CBS Corporation staying put in local radio and TV


Lots of folks on Wall Street like to talk about how TV network companies should jettison their O&O stations and go directly to viewers via cable, satellite and the Internet. Well, CBS Corporation CEO Les Moonves is having none of it. He says the company is committed to local media and notes that trends are improving.

For the entire company, Q3 revenues were down only 1% in Q3 to $3.35 billion. Operating income before depreciation and amortization (OIBDA), before impairment charges each year, was $597.3 million in Q3 2009, vs. $638.8 million in Q3 2008.

Television division revenues were up 9% to $2.27 billion and OIBDA gained 17% to $483.9 million. Gains in television license fees and affiliate revenues were partially offset by lower advertising sales. And while ad sales have been down this year at the O&O stations, Moonves notes that, excluding political, spot sales were up for the TV group in October, so a rebound is underway. Meanwhile, scatter pricing for the CBS Television Network is up over 100%, with the CEO saying he’s heard from agencies who’ve lamented that their clients didn’t take their advice to buy more in the Upfront.

Radio revenues declined 19% to $318.9 million and OIBDA declined 33% to $93.1 million, with cost-cutting more than offset by the soft advertising market. However, CBS officials said the ad market is improving for local radio as well as TV.

CBS Outdoor saw Q3 revenues decline 23% to $424.9 million, with the overseas billboard business down more than the US. OIBDA decreased 71% to $32.6 million. But Moonves was dismissive of an analyst’s suggestion that CBS Corp. load the outdoor company up with debt, since the credit markets are currently receptive (CBS Corp. itself announced closing on a new $2 billion credit facility running for three years), and then spin it out to shareholders as a separate company. The CEO said he liked the cash flow from CBS Corporation’s local media businesses and is sticking with them. (He did allow that CBS might still try to sell more of its radio stations and possibly some smaller market TV stations.) In fact, the company is changing its quarterly reporting segments and, beginning with Q4, Local Media will be reported as a new segment. That will include CBS Radio, CBS Outdoor and the O&O TV station group, which will not longer be lumped in with the network and cable businesses.

At the beginning of Thursday’s call, Moonves got a glowing endorsement from Executive Chairman Sumner Redstone, who said two things have become clear in this difficult year. “One, the light at the end of the tunnel each day continues to get brighter. And two, the companies with the best content have not only fared the best throughout these challenges, they’re emerging stronger than ever as well. And CBS is clearly one of those companies, and, if I may say so, the preeminent company,” he declared.  

RBR-TVBR observation: What is it about local radio and television stations that Wall Streeters don’t like? Over the course of history, local stations in large markets have been a high-margin business, while TV networks have been a low-margin business. Even in this recession, the O&O groups have continued to pump out cash flow for their parent companies. Les Moonves at CBS and Rupert Murdock at Fox continue to tell analysts that selling off their TV station groups would be a stupid move, but they just don’t seem to get it.