CBS 2Q15 Earnings Call Notes

Must position for broadband future with potential audience of 90m households

“The heart of our strategy is to create must-have content and position ourselves for the broadband future. During the quarter, we took significant steps forward in this regard. First, we launched the new streaming service for Showtime. This will enable us to gain subscriptions from a potential new audience of as many as 90 million households. Next, we greatly expanded the reach of CBS All Access, our over-the-top subscription service.”

We have the most watched programming and we will get paid for it

“out of every network on television, broadcast or cable, and every site on the Internet, we have the most watched programming there is anywhere, and we will get paid the appropriate amount for it.”

There are all sorts of places that we can sell our content around the world

“As the major U.S.-based SVoD companies expand aggressively overseas, local assets with their own SVoD services are now stepping up to compete. So there are all sorts of new places where we can sell our content around the world. As a result, we continue to post rapid and sustainable growth in international license fees.”

90m homes will now have access to Showtime directly

“As I said earlier, there are about 90 million households in the U.S. that will now have the ability to add Showtime directly for the first time. This includes broadband-only homes and homes that previously could only purchase Showtime after buying basic cable packages. Capturing just a small percentage of these subscribers will begin to pay off immediately and will lead to a tremendous upside for us.”

Politico estimates that next year campaigns will spend $4B on TV advertising

“POLITICO estimated last week that TV ad spending, TV ad spending for the 2016 campaign will top $4.4 billion. That’s $0.5 billion up from 2012 and four times as much as campaigns are expected to spend on digital.”

Ad buying has been strong

” it’s definitely demand across the board. Obviously, we have inventory, because, you know, that’s why you don’t sell out 100% of the Upfront because again, you want to have that scatter available, and we’re taking advantage of it. As Les said, the price increases are double digits. If I was just looking at a couple of categories, auto and healthcare are two categories that are really spending here in the scatter.”

We can just keep investing in programming and there are so many possibilities

“in terms of programming, what’s changed about the marketplace is, and we’ve mentioned it, is that the back end is becoming as important as the front end. So investing in more original programming for both CBS and Showtime offers so many more possibilities, which is why that we have increased the number of originals we have on CBS, and we are also increasing what’s available on Showtime, because we are able to monetize it. Every time we order a new show, we have an entire game plan, so there is very little risk, and the upside is pretty tremendous”

Floyd Mayweather did better than CBS on the fight

“Well, on this fight, Floyd Mayweather did better than CBS did. That’s all I got to say…We made a sizable amount of money. As I said, not nearly what Floyd or Manny made, but we did fine.”

Skinny bundles are good for us because it drives prices more towards parity per viewer

“every skinny bundle deal that’s out there, and obviously we’ve made a few of them already, the ecosystem gets validated towards he who has the most viewers gets paid the most money. I know it’s an odd concept for some of the cable companies, but that’s the way it should be. We’re sort of re-regulating what the system should be. So anytime there’s a new bundle that you hear out there, you can assume that CBS is applauding it, because we are going to get paid more than we get paid by the traditional MVPDs.”

We love having the super bowl

“if there’s a rap on it, tell them we will take the Super Bowl every single year, year in, year out forever. So, you know what, if the incremental doesn’t outweigh the amount of money you get per spot, what NBC got last year, it is very, very worth it. You are going to see it in revenue and in profit in 2016 and we love having it. We’re very excited about having it. There’s no downside.”

Broadcast will fare better than cable in digital transition

“as I said in my thesis, which I think has been borne out, is that broadcast reaches a mass audience, and there are certain niche cable networks that are replaced by the Internet.’

You wont see major brand advertisers veering away from broadcast

“You won’t see in a major car company or a Procter & Gamble; most industries will not veer away from broadcast. Digital obviously is the brave new world, and we’re part of it, but most digital advertising is actually off network product that you find digitally.”