CBS Call: Redstone: Light At The End Of The Tunnel

Leslie Moonves, CEO, CBS

Before turning the Q3 earnings call over to CBS Corp. (NYSE: CBS) president and CEO Les Moonves, Sumner Redstone, the company’s executive chairman heaped praise on the company’s efforts to manage the downturn and sounded relieved to say “there is finally light at the end of the tunnel.”

Moonves echoed his sentiment: “We’ve said that the second half would be improved and it was. We’re pleased that in this marketplace, revenues were down only slightly. Going forward, we expect stronger underlying growth trends for ad markets into next year. Our general optimism is based on the economy as a whole and the positive changes in the ad environment.” He added that retransmission dollars will double based on contracts currently in place. He’s counting on retrans and efforts like authentication, or TV Everywhere, for diverse revenue streams.

Moonves also said the realigned operating segments announced earlier will provide greater transparency. It will also serve to emphasize CBS’ extensive local media presence — an area where ads are expected to grow much more significantly compared to the general market.

Turning to online, although Q3 interactive was somewhat mixed — income was up about 11 percent, but revenues were down about 14 percent — Moonves insisted that display ads are improving. As a result, he fully expects CBS will be “a leading beneficiary in that upturn, especially online video which is expected to grow double-digits.”

CFO Joseph Ianniello discussed CBS’ improving outlook for the end of the year, though he declined to offer quarterly guidance. Despite that expression of confidence, Ianniello said that he company still has an eye on possible weakness remaining in parts of the ad industry. So to quell any fears about the ad recovery being short-lived, Ianniello made a point of noting that CBS’ revenues will come from other areas besides marketers’ dollars, specifically, licensing and subscription fees.

After more discussion about retrans revenues, analyst Jessica Reif Cohen asked whether CBS would sell any of the local properties. Moonves: “We’ve talked about trimming down our radio — we did so successfully in Portland — and we while we don’t have to sell, there are some markets where we could consider further trimming radio and local TV assets.”

Deutsche Bank’s Doug Mitchelson inquired about about the way the network factors in ratings from DVR use and what sort of impact on advertising, which is an area that Moonves and CBS research head Dave Poltrack have been very bullish on. Moonves also touched on the growing importance of Nielsen’s live-plus-seven ratings program, which measures time-shifted viewing a week after a show airs. “We’ve always stated that DVR use is for primetime network or premium cable content. In that environment, [Nielsen’s] live-plus-seven ratings becomes a more significant number. On top of that, we’re in conversations with Nielsen to get online represented as well. There’s a significant number of viewers that we’re not getting paid for.”

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