Revenues Dip at CBS Corp. in Q3

NEW YORK: CBS Corporation posted revenues of $3.26 billion in the third quarter, down from the $3.37 billion reported in Q3 2014, with the decrease partly attributed to the timing on TV licensing sales.

Operating income of $753 million for Q3 was up 1 percent from the same prior-year period, with growth in high-margin affiliate and subscription-fee revenues, which were offset by lower profits from TV licensing.

Entertainment revenues (CBS Television Network, CBS Television Studios, CBS Global Distribution Group, CBS Interactive and CBS Films) were up 1 percent to $1.93 billion, thanks in part to a 55-percent increase in affiliate and subscription fees. Network advertising revenues were up 1 percent, despite the broadcast of fewer sporting events on the CBS Television Network. Content licensing and distribution revenues dipped 3 percent, due again to the timing of TV licensing sales. Operating income in the segment was $339 million, up 12 percent from the prior-year period, led by growth in higher margin revenues, which were partially offset by an increased investment in programming and digital distribution initiatives.

Cable networks revenues (Showtime Networks, CBS Sports Network and Smithsonian Networks) were $526 million, compared with $624 million for the same prior-year period, which included domestic streaming sales of Dexter and Californication and higher revenues from pay-per-view boxing events. There was an increase in affiliate and subscription fees, with growth in rates and revenues from new digital distribution platforms. Operating income was $246 million, compared with $266 million in Q3 2014, due to lower revenues. The decline was partially offset by lower programming costs that were associated with PPV boxing events.

Local broadcasting saw revenues of $638 million, down 6 percent. CBS Television Stations revenues declined 7 percent from a year ago, as a result of 2014's benefit from the midterm elections and the broadcast of fewer sporting events on CBS in 2015. Growth in affiliate fees partially offset the decline. Operating income was down 9 percent to $174 million, largely due to the revenue decline, which was partially offset by recent cost-cutting measures the company put in place.

Publishing revenues were up 2 percent to $203 million, while operating income also grew 2 percent, to $43 million.

"Thanks to the strength of our great content, CBS continues to have a winning hand," said Sumner Redstone, the executive chairman of CBS Corporation. "Les and his team are capitalizing on all of the opportunities before us, and I'm confident they are setting the company up for continued, long-term growth."

"During the third quarter, we once again grew our profit and EPS while continuing to increase our investment in content and new distribution services," said Leslie Moonves, the president and CEO of CBS Corporation. "I'm particularly pleased with the gains we're seeing in network advertising, including underlying ad growth in the third quarter and even better pricing here in the fourth. Plus, having sold less inventory in the Upfront, we stand to benefit throughout this television season as we sell our number one network in a very robust scatter marketplace. Add to that CBS's broadcast of Super Bowl 50 in February and the upcoming presidential election, you can see why we feel very good about advertising in 2016. At the same time, our non-advertising revenue continues to grow even faster, led by retransmission consent and reverse compensation, which were up 50 percent in the third quarter and are well on their way to exceeding $1 billion next year. Looking ahead, as viewers increasingly want to access and pay for content in new ways, we see continued increases in subscription revenue from our in-house over-the-top services at CBS and Showtime, as well as those from outside distribution partners. The good news is, no matter how quickly the industry changes—from big bundles to 'skinny' ones to a la carte—CBS is positioned to succeed."