CBS stock rose 3.5 percent Monday, a day ahead of its quarterly earnings, which are expected to be higher on rebounding ad spending.
But that isn't the only good news for CBS: the company has announced that it struck a 10 year retransmission agreement with Comcast, to distribute CBS network, local stations, College Sports TV, Showtime and the Smithsonian Channel.
This deal is huge — Comcast is the largest cable provider with more than 23 million basic cable subscribers. (Comcast is in the midst acquiring CNBC's parent, NBC Universal, in a $30 billion deal pending final regulatory approval.)
It secures a significant revenue scream and increased distribution for CBS College Sports and the Smithsonian network. It also provides crucial visibility to investors, securing a crucial second revenue stream for the broadcast business. The companies' contract wasn't set to expire until 2012; nailing down this deal early means there's no risk of channels being pulled from the air during a negotiations standoff. (Read the full news release here for more.)
Anthony DiClemente, Barclays Capital media analyst, projects CBS will earn about 50 cents per subscriber, per month in fees starting in 2012. DiClemente says this will help CBS meet or beat the target it set of $250 million in retransmission fees for its fiscal 2012.
"Wall Street expects the company to report that each of its ad segments — even local ads — are up across the board."
Higher retransmission fees, along with a stronger ad market is expected to send CBS' results higher. The company's expected to post earnings of 21 cents per share, up from 8 cents in the year-ago quarter, on 8 percent higher revenue of $3.24 billion. Because CBS relies on advertising for two thirds of its revenue, it's considered a bellwether for the ad markets. Wall Street expects the company to report that each of its ad segments — even local ads — are up across the board. (Follow All The Earnings News Here)
Expect some questions on the earnings call about whether CBS plans to join the Hulu Plus service, which is co-owned by Disney, News Corp , and CNBC"s parent NBC Universal .
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