Netflix deal helps CBS 2Q profit more than double
Wednesday, August 3, 2011
LOS ANGELES (AP) — Those big checks that Netflix talks about sending to TV and movie studios for online rights are starting to be cashed on the other end.
Broadcaster CBS Corp. said Tuesday that its net income more than doubled in the second quarter, helped by a new deal with Netflix Inc., a mail-order DVD company that is expanding its library of programs for online viewing.
CBS cut a two-year pact with Netflix in February for older shows including “Frasier” and “Medium.” The broadcaster views the deal as highly profitable because it allows CBS to generate new revenue from shows that have already run on TV, in many cases years ago, beyond what those shows already made in advertising.
“CBS has always been very aggressive in seeking new ways to utilize their library,” said Edward Jones analyst Robin Diedrich. “That’s working for them right now.”
Chief Financial Officer Joseph Ianniello said such deals are not just “gravy.” Because of their 50 percent-plus profit margins, he said, they also represent “cream and cherries on top.”
“Stay tuned for more of that,” he said.
CBS’ net income in the three months through June 30 rose to $395 million, or 58 cents per share, compared with $150 million, or 22 cents per share, a year ago. Analysts polled by FactSet were looking for earnings of 45 cents per share.
Revenue grew 8 percent to $3.59 billion, also better than analysts’ forecast for $3.55 billion.
The biggest driver of revenue in the quarter was its content licensing and distribution business. Revenue there increased 21 percent to $889 million from $733 million a year ago.
Chief Executive Les Moonves said the company will seek more companies that want to distribute shows such as “CSI” and “Hawaii Five-O” online.
Last month, CBS signed a pact with Amazon.com Inc. that made 2,000 TV episodes available online to members of its Amazon Prime premium shipping program. Last week, CBS cut another deal with Netflix, this time for its online subscribers in Canada and Latin America.
Moonves put Google Inc., Apple Inc., Microsoft Corp. and Dish Network Corp. among possible buyers of CBS shows in the future.
“The world is getting bigger every day,” Moonves told analysts on a conference call.
Diedrich said despite such positive moves to diversify its revenue, CBS was still mostly tied to advertising and the up-and-down economic cycle. She has a “hold” rating on its stock.
Advertising revenue crept up only 3 percent to $2.22 billion from $2.16 billion.
Still, it was an impressive showing for advertising because it was compared against higher political advertising and higher revenue for the NCAA college basketball tournament in the same quarter a year ago.
This year, CBS shared coverage of the tournament with Time Warner Inc.’s Turner. That reduced revenue, but it also lowered costs and improved profits. The April 4 championship game came in the second quarter.
CBS’ stock increased 50 cents, or 1.9 percent, to $26.78 in after-hours trading following the release of results Tuesday. Earlier, it closed the regular session down $1, or 3.7 percent, at $26.28. Since the beginning of the year, shares of the New York-based company are up 39 percent.