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Streaming Again Spurs CBS Q3 Entertainment Profit

3 Nov, 2011 By: Erik Gruenwedel

Content license deals with Netflix, Hulu Plus and Amazon Prime help CBS withstand timing of traditional TV syndication sales

CBS Corp. Nov. 3 reported third-quarter (ended Sept. 30) pre-tax operating income of $405 million in its entertainment segment — and increase of 46% from pre-tax operating income of $277 million during the previous-year period.

Entertainment revenue increased 1% to $1.63 billion from $1.62 billion due in large part to new multiyear domestic and international licensing agreements for digital streaming subscription services such as Netflix, Amazon Prime and Hulu Plus, among others.

Indeed, content licensing and distribution revenue increased nearly 5% to $867 million compared to $828 million last year.

Other entertainment revenue drivers included higher international TV syndication sales, increases in retransmission revenues and higher primetime advertising.

CBS’s entertainment properties include CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Films and CBS Interactive.

“In less than eight months we have secured [streaming] deals that worth hundreds of millions of dollars from the diversification of revenue streams,” Les Moonves, CEO of CBS Corp. said in a call with analysts to discuss the results. “We are clearly being helped by new sources of revenue.”

Indeed, licensing agreements for the digital streaming of select library titles contributed to the entertainment division nearly doubling operating income in the second quarter.

Moonves said the “phenomena” of digital distribution is being driven by viewers (especially younger) wishing to access content on alternative devices and sources.

More importantly, Moonves said digital licensing rights add incremental revenue without negatively effecting traditional TV syndication and network advertising business models.

The CEO said the media company continues to talk to streaming platforms to generate incremental dollars going forward.

“The significance of this [The CW] deal is that we did get paid a chuck of money. There’s no advertising split on this, which is something we absolutey refused to do,” Moonves said. “The CW went from being a money loser for CBS to a profitable venture for us [due to streaming]. We have become a more versatile company.”

CFO Joe Ianniello said the streaming deals already completed will result in substantial revenue growth a year from now.

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