Company blames tough comps due to high-grossing primetime finales in May 2005 for second-quarter slide in network revenue.
There’s nothing wrong with the broadcast network business, CBS executives insisted this morning in a teleconference with securities analysts following the release of second-quarter earnings.
That revenue in the quarter was down 1.5% from last year was due primarily to unusually high advertising revenue from primetime series finales in May 2005. Time in the finale of Everybody Loves Raymond went for “an ungodly amount,” said CBS CFO Fred Reynolds. CBS also benefitted then by heavy spending on the final installments of JAG, Judging Amy and Survivor.
CBS CEO Les Moonves added that the scatter market in the second quarter was “soft.” But, he added, with the exception of the second quarter, scatter has been “significantly up.”
Moonves said that one of the reasons the network upfront market was “flat” (that it was down is a “myth,” he said) was because Johnson & Johnson and some other advertisers decided to spend their money later in the year. He said CBS will “take a significant part the J&J money,” when it starts spending in August and September.
Not surprisingly, Moonves was optimistic about CBS’s primetime chances in 2006-07, saying that the network should meet on exceed its strong performance last season, in which it was tops in total viewers and households. The network lost none of its “major shows,” he said. And with only four new shows to promote, “all of which are getting great buzz, we are confident that we can deliver again starting in September.”
The revenue story for the TV stations in the second quarter was happier. Moonves said the group was up 5%. Except for New York, he said, “political spending is exceeding expectations.”
“Early advertising sales indicate that our CW stations are also quite strong, which should lift the station groups even higher,” Moonves said.
CBS’s Television segment includes not only CBS, its half interest in CW and the TV stations, but also its syndication division and its two cable networks, Showtime and CSTV.
For the quarter, segment revenue was down 1% to $2.3 billion, primarily due to a switch of home video distribution to a third party. OIBDA (operating income before interest, depreciation and depreciation) dropped 2% to $535.4 million as a result of $24 million in expense related to shutting down UPN and higher stock-based compensation. Overall segment advertising revenue was flat.
For the corporation as a whole, revenue declined 1% in the quarter compared to last year to $3.48 billion as growth at outdoor and publishing was offset by an 8% decline in radio. Earnings per share was up 36% to 64 cents, but those numbers were inflated by a tax benefit of $129 million or 17 cents per share.