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Eyeing the Growth at CBS

CEO Les Moonves boasted on CBS'earnings call that each consecutive quarter this year the company's results have improved and that the operating environment for the business continues to improve.

rong>CBS reported higher profits in every division except radio and outdoor advertising; and at its biggest division, television, revenue grew 9.3% with earnings up 17%.

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CBS

Down from profit of 43 cents a share in the year-ago period, this quarter's profit beat expectations, coming in at 30 cents a share, or 39 cents excluding write-downs.

CBS' results speak to the success of its TV syndication business, and higher affiliate revenues which helped compensate for still-weak ad revenues. Though ad declines seem to be moderating ad declines still which dragged down results at the company's digital radio and outdoor divisions.

Of all the media conglomerates, CBS is most exposed to advertising trends, with two thirds of its revenue ad-related. That's one reason it's such a good indicator of where ad dollars are headed. It's no surprise that radio and outdoor divisions posted drops in revenue, it's more surprising that the digital division also showed a revenue decline.

Moonves said on the earnings call that he sees trends in the economy and advertising improving, that the "scatter" market for last-minute ad purchases are strong. "They're knocking down our doors... there clearly is a demand much larger than we expected." Moonves concludes that this will prove to advertisers that it's smart to nail down ad commitments in the upfront, which this year had unprecedented low commitments. If Moonves is right the upfront ad sales period could have a resurgence next May.

Moonves pointed out that despite the fact that costs at the TV network were cut 12 percent, TV revenues managed to gain 9 percent and CBS is the only network with more viewers than a year ago. Building on the fact that the company clearly knows how to create successful content, and that local ads are suffering the most, the company is reorienting its financial accounting system. Now it'll start aligning the content businesses together, and then the local advertising businesses separately. The idea is to show investors that while the local ad business may be tough, CBS knows how to produce successful products. This isn't all too dissimilar from what Time Warner is doing to show how strong its content creation is, and how strong it'll be without AOL.

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