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Streaming Deals Drive CBS Q4 Entertainment Income

15 Feb, 2012 By: Erik Gruenwedel

CBS also in discussions with Netflix for oringinal programming

CBS Corp. Feb. 15 said content license deals with subscription video-on-demand services helped drive fourth-quarter (ended Dec. 31) entertainment adjusted operating income up 31.5% to $275 million from $209 million during the previous-year period.

Adjusted operating income for the fiscal year increased nearly 74% to more than $1.2 billion, compared with adjusted operating income of $731 million in 2010.

CBS’ entertainment division includes CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Films and CBS Interactive.

Entertainment revenue declined 1% to $2 billion from $2.02 billion due to unfavorable comparisons with the second-cycle syndication sale of “CSI: Crime Scene Investigation” during the fourth quarter of 2010.

Streaming and content distribution deals in the quarter generated $758 million in revenue, down 4.8% from revenue of $796 million during the previous-year period.

For the fiscal year, entertainment revenue was up 1% to $7.5 billion, driven again by streaming, network advertising and higher retransmission fees. Indeed, streaming and related content distribution deals generated more than $3.2 billion for the year, up 6% from 2010.

CBS has streaming deals with Netflix, Amazon Prime, and Hulu Plus, among other channels.

“The ways we get paid for our content continue to grow and get more profitable, improving the quality of our earnings,” CEO Les Moonves told analysts during a call to discuss results. “For the year, new profitable content deals helped our margins grow five percentage points to 22%.”

When asked if SVOD deals with other players were in the works, Moonves said the opportunities are increasing.

“There are a lot of conversations. ... It’s hard to predict whether there will be a major deal, but we’re talking to an awful lot of people,” Moonves said. The CEO said when a network program is pulled from the primetime line-up it is entered into an SVOD agreement.

Indeed, Moonves said CBS is in discussion with Netflix to create original programming. In addtion to "Lilyhammer," Netflix has Tv series "House of Cards," "Orange is the New Black" (from Lionsgate) and "Arrested Development" in production.

“We are talking to Netflix about a potential deal to produce a show for them,” Moonves said. “Until they are doing 22 hours a week of premium content, we do not look at them as a competitor, but rather another place to put our content.”

CFO Joseph Ianniello said revenue from SVOD players in 2012 would exceed SVOD revenue in 2011.

Moonves said CBS Films’ Feb. 3 horror release Woman in Black, starring “Harry Potter’s” Daniel Radcliffe, has generated more than $38 million at the box office and is already profitable.

CBS Films titles are distributed at retail by Sony Pictures Home Entertainment.

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