CBS Optimistic as Profit Drops
CBS Corp stock traded up after hours on CEO Les Moonves' optimism about recovery after the company released earnings that suffered from the advertising recession.
Thecompany reported adjusted earnings of 8 cents, a penny above analyst expectations, but down from adjusted earnings of 49 cents in the year-ago quarter.
Revenue fell 11 percent to $3.01 billion, lower than Wall Street projected, dragged down by weak advertising.
CBS is the only of the four TV networks that's grown its prime time audience; Nielsen reports that its ratings are up over 9 percent from last year. Still, its TV ad revenue fell 13 percent from a year-earlier quarter.
Higher costs compared to savings from a writer's strike last year didn't help. CBS' exposure to the ad markets - more than any other media conglomerate - took its toll across the divisions. Revenue at the outdoor advertising division plummeted 27 percent while radio revenue dropped 23 percent.
But all that exposure to advertising gave Moonves hope, saying on the conference call that its high TV ratings make it "better positioned than peers" if and when ad dollars return.
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But Moonves is brimming with optimism about the advertising markets recovering, saying that he's "truly surprised" by the phenomenal demand for ads so far this quarter. In fact there's so much demand they're actually looking at ways to generate more ad inventory. The ad market seems to be shifting away from pre-planned ad buys, purchased months and months in advance. Now the "scatter" market of last-minute ad buys is what's hot. Moonves says that they sold about 30 percent more in the scatter market this year than last year. They're holding back more of their inventory for the fall season, selling roughly 65 percent compared to 75 or 80 percent last year, expecting high pricing for scatter purchases to continue.
Moonves sees corporate America and the consumer coming back. The auto industry is a huge advertiser for CBS and the other networks, so Moonves celebrated the extension of the Cash for Clunkers program, calling it a "real shot in the arm." The growth in auto sales "Cash for Clunkers" sparked gives Moonves confidence that the auto industry will have a lot more money to spend six months from now than they to today.
CBS is fighting an uphill battle when it comes to the secular trends of a shift away from broadcast TV to cable and the internet. But the network does have a couple factors working in its favor: the Super Bowl, a CSI spin off, and some serious TV syndication revenue. We'll see how fast, and whether, the ad market comes back to help CBS profit from its network's ratings.
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