Advertising Revenues Will Drive CBS’ Q4 Earnings

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CBS Corporation (NYSE:CBS) will report its Q4 2013 earnings on February 12. We expect another solid quarter with growth across its segments. The company’s broadcasting network in Q3 2013 had benefited from solid summer programming. In Q4, it will again be the programming that includes NCIS, The Big Bang Theory and NFL On CBS, which will boost the broadcasting revenues. The media house will continue to do well in the near term with a strong lineup and growth in ad pricing due to its dominance in the television ratings. CBS in Q4 will also see benefits from its movie Last Vegas, which had a production budget of $28 million and has grossed $124 million at the global box-office. [1]


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CBS Ratings Continue To Grow

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CBS has remained at the top in ratings (total viewers) due to high demand for its content. The media company telecasts NFL football games and they account for highest ratings. CBS said its regular-season schedule averaged 18.7 million viewers, a 6% increase over last year’s 17.7 million viewers. [2] In terms of scripted series, The Big Bang Theory and NCIS continue to lead the ratings in key demogrphics for the broadcasting network. [3] The company in its third quarter earnings call stated that both of these shows are pulling in more than 20 million viewers a week. [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.

Trends In Advertisement Sending Supportive

Television ad spending in the U.S. has been supportive for the content owners. During Q3 2013, the company witnessed 4% growth in ad revenues to $1.86 billion, primarily driven by the growth at the CBS Television Network and CBS Interactive. [5] The advertising market has trended well in 2013, despite the absence of the Olympics or high political spending. By the end of the first three quarters of 2013 (latest Nielsen data available), global advertising spend grew by 3.2% as compared to the prior year period. However, the North American region saw a slight decline of 1.3% during the same period. [6] This can be attributed to the absence of heavy political advertisements versus the prior year. Television as a medium continues to show steady growth.  With a 4% increase in advertising spend for the third quarter of 2013, it accounted for 58% of the overall market, according to Nielsen estimates. [7] Content owners such as CBS will benefit from the advertising growth as more than 50% of CBS’ value comes from advertising related businesses, according to our estimates. We believe that CBS will benefit from its continued focus on original programming, evident from the performance of Under The Dome in the previous quarter. CBS will air Amblin Entertainment’s Extant starring Halle Berry in the coming summer season. The company has already started to see the benefits from the show and recently inked a deal with Amazon for Extant’s exclusive content licensing.

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Notes:
  1. Last Vegas, Box Office Mojo []
  2. An NFL Ratings Bonanza, Sports Illustrated, January 2014 []
  3. CBS 2013-14 Season Ratings, TV Series Finale, Feb 9, 2014 []
  4. CBS Management Discusses Q3 2013 Results – Earnings Call Transcript, Seeking Alpha, Nov 6, 2013 []
  5. CBS’ SEC Filings []
  6. GLOBAL ADVIEW PULSE LITE – Q3 2013, Nielsen, Jan 22, 2014 []
  7. TV REMAINS THE REIGNING CHAMP, BUT DISPLAY INTERNET ADS ARE THE MVPS OF 3Q, Nielsen, Jan 27, 2014 []