CBS CEO Les Moonves has fallen in love with digital: His streaming properties helped the company to continue its streak of beating Wall Street’s earnings expectations in Q2 — at least when you don’t include the radio operation it plans to merge with Entercom.
And he told analysts that the company plans to introduce a 24/7 live streaming service for sports. No details just yet, including a name.
The company took a $365 million charge on CBS Radio, adjusting for the lower valuation it now figures for the operation vs the one it had in the books. There’s also a $7 million restructuring charge.
But if you take that out of the picture, then net earnings came in at $397 million, up 6.4% vs the period last year, on revenues of $3.26 billion, up 9.4%. Analysts expected revenues of $3.09 billion.
Adjusted earnings at $1.04 a share also beat forecasts for 98 cents.
Shares are up less than 1% in post market trading. Broadcast ad sales were up 6%, in line with many analysts’ expectations.
Moonves says that the company “took significant steps during the quarter to grow our affiliate fees from both traditional and ‘skinny’ bundles. Retransmission consent and reverse compensation increased 25% in the second quarter. And we are now seeing the benefit of our recent skinny bundle deals with Google’s YouTube TV, Hulu, and fuboTV, and just today we announced that we will be part of DirecTV Now as well. At the same time, our in-house over-the-top subscription services, CBS All Access and Showtime OTT, continue to grow beyond our expectations and are on track to surpass a combined four million subscribers by the end of 2017. We are now gearing up to take the next strategic step with All Access by expanding it into the international marketplace, starting with Canada in the first half of 2018.”
The Entertainment unit — which includes the CBS network and CBS Interactive — saw revenues grow 12% to $2.18 billion. That was mostly due to the 38% jump in affiliate and subscription fees. The 6% ad sales lift was mostly due to the move of the NCAA Final Four returning to CBS from Turner.
Content licensing improved 12%, a surprise considering that last year included a licensing agreement for Netflix to stream five Star Trek series overseas.
With the higher cost programming, operating income fell 1% to $346 million.
The Cable Networks operation, including Showtime, generated $571 million in revenues, up 7%. The company attributes the lift to higher affiliate and subscription fees, including from Showtime’s digital service. Operating income was up 11% to $253 million.
Local Media, mostly the broadcast stations, boosted revenues 4% to $412 million, mostly with retransmission consent revenues. Ad sales fell 2% compared to last year’s political season. Operating income fell 2% to $130 million.
And the Simon & Schuster publishing unit saw a 10% increase in revenues to $206 million helped by Cassandra Clare’s Lord Of Shadows and Kevin Hart’s I Can’t Make This Up. Operating income was up 8% to $28 million.