CBS 2Q beats Street as dispute goes on
- Article by: RYAN NAKASHIMA
- AP Business Writer
- July 31, 2013 - 7:50 PM
LOS ANGELES — CBS Corp. said Wednesday that net income rose 11 percent in the latest quarter, beating the expectations of analysts as the company continues to benefit from the types of fees that are at the center of a dispute with one of its key cable TV distributors.
Second-quarter net income grew to $472 million, or 76 cents per share. That's up from $427 million, or 65 cents per share, a year ago.
Revenue rose 11 percent to $3.7 billion.
Analysts polled by FactSet had expected 72 cents per share of earnings on revenue of $3.51 billion.
Shares edged up 34 cents to $53.18 in after-hours trading.
The broadcaster benefited from licensing its shows to online streaming providers such as Netflix Inc. and from increasing the money it receives from cable and satellite TV distributors to retransmit CBS programming on customers' lineups. Analysts see such retransmission fees as key to CBS posting revenue and profit growth in the future. But such fees come at the expense of distributors, which are increasingly resisting.
A fight between CBS and one such distributor, Time Warner Cable Inc., continued Wednesday after a brief blackout of CBS stations to some cable customers after midnight on Monday. The companies have set a Friday deadline to reach a deal after a previous deal expired as the second quarter ended on June 30.
CBS CEO Leslie Moonves told investors on a conference call that the company remained resolute in its negotiations with Time Warner Cable. Time Warner Cable has resisted, saying CBS's demands would push up customer's monthly bills. But Moonves said he was confident a new deal would result in more money than CBS was receiving previously.
"Every deal we've made in the last two years has been an improvement from the one before," he said. "Our job is to continue to produce the content we're doing and getting paid for it."
Revenue from licensing deals is key to ensuring stability for CBS because advertising revenue ebbs and flows with the economy. The company said revenue from non-advertising sources grew to 43 percent of the total compared to less than 30 percent a few years ago.
Advertising revenue grew 5 percent in the quarter.
The company also highlighted the success of the TV show "Under the Dome," an unusual summer release that was made possible because it sold exclusive online rights to Amazon.com Inc.'s streaming video service. Episodes are available on Amazon four days after they broadcast on CBS.
Moonves said the show, based on the novel by Stephen King, cost more than $3 million per episode, but it was profitable even before it aired because of Amazon's participation and international sales.
Advertising sales based on the more than 10 million viewers each week are "gravy" that will bring in profits in the third quarter, Moonves said.
Moonves said other networks would likely try to copy the model. He said Amazon CEO Jeff Bezos "actually spoke to me personally about how pleased they were that they experimented with this."
The new way of releasing TV shows also won over analysts. William Bird, with investment bank Lazard Capital Markets, said the "Under the Dome" experiment showed CBS can reduce risk while profiting during a normally slow period. The success, along with a solid quarter, caused him to bump up his target price on CBS shares to $61 from $58 and reiterate his "Buy" rating.
"CBS appears to be successfully evolving the business" to a world that includes online video, he wrote in a research note Wednesday.
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