Driven higher by retransmission fees and digital revenue, CBS beat earnings expectations with an upbeat outlook for 2013. But revenue came in lighter-than expected, dragged down by CBS Radio's advertising declines, as well as foreign exchange rates, and the impact of the Republican and Democratic conventions pre-empting six nights of programming. But CEO Les Moonves' projections for the fourth quarter were rosy, saying the company will benefit from higher retransmission compensation, plus more digital revenue, as well as the surge of political advertising, which shifted into the fourth quarter this campaign season.
Revenues inched up 2 percent to $3.42 billion—the strongest growth from a 12 percent increase in affiliate and subscription fee revenues. Excluding one –time items earnings came in at 65 cents per shares, four pennies more than anticipated, and up from 50 cents a year ago.
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Moonves boasted that CBS , which was once almost entirely reliant on advertising, is now diversifying: This past quarter, a record 44 percent of its revenue came from non-ad sources, namely compensation for its broadcast and cable networks. Moonves says that the company has recently closed retransmission deals for over 40 percent of its distribution, and says "they were signed on terms significantly better than anything we've done before." With more deals due up for renewal in the next year, he says the company will beat its goal of reaching $1 billion in retrains and affiliate revenue by 2017
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And advertising is poised to look up, led by the Super Bowl in the first quarter—Moonves says the company is selling 30 second spots for $4 million. Moonves says that scatter pricing—for last minute ad purchases—is higher this quarter. And he returned to the importance of live events, like the Super Bowl, to help drive ratings and advertising, also saying that "industry measurement of DVR viewing is catching up" and will help CBS.
That DVR viewing, and the negative impact it's having on ratings, was a central point of conversation in the remarks as well as the question and answer period, just as it was on News Corp and Time Warner's earnings calls. Moonves said the biggest trend impacting ratings, is the rise of DVR usage. To increase CBS' compensation for all that DVR usage, the company is pushing for the first 7 days after a show first airs to be counted towards ratings, not just the first 3 days.
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As for the impact of streaming, Moonves says it's a net positive, saying "it's a different way of looking at our world," but that when you add all these elements together, it's a strong new source of revenue. One new source of digital revenue: for the first time CBS is considering licensing past seasons of current CBS and Showtime programming.
-By CNBC's Julia Boorstin
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