Technology is a friend of companies like CBS that have popular content, CEO Les Moonves told investors this morning in a presentation at the RBC Capital Markets Technology, Internet, Media and Telecommunications Conference. That includes Sony’s planned streaming service, which CBS has agreed to support. Here’s what he had to say about that, and other Wall Street concerns about the company and broadcasting:
Sony and other streaming initiatives: “Sony is going to do an offering that’s very interesting,” the CEO says about the planned — but still largely mysterious — linear service for owners of Sony PlayStations and its other smart TV devices. It will have “more bells and whistles, more VOD content…. We went from a universe of broadcast-only, to cable, to satellite, to telco, and now streaming. [Sony’s service] is the next iteration of that.” Between that and similar plans by others, including Verizon, there’ll be a booming market for hit shows.
CBS’ streaming plans: No more specifics about Showtime. Similar to what he said last week, Moonves told investors that Showtime will “have some over-the-top offering in 2015. I was sort of reiterating what HBO said when they said will have something over-the-top by the end of 2015.” The Showtime initiative, in addition to the recently launched CBS All Access and CBSN news service, are driven by a belief that streaming is ” the wave of the future.” Although 77% of the audience still watches shows live, “that number’s going to get less and less. More and more people are watching by DVR and the biggest growing number will be streaming and we need to be there.”
Ad market: The CEO says that it’s better than people think — at least for broadcasters — and that by next year about 75% of his sales will include audience reached over 7-days of viewing, up from three. “Third quarter was better than second quarter, and fourth quarter is better than third quarter.” The scatter market “was slower during the summer and therefore picked up a little bit later than normal. But now it’s starting to come in like it normally does.” How come? “I don’t know….But at the end of the day it didn’t affect us.” At local outlets, “auto has picked up… That’s like 40% of our revenue.” It’s a different story for cable. “Most of the top basic cable networks are down double digits….People don’t DVR CNN. They don’t DVR the Discovery Channel. They DVR The Good Wife, NCIS, Blacklist, Scandal – all the premium quality shows. I’m known for being the biggest cheerleader for broadcast. Broadcast has been buried for the last 30 years, and all I can tell you is that it’s alive and very, very well.”
He adds that CBS and others are still able to cash in on the fragmenting audience — including those who watch online. “We have a new show called Scorpion. Opening night is watched by 13 million viewers.” Another 5 million watch on a time delayed basis within the week, “so the number we’re being paid for is 15 million viewers.” Then streaming adds 8 million viewers, and “we’re getting paid higher CPM’s than we’re paid over the air. Suddenly the 13 million person audience is now really a 26 million, of which 18 million is counted by an Nielsen and the other eight are getting paid for internally by streaming.”
Consumer pay TV outlays: Is the television industry – driven by pay-TV – headed off a cliff by constantly raising prices beyond what consumers are willing to pay? Perhaps. “That number’s getting up there,” Moonves says because people are “paying for a lot of channels that they don’t want… You shouldn’t be paying the Karate Channel 15 cents a month when nobody’s watching it. You should take the networks that people are watching and give them more money. That’s how the system should work.” That’s why he doesn’t think that CBS’s effort to increase its retransmission consent prices contributes to the problem. “Given that CBS is the No. 1 network with the most number of eyeballs for about the last decade, we deserve more retrans fees than some of the cable networks that don’t get nearly [as many viewers as] we get. ” And consumers are being well served, especially by broadcasters and some premium and basic cable channels. “There’s too [many] good shows and people who have DVRs are having trouble catching up. I’ve said, ‘Forget about everything else in your life. Don’t go out to dinner’.”
CBS’ negotiating clout: Moonves isn’t concerned abut Comcast’s planned acquisition of Time Warner Cable, or AT&T’s of DirecTV. “We still have a strong hand at the table, and we always will.” As a result, he doesn’t feel pressure to grow. “We’re very happy with where we are today” although “if there’s some great opportunity obviously we’d look at it. We’re not going to do anything that’s not accretive” to earnings. The CEO also doesn’t worry about his ability to drive a hard bargain for the programming contract that’s about to expire with Dish Network — which recently allowed Turner channels except TNT and TBS to go dark. “As I said to [Chairman] Charlie Ergen, your people won’t be very happy not having the Denver Broncos on the air. At some of the smaller networks I don’t think there is is much pushback. There would be a lot of heat for not having CBS programs on.”