CBS Delivers Record Profits in Q2

Network soars on 11 percent increase in ad sales revenue

A strong finish to the broadcast season and a breakout summer hit helped CBS Corp. amass the greatest quarterly profit in its history.

Second quarter net income rose 11 percent to $472 million, or 76 cents per share, up from $427 million, or 65 cents per share, in the year-ago period. CBS beat consensus estimates by 4 cents per share.

Company-wide advertising revenues grew 5 percent to $2.09 billion, thanks in large part to an 11 percent improvement at CBS’ broadcast flagship. This marked an acceleration from the first quarter, when ad sales were up 8 percent. (It’s a particularly significant accomplishment, given the fact that CBS aired the Super Bowl in Q1.)

Speaking to investors during CBS’ Wednesday afternoon earnings call, CEO Les Moonves said the ad market continues to grow—a fact that is reflected in the company’s upfront performance. “Once again we took share from our competitors and we were the leader in both volume and pricing,” Moonves said.

CBS wrapped its 2013-14 upfront business in early June, writing average CPM increases of 8 percent and taking in some $2.65 billion in advance commitments. This puts the Eye Network leagues ahead of its competition; by comparison, runner-up NBC is believed to have booked around $1.9 billion.

“This is a Golden Age for those who have the best programming,” Moonves said. “Prime-time network advertising is better than it’s been in a long time and a political year is right around the corner.”

Financial services and health care were important categories for CBS in Q2, and Moonves projects the strengthening marketplace will only get more robust as the year progresses.

“We expect underlying advertising growth to accelerate in the third quarter,” Moonves said. “We have more inventory to sell than last year’s Q3, when we had several political preemptions.” Naturally, a month of NFL football and two weeks of new prime-time content will help CBS rake in the ad dollars in the tail end of the quarter.

Over the course of the call, Moonves touched on a number of pet subjects, including the industry’s embrace of a hypothetical C7 ratings currency, the success of the summer drama Under the Dome and CBS’ quest to secure higher retransmission consent fees from Time Warner Cable.

On the subject of the currency, Moonves noted that while CBS was compensated for some of the time-shifted deliveries of Under the Dome, not every eyeball is being counted. “The initial viewing was 13.5 million, and when you added the DVR and VOD, it was north of 20 million. So that’s literally a third [of the premiere’s deliveries],” Moonves said. He reiterated that C7 would be established as the ratings currency within the year, adding, “there are some C7 deals being done now.”

Through the first six episodes, Under the Dome is averaging a staggering 11.7 million live-plus-same-day viewers, a 2.9 in the adults 18-49 demo and a 3.8 among the 25-54 set. In essence, the $40 million drama is delivering autumn ratings in low-HUT level July.

Because the latest extension of the Time Warner Cable-CBS carriage deal does not expire until 5 p.m. EDT Friday, Moonves said he didn’t have much to say about the matter. Later, he spoke more generally about retrans payments, telling an analyst that he believes that “he who has the most eyeballs should get paid the most…And, by the way, most everyone agrees and we are getting paid fairly in most places.”

CBS’ consistency is apparent in its programming schedule. As Moonves said midway through the call, the network has always ordered 18 to 22 pilots every year, no matter if it ends the season in last place or first place.

The network is so stable that once again it is introducing only six new series this season. The comedies Mom, We Are Men, The Millers and The Crazy Ones join the serialized thriller Hostages in the fall, while the Josh Holloway adventure series Intelligence arrives in mid-season.

“We only have five new [fall] shows,” Moonves said. “Not every one of them is going to work but they are all positioned in very good time periods so that they can work … We can’t wait for the fall to begin.”

Before the call wrapped up, Moonves addressed a question about how the Publicis-Omnicom merger might impact ad sales negotiations. “You know, it really is too early to tell. I remember we were concerned when WPP was amassing all those agencies, and we’ve always had good business with them,” he said. “We’ll see.”

Moonves added that CBS ad sales president Jo Ann Ross told him that she was not concerned about the outsized clout POG could potentially wield.