Redstone and Moonves see business starting to turn


CBS Corporation Executive Chairman Sumner Redstone kicked off the company’s quarterly conference call with his declaration of “clear signs” that the economy is starting to turn. “Indications are we’ve seen the bottom of this downturn,” CEO Les Moonves declared, predicting that the second half of 2009 will be better than the first half. Meanwhile, CBS Corp. reported a net loss of $55.3 million in Q1, compared to net earnings of $244.3 million a year earlier. Television division revenues fell 12% and radio 29%.

Redstone said CBS had certainly not been immune to the economic downturn, but that what comes through is its underlying strength and viability. Citing strong ratings, he said that when the economy turns – “and there are clear signs that it is starting to turn now – CBS will take advantage of its strengths and lead the other media companies in this recovery.”

“I have no doubt that the recovery is coming in the not to distant future. When it does, CBS will be among the first to deliver significantly better results,” Redstone told analysts and investors.

Moonves noted the impact of the economic downturn on CBS’ businesses, but then brightened. “Fortunately, we feel that it is starting to turn. And despite the operating environment that we faced in the first quarter, we have some examples that speak to the resilience of our businesses. For one, we continue to generate growth in our non-advertising supported businesses as well as profitability on an OIBDA [operating income before depreciation & amortization] basis in every one of our operating segments. We also continue to produce healthy free cash flow,” the CEO said. 

“And going forward we have confidence that the second half of ’09 will be much stronger than the first half and here is why: First, we have a strong slate of syndication titles to be released later this year. These titles have already been sold at attractive prices to leading cable outlets, including ‘Criminal Minds’ to A&E, ‘Medium’ to Lifetime, ‘Ghost Whisperer’ to Sci Fi and ‘Everybody Hates Chris’ to Nick @ Nite – and a similar deal for ‘Numb3rs’ will soon be announced. Second, we implemented significant cost reduction in the second half of ’08 which will benefit us in ’09, particularly in the 4th quarter. We also have much lower capital expenditures planned for this year, which will help cash flow,” Moonves said.

“Finally, perhaps most importantly, we are seeing early signs of improvement in the advertising marketplace, both locally and nationally. You have heard these themes from other major media companies and we are seeing it as well. In each of the last several weeks we’ve seen sales pacing improve. It’s premature to call it a full recovery, but the trends are encouraging, particularly as we look to the back half of the year,” he continued. “For these reasons, we are now offering full year guidance. We are projecting ’09 OIBDA  to finish in the range of $1.725 billion to $1.925 billion. It is important for you to understand that our run rate is better than indicated by our first quarter results,” the CEO told Wall Street.

Q1 revenues fell 13.5% to $3.16 billion and OIBDA was off 61.1% to $249.8 million.

Television revenues were down 12% to $2.23 billion, which was attributed to lower ad sales and television license fees, although that was partially offset by higher affiliate and home entertainment revenues. Advertising sales were down 15% to $1.31 billion. Television OIBDA was down 49% to $228.7 million.

CBS Radio revenues took a 29% hit in Q1 to $259.7 million. That was largely due to the tough advertising marketplace, but also because of the absence of revenues from the former Westwood One deal and the sale of the company’s radio stations in Denver. Radio OIBDA dropped 57% to $52.2 million.

CBS Outdoor revenues were down 24% to $379.9 million and OIBDA dropped 75% to $25.1 million.

The only division to gain was CBS Interactive, with revenues of $133.6 million from $52.9 million, including the addition of CNET. On a comparable basis, interactive revenues were down 5%. OIBDA was $8.2 million, vs. $1.1 million, primarily due to the addition of CNET.

In his Q&A with analysts, Moonves didn’t rule out CBS eventually putting content on Hulu alongside ABC, NBC and Fox, but for now he prefers and so the company can control its own destiny.

Here’s an item that will be of interest to CBS affiliate stations. When discussing retransmission consent negotiations with cable MSOs, Moonves said CBS has completed 51 deals representing about 10 million cable subscribers out of about 40 million total. “In addition, we’re starting to look at what happens with retrans with our affiliates, which is another new revenues source that probably will be coming up in the future,” Moonves said.