (serially, not bulk-released) next January, Moonves said. He said the show would also be a calling card for the OTT service, so a deliberate decision was made to forgo other revenue opportunities around reviving the storied franchise. “We could have cashed in for a lot of money” via a deal with Netflix or another deep-pocketed SVOD, Moonves said. “But it’s important that we show the world that All Access is important to us.”

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Non-ad-related revenue streams also showed increases in the quarter. Affiliate and subscription fee revenues rose 15%, driven by 42% growth in retransmission revenues and fees from CBS affiliates and new digital platforms. On an annual basis, retrans is on track to hit $1 billion, Moonves said.

The local broadcasting unit posted revenue of $649 million, up 9% on the Super Bowl and political ads, plus retrans revenue growth. Revenues for the laggard radio operation, which CBS is currently shopping, dipped 2%. Operating income still managed to rise 28% to $206 million. Asked by an analyst about the spectrum auction, Moonves declined to comment, citing federal rules, but noted the company has “thrown our hat into the ring” in several markets.

One major sports venture—re-upping with Turner to share the NCAA Men’s Basketball Tournament for the next 16 years—will be profitable “every single year,” Moonves predicted. “And it’s not often you can say that in sports.” Plus: “I look forward to personally renegotiating this deal in 2032.”

Cable network revenues slipped less than 1% to $525 million due to the year-earlier benefit from a multiyear licensing deal with Bell Media in Canada. Revenue growth from new digital distribution platforms partially offset that drop. Operating income fell 10% to $228 million due to lower international licensing revenue and incremental costs associated with the premiere of Billions on Showtime.

During the call, Moonves repeatedly praised Showtime’s batting average with creating new hits and execs said the strategy introduced by newly minted CEO David Nevins to launch new programming every month has already reduced churn. He also noted that it topped all premium cable networks in total viewers in the final three quarters of 2015.

Moonves wrapped every message around the entertainment division’s robust growth and stability—which would keep it in skinny bundles such as the one Hulu said it plans to roll out. (No discussions have been held with Hulu, though execs said they’d be open to talking.)

CBS ordered 16 pilots—eight dramas and eight comedies—and the prime-time schedule remains under construction. Even more appealing to investors: Despite the arms race that has spent programming spending on a billion-dollar rocket ship ride, Moonves offered a guarantee that total programming costs for 2016-17 would be less than the current season.

It was a familiar theme of scale carrying the day for CBS. “The deep value of big-ticket programming is becoming more and more apparent every single day,” Moonves said.