CBS Q2 Profit Drops 96 Percent, Upfront Wrapping

CBS Corp. on Thursday reported a 96% drop in second-quarter profit as revenue fell 11% amid advertising woes due to the recession.

But company CEO Leslie Moonves said in its earnings conference call that the ad market improved in the second quarter and beyond. The ad recovery for CBS’s businesses began in the second quarter and has been “gaining steam in the third,” he said. “Improvement has been very steady and very real.”

Moonves also said the company is close to the finish line in its upfront sales negotiations. Despite downward pricing trends, CBS will bring in about flat revenue in the upfront, he said. The firm is withholding a bigger amount of ad inventory for later sales though as scatter prices are up in the third quarter with solid interest from telecom, retail and fast-food restaurants, which should bode well for the company, Moonves said.

Overall, third-quarter scatter revenue is up 30% from the year-ago period, he said.

After the market close, the media giant posted a profit of $15.4 million, compared with $408.4 million in the year-ago period on revenue of $3.01 billion, down from $3.39 billion. Adjusted for special items, CBS’s quarterly profit of $57.4 million compared to $330.1 million in the year-ago period. Operating income amounted to $242.2 million.

UBS analyst Michael Morris had forecast quarterly revenue to be down 10.4% to $3.04 billion, with operating income off 66.8% to $211 million.

Importantly, CBS, which is the most ad-dependent of the major U.S. media and entertainment companies, said TV ad revenue fell 13%, while TV license fees dropped 6% and affiliate revenue rose 10%. This left total TV unit revenue down 10% at $1.95 billion.
“As we anticipated, early signs of a recovery took hold in the second quarter, and our revenue, profit and EPS trends were all better than in the first quarter,” said Moonves.

“We continue to believe that the back half of the year will be considerably stronger than the first.”

Executive chairman and controlling shareholder Sumner Redstone added: “Leslie and his management team continue to run CBS with a sure and steady hand.” And he said the goal remains to position CBS as “one of the leading beneficiaries in an economic recovery.”