CBS Promises A Banner 2018

COO Joe Ianniello told securities analysts tuned into CBS Television’s 4Q financial results conference Thursday afternoon that 2018 will be a record breaker for the company, with “four pillars” contributing to financial success.

The four pillars are advertising, direct-to-consumer (DTC) distribution, retransmission consent/reverse compensation and international licensing, which will be good for “incremental growth well in excess of $100 million each.”

It’s all part of the overall strategy, which CEO Les Moonves said is to “produce must-have content and monetize it and more and more lucrative ways.”

Ianniello laid it right out, promising high-single-digit revenue growth and high-teens earnings per share growth for the entire year.

Local, which comprises CBS’s television stations, is pacing up in the low single digits in this year’s first quarter, a good thing, but the news on the network scatter front is excellent. Said Ianniello: “Network advertising has been robust in the first quarter. Pricing in daytime, primetime and latenight is up nearly 40% from the upfront, demonstrating broad-based health in the marketplace.”

Political is fully expected to be robust, although it is minimal during the first quarter. Ianniello said that roughly half of the spending will come in October.

Moonves has been touting the improved visibility CBS has regarding anticipated financial performance, and one key to that is retransmission consent and reverse compensation income, which is immune to the political cycle and the general vagaries of advertising market. He said the company is still on track to achieve $20.5 billion in combined retrans/reverse comp income by 2020.

The new tax law is going to result in hundreds of millions in savings, which according to Ianniello, the company plans use to accelerate investment in key growth initiatives, including DTC launches, increasing international distribution and new program production.

Looking back to 4Q 2017, Ianniello said combined retransmission consent and reverse compensation revenue was up 31%. Reverse compensation on its own was up 40%, he noted later.

The television station group took the usual off-election-year beating during the quarter, registering a 14% drop in revenue and a 37% hit to operating income.

But there was a bright spot. Nonpolitical revenue beat expectations with a robust 7% gain, driven by strong retail performance during the holiday season.

Moonves couldn’t seem to say enough about the company’s forays into direct to consumer distribution platforms. He said that between them, CBS All Access and Showtime OTT are at 5 million subs combined (split about 50-50), putting the company well on its way to exceeding its goal of 8 million subs by 2020.

In addition to subscription fees to the DTC services, which are more profitable to CBS than those it receives from traditional MVPDs and other OTTs, the services are a source of invaluable audience data, and he is very pleased at the composition of that audience.

“Delivering these services … allows us to attract the next generation of viewers with an average age that’s approximately 20 years younger than those who watch broadcast and cable television.

He cited the digital news offering CBSN, where almost 80% of the audience is 18-49 and the average age is 38. He hopes to draw even more of them, as additional DTC offerings coming this year will feature expansions of CBS Sports and Entertainment Tonight.

Moonves brushed off Fox’s capture of Thursday Night Football. He said CBS loves the NFL, but noted that Sunday games are much better, partly because the Thursday broadcasts were not exclusive (they can be seen on NFL Network and Amazon). He added that he has no worries about CBS on Thursday, thanks to the presence of Big Bang Theory and Young Sheldon on the schedule.

Asked about the need for audience measurement to catch up with modern viewing realities, Ianniello said it was extremely important. He sees unmeasured viewing as a “lost opportunity,” and noted that Nielsen is working on it.

“The good news is the consumption’s there,” he said, “and there is real upside, and you can do it by percentages — double-digit percentages are kind of watching it on their own time, and that’s an opportunity. And we have to make sure we deliver that for advertisers, and we have to measure that and get paid for that.”

Anybody hoping to get some insight into any possible moves involving Viacom had their hopes dampened at the outset of the session, when it was announced that there would be no discussion of the topic.