CBS’ Moonves Upbeat Despite Rough First Half

NEW YORK CBS Corp.’s sales and profit fell in the second quarter compared to a year ago, but improved over Q1 ’09.

CBS CEO Leslie Moonves — citing those results along with a “very pleasing” turn of events in the upfront market, as well as a surprisingly strong Q3 scatter market — today proclaimed: “We’re seeing light at the end of the tunnel,” even as the recession continues.
“The economic climate is still very difficult,” he said. “But signs of recovery continue. The second quarter was better than the first, and the third quarter is [shaping up to be] better than the second.” CBS expects quarter-by-quarter momentum to continue into early 2010, he said.
CBS reported a 9 percent drop in revenue to $3.01 billion for Q2. In that stretch, net profit fell more than 90 percent to $15.4 million compared to the same period a year ago.
For the first half, CBS’ revenue dipped 12 percent to $6.17 billion, with a net loss of $40 million (vs. a profit of $653 million for the first half of 2008).

Despite the struggles so far in ’09, “we continue to believe that the back half of the year will be considerably stronger than the first,” Moonves said.
In a conference call to discuss earnings, Moonves reported that CBS is close to wrapping its upfront sales, adding that he is “very pleased” with the results.
The company is selling less inventory and obtained “slightly” lower pricing than last year, Moonves confirmed. But because ratings were up, the network’s upfront revenue take will be flat compared to ’08, even though it is selling about 15 percent less inventory.
The network will sell roughly 65 percent of its available prime-time inventory for next season in the upfront market, Moonves said.
That’s about 15 percent less the 75 percent the network sold last year, Moonves said.
“We’re nearing the finish line of our upfront discussions,” he said. “We’ve been the strongest player in very protracted negotiations. The good news for us is, despite slight pricing declines our audience has grown. As a result, we have been able to achieve flat revenue for the percentage of inventory we sold so far.”
And with a surprisingly strong third-quarter scatter market, “we like our position as the economy continues to improve and we [plan to] maintain our standing as the most watched network,” he said.

The third-quarter scatter market for CBS is up about 30 percent, or $30 million, said Moonves. “Advertisers have been coming back very strongly,” he said, “particularly in core categories like retail, telecom, pharma and quick-service restaurants. Pricing is up over upfront rates.” 
Helping CBS’ effort is the fact that the network did not have make-goods to dole out, which eat into available scatter inventory. “We are even more confident in our stable schedule. So when you couple that with the improving economy, we once again believe we can lead the market,” Moonves said.
Television revenue for the second quarter decreased 10 percent to $1.95 billion from $2.16 billion due to lower advertising and home-entertainment sales and television license fees.

But CBS CFO Fred Reynolds noted that the pace of sales for the CBS TV stations in the third quarter is significantly ahead of where they were at this time a year ago for Q3 ’08.
Radio revenue for the second quarter fell 23 percent to $322 million, primarily due to continued weakness in the ad marketplace. But again, Reynolds noted that the pace of Q3 sales is up and ratings are stable.
Outdoor revenue for Q2 dropped 27 percent to $434.1 million, reflecting the soft ad market and the unfavorable impact of foreign exchange rate changes as the U.S. dollar gained strength overseas.
Interactive revenue for the quarter increased to $126.4 million from $40.2 million for Q2 ’08, reflecting the acquisition of CNET. Factoring out that deal and viewed on a comparable basis, interactive revenue fell 8 percent.