What Les Moonves Isn’t Worried About


After announcing CBS’ record-setting, but not unexpected, earnings Thursday, Les Moonves was upbeat as usual.

While advertising revenues at the top-rated CBS Television Network were only flat in the corner, Moonves expressed little concern about the third-quarter scatter softness other media executives cautioned analysts about.

“In August, we don’t worry about the scatter market especially in an Olympic year and especially an Olympics that’s doing this well,” Moonves said on the company’s conference call with analysts.

CBS has supplementing advertising revenues with payments from retransmission, reverse compensation and streaming, and Moonves indicated that those streams would all continue to grow.

The $250 million retransmission figure CBS has been providing analysts with as guidance for this year was “conservative,” he said and new year, CBS said reverse comp would cross the $100 million mark. Could that income be threatened by new technology companies like Aereo, which last month won a court ruling against the broadcasters allowing it to stream their programming without paying retransmission?

“It’s not something I lose sleep over for even 5 minutes,” Moonves said.  We think it’ll go away. We think we’ll prevail in the courts. We will always get paid for our content.”

And payments from Netflix will continue to grow.

“The renewal is already preordained,” Moonves says. “Frankly, with Netflix, our relationship is so good, we will be adding titles such as CSI: Miami, which just came off our schedule. And we are working with them about increasing some and decreasing others. And the overall bottom line will be, we will get more money for this.”

Analysts who cover CBS aren’t nearly as carefree.

“We are cautious on advertising trends and are modeling relatively conservative 3% growth for the CBS network,” said Anthony DiClemente of Barclays Capital in a report. “We expect 4Q network ad growth to reaccelerate to 5%, as the new upfront pricing kicks in and the fall schedule gives ratings a boost.”

“Listeners hoping for an acknowledgement of risks were predictably disappointed, leaving investors in the familiar position of having to decide whether management’s bullishness should be taken at face value,’ wrote an even more skeptical Todd Juenger of Bernstein Research.

Juenger ticked off a laundry list of concerns, and management’s positions.

  • Can Aereo, or something like it, put retrans at risk? (no).
  • Will new digital deals fail to materialize? (no).
  • Will Showtime subscriber growth hit a wall? (no).
  • Will advertising demand be healthy (across network, TV stations, radio, and outdoor)? (yes).

“All of that puts together a nice story in our view, and CBS remains our favorite Market-perform stock. However, we still can’t get over the hump to an Outperform primarily because of longer-term risks we cannot ignore,” Juenger concludes.