CBS Posts $55.3 Mil Loss on Ad Slump; Redstone Sees Economy Healing
CBS, which lost $55.3 million in the first quarter due to an advertising slump and a down economy, today said it is seeing signs that the worst of the recession might be over.
That assessment of the economy followed News Corp. CEO Rupert Murdoch’s statement Wednesday during an earning call indicating he believes the recession may be easing.
On a conference call today discussing CBS’ first-quarter loss, controlling shareholder Sumner Redstone said that “when the economy turns, and there are clear signs that it is starting to turn now, CBS will take advantage of its strength and lead the other media companies.”
Mr. Redstone added that “I have no doubt that a recovery is coming in the not too distant future. When it does, CBS will be among the first to deliver significantly better results.”
CBS CEO Les Moonves noted that rivals are reporting “early signs of improvement in the advertising market both locally and nationally. We are seeing it as well. Each of the last several weeks we’ve seen sales pacings improve.”
Mr. Moonves also addressed how NBC's decision to put Jay Leno in prime time would affect CBS's bottom line.
CBS's first-quarter loss of 8 cents a share compares to earnings of $244.3 million, or 36 cents a share, a year ago when programming costs were lower because of the Writers Guild of America strike.
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Revenues fell to $3.16 billion from $3.65 billion a year ago because of lower advertising revenues, CBS said.
“Like other companies, our results were affected by the economic downturn that continued during the first quarter,” Mr. Moonves said in a statement. “We are extremely pleased with the performance of our content businesses, particularly the CBS Television Network, which is having its best season in years with ratings up in all measures. And our non-advertising-supported businesses, which represent one-third of revenues, continue to perform exceptionally well.”
CBS executives said that the first quarter was not representative of how the company would do in 2009 because of some difficult comparisons and special items from the first quarter of 2008. Financial performance is expected to improve in the second half, when the ad market hopefully improves and when revenues from five large syndication sales to cable networks and stations kicking in.
Operating income at CBS’s television businesses fell 54% to $184.7 million from $404.8 million a year ago. Revenues fell 12% to $2.23 billion from $2.54 billion.
Ad sales fell to $1.3 billion, compared to $1.5 billion a year ago. The company blamed the drop on softness in the advertising marketplace and significantly lower political advertising sales after the presidential election.
At the CBS Broadcast network, ad revenues declined 8.6%. CBS noted that ad revenue was hurt by 4 1/2 hours of prime-time coverage of the inauguration and presidential speeches.
Mr. Mooves said that over the last four to six weeks, volume in the scatter market has increased dramatically, and has been improving week by week.
“We are encouraged as we head into the upfront that the scatter market is returning,” Mr. Moonves said.
CBS CFO Fred Reynolds added a note of caution.
“We’re not looking for a ‘V’ kind of recovery,” he said. The rate of decline has certainly stopped . . . It doesn’t mean we’re growing over last year. We still had a big trough to fill in, but I’d say it’s a slight upswing.”
(Editor: Baumann. Updated 4:30 p.m. to add CBS broadcast network numbers.)