CBS beats estimates: Old media meets new media

Rolling out the good ol’ classics

CBS Corp posted an earnings beat as the media company benefited from new distribution deals for its TV shows and higher spending by advertisers. The traditional media company, with a broadcast network, a billboard division, book publishing and radio, is finding new channels to generate revenue in new media, specifically through streaming deals for its library of TV shows. It signed two deals with Netflix (NFLX), one for domestic streaming and the other for international, as well as a deal with Amazon.com (AMZN), to give customers Internet access to older CBS TV shows like “Cheers” and “Frasier”.

CEO Les Moonves noted on a conference call that future deals could be struck with Apple (AAPL), Google (GOOG), Microsoft (MSFT), and Dish Network (DISH). The hot new deals paired with its solid TV lineup and strong advertising sales have sent shares of CBS shares up 43% this year, far outpacing its major media competitors. However, one uncertainty is whether the rocky U.S. economy will knock advertising spending off course. Through the second quarter, advertisers seemed undeterred by the shaky economy as commercial rates in the scatter market, where advertisers purchase last minute TV time, jumped by as much as 30%. Second quarter ad revenue rose 3% from a year ago, when it was helped by 2010 political advertising and higher revenue for the college basketball's championships, known as March Madness. CBS said its new programming agreement for the basketball championships results in lower revenues, but higher profits. Another hot spot has been retransmission deals, wherein cable companies pay CBS a fee to carry the network's content. It also is banking on those new retransmission deals, particularly since the ones it has signed so far cover only a small sampling of its library of TV shows.

Overall, CBS's second quarter revenue rose 8% to $3.59 billion, surpassing the $3.55 billion analysts expected. Profit more than doubled to $395 million, or $0.58 a share, which also exceeded the $0.45 a share analysts on average had expected.

CBS (CBS : NYSE : US$26.70), Net Change: 0.42, % Change: 1.60%, Volume: 22,756,163

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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