CBS Q4 Profits Drop on Lower TV Revenue

Moonves Touts Importance of Broadcast TV, Adds that Company Is ‘Looking at All Sorts of Deals’ to Get Paid for Content

By B&C Staff -- Broadcasting & Cable, 2/26/2008 12:52:00 PM

CBS president and CEO Leslie Moonves touted the continued importance of broadcast television Tuesday as his company reported a 15% drop in fourth-quarter profit in 2007 on a slight dip in TV revenue.

CBS posted net income of $286.2 million, or 42 cents per share, in the three months ending in December, down from $335 million (43 cents) in the same period a year ago. Revenue for the quarter decreased 3%, to $3.76 billion from $3.88 billion in the same period a year ago, in line with analysts’ expectations.

Revenues from CBS’ television business were down 4%, to $2.461 billion from $2.561 billion in the previous year, reflecting the company’s divestiture of nine stations and a fall-off in political-ad sales from the previous election year.

Operating income before depreciation and amortization (OIBDA) was $824 million, up 4% from $794.9 million a year ago, while operating income in the quarter was up 3%, to $704.8 million from $681.5 million. CBS forecast income to grow 3%-5% in 2008.

For the year, CBS revenues were $14.07 billion, down 2%, which it attributed to sales of TV and radio properties and the "absence of UPN," as well as the "nonrenewal of marginally profitable outdoor transit contracts." TV revenues for the year were down 2% to $9.274 billion.

Affiliate revenue for the quarter was up 5% on rate increases and subscriber growth at pauy-cabler Showtime and sports network CSTV, soon to be renamed CBS College Sports Network, the company said. Fees for syndicated programming were down 4% with the departure of Star Trek: Voyager, offset somewhat by the arrival of NCIS.

CBS shares were off slightly Tuesday after closing Monday at $25 each. The company’s stock has fallen 20% over the past year.

Speaking on a conference call Tuesday morning, Moonves said, “Network TV will always be a must-buy” for advertisers, adding that CBS’ TV content -- which includes programming from Showtime and CSTV -- is driving the company’s expansion into new-media platforms.

“Our Internet business is truly an extension of our network business,” he said.

Moonves also affirmed that CBS weathered the writers’ strike well. Echoing the much-publicized remarks of his rival, NBC Universal president and CEO Jeff Zucker, he said the strike “changed the way we do business” by allowing CBS to cut in half its overall deals with writers and streamline its development process.

“You don’t need to spend $5 million on a pilot to know if you have a hit series,” he added.

Addressing the strike’s effect on the upfronts, Moonves restated CBS’ plans to hold its presentation at Carnegie Hall, as in years past, but he added, “there will be a lot less bells and whistles.”

Moonves also pointed to 20 retransmission-consent deals CBS reached with cable operators, repeating his oft-stated intention to get cash for the right to retransmit CBS’ broadcast content. However, he said, the company is “looking at all sorts of deals” to get paid for its content in contracts coming due in the next three years.