CBS on Digital Distribution: We're in Early Innings, With Pujols Up to Bat

Network Moving to Reduce Reliance on U.S. Advertisers

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Ted Danson and Marg Helgenberger star in 'CSI' on CBS.
Ted Danson and Marg Helgenberger star in 'CSI' on CBS. Credit: CBS

CBS Corp., owner of the most-watched U.S. television network, reported that third-quarter profit rose 6.6% as distribution and licensing revenue climbed.

CBS actually gets more of its revenue from advertising than other major U.S. media companies, and has seemed more wary of outsiders' digital distribution platforms than its rivals. CBS Interactive President Jim Lanzone, for example, told Ad Age 's Digital West conference in September that "subjugating" the CBS brand to a platform like Hulu didn't make sense.

But to decrease its dependence on the U.S. ad market, it has increasingly pursued international expansion and deals with online distributors such as Netflix, Amazon and Hulu in Japan. "We are clearly tracking ahead of our strategy to diversify and de-risk our business," CEO Leslie Moonves said on an investor call today.

The company is likely to cut more digital distribution agreements in the future, according to Mr. Moonves. "We're probably in the third inning, and we have Albert Pujols coming up to bat," he said, referring to the first basemen who helped the St. Louis Cardinals win the World Series this year.

CBS, controlled by 88-year-old Chairman Sumner Redstone, struck a deal with Netflix last month that gave the online video service streaming rights to the full lineup of shows from CW, the joint venture between CBS and Time Warner . Mike Morris, an analyst at Davenport & Co., estimates CBS and Time Warner would each receive $30 million in the first year of the deal.

Last week CBS announced a separate deal giving Hulu rights to show CW programming.

CBS is doing a good job of adding revenue beyond advertising, said David Miller, an analyst with Caris & Co. who rates the shares "above average" and doesn't own any.

Net earnings increased to $338 million in the third quarter, or 50 cents a share, from $317 million, or 46 cents, a year earlier, CBS said today in a statement. Analysts had projected 46 cents, the average of 25 estimates compiled by Bloomberg.

Revenue climbed 2.1% to $3.37 billion, compared with analysts' estimates of $3.44 billion. Distribution revenue and content licensing increased 4.7%, the company said.

Advertising for the quarter was little changed from a year earlier at $1.99 billion as lower local political ad spending was offset by growth in network prime-time and outdoor ad revenue.

-- Bloomberg News with Ad Age staff --

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