CBS Earnings Bounce Higher on NCAA Deal

Revenue flat despite Super Bowl comparison

By Jon Lafayette -- Broadcasting & Cable, 5/3/2011 4:35:30 PM

Updated at 6:30 p.m.

CBS reports sharply higher profits as revenue losses were offset by much lower expenses associated with March Madness.

Net earnings were $202 million, or 29 cents a share, up from $34 million, or 5 cents a share a year ago.

Revenues were $3.51 billion, down 1% from a year ago, when CBS carried the Super Bowl. Last year, CBS also carried the NCAA Men's basketball tournament exclusively. This year it split revenues with Turner sports, an arrangement CBS said was more profitable this quarter. CBS said these two items affected were worth 10 percentage points in comparing revenue year over year.

"Our first quarter performance was driven by strong underlying advertising revenue growth and increases in non-advertising revenue streams, as we continue to maximize the value of CBS's world-class content," CEO Les Moonves said in a statement. Looking ahead, we have great momentum heading into this year's Upfront marketplace, and we continue to enter into lucrative retransmission, syndication and online distribution deals. As we increasingly capitalize on these opportunities, we are confident that we will drive growth over the long term by focusing on our strategy to drive higher recurring revenue streams and diversify our businesses while delivering value to our shareholders."

During the company's conference call with analysts, Moonves said that he expects to see "solid double digit increases" during the upfront. The scatter market has remained strong, with prices 40% higher than last year's upfront.

Moonves said CBS has already made a couple of upfront deals. "any deal we would have taken in April would have to be at a very good number," he said.

"How much we sell is going to depend on how much they want to pay," Moonves said. Historically, he  said, CBS has sold between 65% and 80% of its inventory in the upfront.

Big event programming continues to pull in viewers unlike any other medium," Moonves said. "Broadcast television is still the best game in town."

CBS said adjusted operating income for its entertainment group, which includes the CBS Television Network, its studios and its distribution unit, rose 85% to $268 million from $145 million while revenues dropped to $1.994 billion from $2.081 billion. Advertising revenues dropped to $2.292 from $2.381 billion.

For the CBS broadcast network, excluding the Super Bowl and NCAA changes, ad sales were up 12%, led by increases in football. Syndication was also strong, the company said.

CBS' cable network groups' operating income rose 51% to $153 million, reflecting revenue growth of  7% to $393 million and the timing of certain programming costs.

Operating income for CBS' local broadcasting unit rose 26% to $169 million, revenues rose 2% to $621 million. The company credited higher ad sales and more retransmission revenue for the gains, which came despite difficult comparisons from a year with a  Super Bowl and a national election.

CBS also doubled its quarter dividend to 10 cents a share from 5 cents a share.