Better Than Expected 2nd Quarter for CBS

Overall revenue was up 9% (excluding the soon to be spun off radio segment) year over year to $3.3 billion. Ad revenue improved by 4% due largely to the NCAA Final Four which drove the 7% increase in network advertising. Affiliate and subscription fees grew 16% year over year as retrans and reverse comp were up 25%. CBS will have all of its retrans and reverse comp deals up for renewal over the next three years, providing the firm with the ability to meet its stated 2020 revenue goal of $2.5 billion. Despite the tough comp from last year’s sale for the international rights to Star Trek library, content licensing and distribution expanded by 12% as management continues to monetize the deep content library. CBS will soon benefit from the first-run syndication of its three third-year shows, NCIS New Orleans, Madam Secretary, and Scorpion, which highlights the firm’s continued investment in its studio. Adjusted operating margin fell by 130 basis points versus a year ago to 20.5% as revenue growth in high margin areas such as retrans and reverse comp were more than offset by increased content costs.

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