Catch Me If You Can

CBS’ Les Moonves predicts a decisive upfront win

While upfront negotiations aren’t likely to begin until the end of the month, Les Moonves believes the outcome is a fait accompli. 

Speaking to investors Tuesday afternoon during CBS Corp.’s first-quarter earnings call, the company’s president and CEO pulled no punches. “We led the upfront last year, and I guarantee we will lead it again this year, both in volume and CPMs,” Moonves said, adding that his sales team will push hard on pricing.

“I know people think I sound cocky … but if we don’t get our right pricing, we’re not going to sell,” Moonves said. “Our intent going in is to sell close to 80 percent [of our prime-time inventory], but only at the right pricing. Otherwise, I’m more than happy to hold out.”

Much of what Moonves had to say about CBS’ upfront prospects echoed remarks he made three months ago when he guaranteed the network would command double-digit CPM increases in the 2012-13 upfront. If anything, Moonves now is even more optimistic, given the state of the scatter market.

“We’re getting a lot of early indications. Obviously our ratings have been fairly significant and fairly dominant, and the marketplace has clearly gotten stronger,” Moonves said, adding that scatter pricing is still up in the mid-teens. “And our schedule is very secure … so it’s a lot easier to plan on CBS than anywhere else.”

CBS in March renewed 18 series, a slate that includes nine dramas, four comedies and three unscripted shows. Moonves hinted that a renewal of a 19th series was on the verge of being completed, and while he didn’t explicitly name the show, it was clear that he was referring to Two and a Half Men.

Also helping matters is CBS’ ongoing ratings prowess. Season to date, the network is averaging 11.8 million total viewers in prime and a 3.0 rating among the adults 18-49 demo—putting it two-tenths of a point behind Fox.

“We are poised to win the season by the widest margin since the modern rating systems began 25 years ago,” Moonves said. (In this case, the victory will be among total viewers rather than the 18-49 demo.)

Moonves’ read on the upfront is largely in line with analyst projections. In a note to investors, Barclays Capital’s Anthony DiClemente predicted that CBS should enjoy “best-in-class pricing” throughout the upfront, with CPMs likely to come in 10 percent over 2011-12 rates.

CBS should once again lock in the greatest dollar volume as well. Per DiClemente’s analysis, the network stands to generate $2.92 billion in advance commitments, or 10 percent more cash than it booked a year ago. 

The network in Q1 booked $2.4 billion in ad sales revenue, marking a 5 percent increase from the year-ago $2.29 billion. While sales reflected higher rates in prime time, the numbers were also given a boost by the timing of the NCAA Final Four, which coincided with the first quarter. (The previous year’s national semifinals fell on April 2, or outside the Q1 window.)

Affiliate revenue grew 7 percent to $455 million.

While CBS remains particularly vulnerable to the advertising market, ancillary revenue streams are starting to show profound growth. Between syndication, retransmission consent and online distribution deals with the likes of Netflix and Amazon, 39 percent of the company’s total Q1 revenue was generated by nonadvertising sources.