Moonves: Reverse Comp Could Hit $450M

The CEO of CBS tells securities analysts that the company is on target to reap $250 million from retransmission consent deals involving its O&Os. Add to that what it expects to get in retrans sharing or reverse compensation from its affiliates and the retrans-related revenue swells to as much as $700 million in the next three to five years, he said. "We've made a number of these affiliate deals for reverse comp without pulling down any signals anywhere.... Everybody's happy."

By taking a big cut of its affiliates’ retransmission consent revenue, CBS now believes it can reap as much as $700 million in annual retrans-related revenue, CBS CEO Les Moonves told securities analysts on a conference call yesterday.

With long-term retransmission consent deals in place with cable giants Comcast and Time Warner for its O&Os, CBS is on course to meet its goal of $250 million in annual retrans starting in 2012, and “that does not include any of the fees that we are going to get from our affiliates,” Moonves said. Once that is added in, the number could climb into the “$600 million to $700 million range” in the next three to five years, he said. In other words, the fees from affiliates — a portion of their retrans revenue — would amount to between $350 million and $450 million a year.

And retrans revenue, he reminded the analysts, “drops right to the bottom line.”

Like ABC and Fox, CBS has begun demanding large shares of its affiliates’ retrans revenue as affiliation agreements come up for renewal.

So far, those renewals have gone well for CBS, Moonves said. “We’ve made a number of these affiliate deals for reverse comp without pulling down any signals anywhere…. [W]e’re in the process of getting some of our larger station groups done at very good rates, and everybody’s happy.”

Moonves dismissed the suggestion of analyst Marci Ryvicker of Wells Fargo Securities that station M&A activity is starting to heat up because broadcasters want to get bigger so they gain more leverage in their dealings with the networks. “Some of them are tough negotiations, but we haven’t seen guys band together or even acquire,” Mooves said.


CBS reported yesterday that its local TV and radio segment was up 2% in the second quarter to $691 million with radio stations up 4% and TV station “up slightly.” Operating income before depreciation and amortization was $230 million, up 7% over the second quarter in 2010, representing a 33% margin.

The increase in TV revenue came despite “a temporary slowdown” in advertising from Japanese car manufacturers, Moonves said. “As this spending comes back, we feel very good about this key category going forward. Because of these factors, we’re confident that we will be able to successfully manage our Local Broadcasting businesses for continued growth just as we did in the second quarter.”

CBS CFO Joseph Ianniello added that domestic auto spending was up by a percentage in the “high-teens” over the second quarter of 2010. “Other categories leading the way were financial services, pharmaceutical and telecom”

In the third quarter, nonpolitical TV stations revenue is pacing up in the low-single digits, he said.

Overall, CBS reported revenues of $3.59 billion in the quarter, an increase of 8% from $3.33 billion for the same quarter last year. The gain was driven by 21% growth in content licensing and distribution revenues, which benefited from a new licensing agreement for the digital streaming of select library titles.

OIBDA of $873 million for the second quarter of 2011 increased 51% from $579 million for the same prior-year period, driven by strong growth and margin expansion in every segment.

Advertising revenues increased 3% despite a difficult comparison to last year’s second quarter, which posted higher political advertising and higher revenue for the NCAA Division I Men’s Basketball Championship. CBS said the new programming agreement for the NCAA Tournament results in lower revenues, but higher profits.

The company’s entertainment group (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Films and CBS Interactive) posted revenues that increased 10% to $1.84 billion from $1.67 billion for the same prior-year period, driven by the new licensing agreement for the digital streaming of select library titles, the third-cycle domestic syndication sale of Frasier, the higher retransmission revenues and growth in network primetime advertising. T

CBS’s cable networks (Showtime Networks, CBS Sports Network and Smithsonian Networks) had revenues that rose 12% to $413 million from $369 million for the same prior-year period driven by rate increases and growth in subscriptions at both Showtime Networks and CBS Sports Network, as well as higher international syndication and home entertainment revenues for Showtime original series.

Read the company’s report here.

This story is based in part on a transcript of yesterday’s securities analyst conference call provided by seekingalpha.com.

Comments (2)

Leave a Reply

Sandhi Kozsuch says:

August 3, 2011 at 5:32 pm

Gee maybe Moonves can double his salary to a $160 million while small market affiliates go broke.

Hope Yen and Charles Babington says:

August 4, 2011 at 4:54 pm

John S: Ya THINK??

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