CBS talke a lot about digital during its earnings report and call today but didn’t provide much in the way of data to show its impact on the company.  In fact, asked for details, CBS President and CEO Les Moonves simply said, “I’m going to be evasive.”
First, the fine print. CBS profit rose 4 percent in 2Q06 to $781.7 million, or $1.02 per share, for 2Q06, compared with $753.8 million, or $0.94 per share in the same period last year. Adjusted to continuous operations, CBS earned $0.64 per share on revenues of $3.48 billion; revenues were knocked down 1 percent, largely due to an 8 percent decline in radio.
Back to digital. Here’s an example of Moonves from prepared remarks: “… We believe incremental revenue streams for existing content will create margin expansion as new media platforms begin to take hold. We continue to test a great number of new media distribution methods and price points to determine which will attract the largest revenue opportunities. Going forward, we’re determined to translate the higher margins afforded by digital content into increased shareholder value.”
Which says what about how much money CBS is making or can make from digital? I may have to send a mash note to Doug Mitchelson at Deutsche Bank, who asked Moonves for “a sense of the amount of digital revenue “ or even a percentage of overall revenue for ‘06 and ‘07.
Moonves: “Doug, I’m going to be evasive. All I can tell you is the revenue from the new media stuff is growing a great deal. It’s going to grow more than 100% in ‘06 from ‘05. We expect that kind of growth (will be) even more significant in ‘07. In terms of giving a specific number, it is very hard because these initiatives are coming in every single day. It will be in the hundreds of millions of dollars though. Sports Line clearly is our number one area for that and that is growing in leaps and bounds and so there is a lot that is out there, rather difficult to quantify right now but it is all very exciting.”
Acquisitions: CBS has money to spend but on what? CFO Fred Reynolds: “We’ve said in the past we want to focus on content acquisitions that makes sense. We have a lot of outdoor small tuck-in acquisitions which wouldn’t use anywhere near the kind of cash we’re talking about. I would say we’re probably more in the CSTV kind of level… We don’t chase after acquisitions. There’s nothing we need to have. But clearly we would like to keep growing the businesses and have a higher growth rate.”
Upfront: Merrill Lynch analyst Jessica Reif Cohen asked, “Given the anemic upfront market for both broadcasting and cable, money is obviously going elsewhere; the Internet, product placement. What is your plan to recapture this money? Do you need to acquire some property, some web-based property or something else or will you go purely the organic route?”
Moonves said the upfront was not diasppointing, that four of the five networks did well. As for the internet properties, “when you look at how much money is shifting to the Internet obviously we’re there. We’ve made a number of deals across the board. Along with our network deals and our syndication deals, there were web properties that got a piece of the upfront. Having said that, the percentage of that was rather small. We did make some cross-platforming deals with a lot of our new shows and a lot of the Internet is there as part of it, but the amount of money is rather small ...”
Earnings | Webcast | Transcript