Moonves: C7 Switch Only a Matter of Time

CBS boss predicts a currency shift will take place by mid-2014

Weeks after expressing his support for a switch to a new ratings currency that would include seven days of time-shifted deliveries, Les Moonves is now predicting that the change will happen by mid-2014 at the latest. 

Speaking to investors at the UBS Global Media and Communications Conference in New York, the CBS Corp. CEO said that while it took some time to institute the C3 currency, “C7 is closer than that.” When asked for a rough estimate on when that might come to pass, Moonves was characteristically forthcoming. “I think we’ll have C7 within a year and a half,” he said. “I’m willing to bet a lot on that.”

A move to C7 would effectively add four extra days of DVR deliveries to the C3 currency that’s been in place since 2005. Nielsen defines C3 as live commercial viewing plus three days of DVR playback.

While there’s little question that a move to C7 would vastly enhance overall deliveries—on Nov. 15, CBS’ new drama Elementary jumped 57 percent in the adults 18-49 demo upon application of a week’s worth of DVR viewing, improving from a 2.3 live-plus-same-day rating to a 3.6—commercial viewing is unlikely to change. (On average, CBS loses a tenth of a ratings point when live-plus-same-day ratings are compared to C3, a reflection of commercial avoidance during playback. That viewers would elect to watch the ads four, five, six or seven days after the live airdate is a dubious hypothesis at best.)

Casting a wider net isn’t the only solution to broadcast’s recent ratings woes. The system against which some $60 billion in national sales are guaranteed must improve as well. “One of the things looking forward that we need to have happen is for Nielsen to get better,” Moonves said. “There are a lot of people watching our shows that are unreported.”

Moonves later acknowledged that Nielsen continues to work to merge linear TV ratings and streaming data. “I think Nielsen is trying really hard to get all the eyeballs in … and when that happens there’s going to be much more accuracy,” he said. “And that’ll be good for everybody.”

The C7 talk comes as broadcasters struggle with powerful cable rivals and the ravages of time-shifting technology. Through the first 10 weeks of the 2012-13 season, CBS is down 18 percent in the 18-49 demo, while Fox has gone from first to worst, plummeting 31 percent to a 2.4 rating.

While many would agree that this has been a particularly weak development cycle, the CBS chief said the quality of the shows on his network is not a factor in the fall ratings turbulence. “This year has certainly been a bit of an aberration, but it’s not a content issue,” Moonves said, noting that the election cycle and NFL Network’s beefed-up Thursday Night Football schedule have softened general-entertainment GRPs by as much as 10 percent.

Moonves said that despite the unsettled fall ratings picture, CBS ultimately would win out among total viewers and both the 18-49 and 25-54 demos. It already is the reach leader, averaging 11.7 million viewers in prime time, leading runner-up ABC by a margin of more than 2.5 million.

In hashing out some of CBS’ economic data, Moonves demonstrated that his network essentially has a license to print money. For example, when CBS pulled the plug on CSI: Miami after 10 seasons, the show’s per-episode production costs had soared to $3.7 million. By comparison, newcomer Elementary has a much leaner budget, with production costs of $1.8 million per episode.

And while the pricey CSI: Miami is no longer on CBS’ schedule, it still makes money for the network. “When we took it off the air it automatically went to Netflix at a preset price,” Moonves said. The series will also generate an estimated $80 million in first-run syndication.

Moonves peppered his conversation with a number of zingers, riffing on everything from CBS’ supposed overreliance on procedurals to the recent antics of Two and a Half Men co-star Angus T. Jones.

“People think we’ve relied way too much on procedurals, but if you can give me a show like CSI which makes $2.5 billion over the length of the series, or NCIS which is breaking $1 billion in profit, we’ll keep killing people every single week,” Moonves cracked. “That’s what we do.”

During an aside on how actors are better compensated as a series progresses, Moonves took a jab at Jones, who recently recanted a video testimonial in which he urged viewers to turn their backs on his show. “We do have to pay actors more in hit shows and that’s a very good thing,” Moonves said. “There’s that kid on Two and a Half Men who is getting $300,000 an episode to talk bad about me.”

Earlier in the day, at a breakfast hosted by The Wall Street Journal, Moonves said he didn’t know if Jones had a future on Two and a Half Men, saying only, “After going what we went through with Charlie Sheen, this has been a piece of cake.”

Clearly in an expansive mood—there appears to be a direct correlation between the volume of one-liners dropped during a Moonves appearance and CBS’ stock performance—the network boss also joked about retransmission-consent revenue, which is expected to top the $1 billion mark by 2017. Noting that ESPN takes in north of $5 per subscriber per month in carriage fees, Moonves said he’d be shooting for a $7 retrans fee in 2013.

Well, not really. “I’m only kidding,” he said. “That sounds nice, though. That’s a nice number.”

Looking ahead to the first quarter of next year, Moonves said that CBS has just a few Super Bowl spots left to sell, reiterating that rates are over $4 million for each 30-second allotment.

“We could have sold out, but it’s good to hold a few so that when you get some crazed movie company come in on January 15th saying, ‘I have to have it,’ well, God what would that number be? It’s fun to think about.”