CBS’ Under The Dome Will Drive Higher Ad Revenues

CBS: CBS logo
CBS
CBS

CBS (NYSE:CBS) has been riding high on the success of Under The Dome. The series has been the basic cable and broadcast’s top show for the summer. Nielsen estimates that 53.4 million viewers watched all or part of Under The Dome first season. Higher viewership directly translates into higher advertising revenues for the content owners. The outlook for the advertising market is stable and television remains the most important medium for advertisers to reach people. The impact of Under The Dome will kick in the third quarter, and we believe it will drive the advertising growth for the company.


See our complete analysis for CBS

Under The Dome Is A Big Hit

Relevant Articles
  1. Beating S&P500 BY 11% YTD, What To Expect From Travelers Stock?
  2. Up 50% Over The Last 12 Months, Is Hyatt Stock Still Attractive?
  3. Capital One Stock Gained 44% In The Last 6 Months, What’s Next?
  4. Up 8% Year To Date As 5G Gains Traction, What’s Next For Verizon Stock?
  5. Up 32% In The Last 12 Months, Where Is BNY Mellon Stock Headed?
  6. Rallying 30% YTD, What’s Spurring The Rally In Applied Materials’ Stock?

Under The Dome is an American science fiction drama from Steven Spielberg’s Amblin Television and was premiered on CBS in June this year. The program is based on the novel, Under The Dome by Stephen King. The series has been a huge success for CBS and its first episode alone attracted 20 million viewers on TV and online. [1] It has averaged 14.85 million viewers, according to Nielsen’s most current ratings. [2]

The show provided a tremendous platform to promote the company’s fall lineup. CBS Studios will license the series in more than 200 territories internationally. The program has been in top rankings in Australia, Canada, Spain, United Kingdom, Germany, Austria, Italy and New Zealand. The series has been recently renewed for the second season. Under The Dome also helped the network retain top spot in ratings even when CBS was blacked out in 3.2 million homes over the retrans dispute with Time Warner Cable (NYSE:TWC) (Read – CBS Remains Immune To Blackout).

What It Means For CBS?

The success of Under The Dome will drive the advertising revenue growth for CBS. The advertising accounts for close to 60% of CBS’ total revenues. In the recent Q2 results, CBS saw a 5% growth in advertising revenues driven by the timing of NCAA tournament. [3] The impact of Under The Dome will be visible in the next quarterly earnings. Moreover, another hit show Big Brother also premiered in June and will bolster advertising growth in the third quarter. Under The Dome went in profit even before it was aired due to the Amazon deal and the international sales. Earlier last week, Amazon (NASDAQ:AMZN) renewed its exclusive rights to provide the series online for the second season. This will bring in additional revenues for CBS.

How Is Advertising Market Trending?

According to Nielsen, advertising spend is continuing to rebound globally. During Q2 2013, the U.S. ad spending increased by 3.5% year-over-year to reach $35.8 billion. Higher primetime pricing and more NBA playoff programming led to 15% growth in cable TV ad spend. [4] According to research by PwC, the TV advertising sector will pass the $200 billion revenue mark with global revenues valued at $209.4 billion in 2017 compared with $162.1 billion in 2012. [5] The spend on TV has been far more than on online ads and all other traditional media. While most of the traditional media markets are growing slowly or declining, television is poised to see healthy growth through 2017. The chart below compares the reported TV ad spending growth rates in the U.S. with overall entertainment and media ad spend for 2009 through 2013, as well as PwC forecasts for TV and overall growth rates reaching out until 2017.

 

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. CBS Management Discusses Q2 2013 Results – Earnings Call Transcript, Seeking Alpha, Jul 31, 2013 []
  2. Under the Dome is the Most-Watched Series in the U.S. this Summer and Also Scores Impressive Ratings Around the World, TV By The Numbers, Sep 12, 2013 []
  3. CBS’ SEC Filings []
  4. Strong Quarter for TV Propels US Ad Spend to a 3.5% Increase in Q2, Market Charts, Sep 9, 2013 []
  5. Global entertainment and media outlook: 2013-2017, Price Waterhouse Coopers []