CBS Networks Will Lead CBS’ Growth In Q3

CBS Corporation (NYSE:CBS) will report its Q3 2013 earnings on November 6. We expect a solid quarter with growth across its cable networks, content licensing and advertising revenue. The company’s broadcasting network in Q2 2013 had benefited from the success of certain big events such as NCAA. In Q3, it will be the Under The Dome and NFL On CBS, which will boost the broadcasting revenues. However, the comparison of advertising revenues will be difficult due to lower political advertising spending, as 2012 benefited from the U.S. presidential election. The media house will continue to do well in the near term with a strong prime-time lineup and growth in ad pricing due to its dominance in the television ratings for primetime network broadcasts. ^[1]

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CBS’ Broadcasting Network Will Show Strength

CBS has remained at the top in ratings due to high demand for its content. Interestingly, even after Time Warner Cable’s (NYSE:TWC) blackout of CBS to around 3.2 million viewers, the broadcasting network held on to its top position in ratings (See – CBS Remains Immune To Blackout). One of the reasons for the higher ratings at that time was the popularity of its show Under The Dome and its impact on CBS’ overall growth will be visible in the third quarter earnings. The show went in profit even before it was aired due to the Amazon (NASDAQ:AMZN) deal and the international sales. Amazon in September, renewed its exclusive rights to provide the series online for the second season. ^[2] Another hit show Big Brother also premiered in June and will bolster the revenue growth in the third quarter. The media company also telecasts NFL matches and they account for highest ratings for CBS. In terms of scripted series, The Big Bang Theory and NCIS lead the ratings for the broadcasting network. ^[3] The network also aired Emmy Awards, which witnessed the largest audience in eight years and its best demos in seven years. ^[4] CBS will benefit from the success of all these shows and the company’s focus on original programming will continue to aid its overall growth.

TV Advertising Shows Steady Growth

We estimate that close to 55% of CBS’ value comes from advertising related businesses. For Q2 2013, ad revenues grew by 5% to $2.09 billion, primarily driven by the timing of semifinals of the NCAA tournament. ^[5] The advertising market has been trending well this year despite the absence of the Olympics or high political spending. For the first half of 2013, global television ad expenditures grew 4% on a year-over-year basis, accounting for 58% of total ad spend. ^[6] Television thus continues to dominate its position as the front-running media format for advertising, and content owners such as CBS will continue to benefit from it. However, excluding television, traditional media budgets took some hits in the first half of 2013, as spending in newspapers, magazines and radio all declined in the first half by -2%, -1.9% and -0.9%, respectively. ^[6] We expect revenues from CBS radio to not experience substantial growth.

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

1. Nielsen Loves CBS but Will It Love Twitter More?, The Motley Fool, Oct 18, 2013 [↩]
2. CBS and Amazon renew ‘Under the Dome’ streaming deal for season two, The Verge, Sep 12, 2013 [↩]
3. CBS, Fox & NBC See Huge Opening Week NFL Ratings, Sports Media Journal, Sep 9, 2013 [↩]
4. Primetime Emmys on CBS Draw Largest Audience in Eight Years, The Variety, Sep 23, 2013 [↩]
5. CBS’ SEC Filings [↩]
6. GLOBAL AD SPEND: WITH DOUBLE DIGIT GAINS, DISPLAY ADS DRIVE IN-YOUR-FACE RESULTS, Nielsen, Oct 22, 2013 [↩] [↩]