CBS Income Off by 52% Due to Weak Ad Market

Auto, Financial, Retail Down; Pharma, Telecoms Up

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NEW YORK (AdAge.com) -- CBS Corp. said the roiling economy sparked a downturn in advertising that prompted a 52% decline in fourth quarter net income and said the broadcasting and publishing company would slash its dividend while the economy remained in turmoil.

Les Moonves
Les Moonves Credit: CBS
"We are operating in a very difficult environment; some say the worst since the 1930s. Clearly, the market has been sharply affected by the recession, particularly in the last quarter of the year," said CBS CEO Leslie Moonves on a conference call with investors. "Our advertising business, obviously, has been caught in this downturn, especially our local business is having a significant impact on our TV and radio stations, as well as outdoor."

CBS said it had net income in the three months to Dec. 31 of $136 million, or 20 cents a share. In the year-earlier period, the owner of the CBS TV network had a profit of $286 million, or 42 cents a share, in the same quarter a year earlier. As part of those results, the company saw TV revenue fall 8% in the fourth quarter, radio revenue fall 18% in the fourth quarter, and outdoor revenue fall 15% for the period.

The company generally cited weakness in advertising for the cause of the slumps. CBS CFO Fred Reynolds noted that a "lack of demand" for outdoor advertising became noticeably apparent during the fourth quarter, while Mr. Moonves said TV-advertising categories were "a mixed bag."

"Autos are down, a challenging category and an important one to us on a local level. Telecoms are all very strong, and the options for the next quarter have all been picked up there. Pharmaceuticals for us are doing very well. Retail is down. Financials are down," he said.

In a move that will likely concern investors, CBS said it decided to slash its dividend to five cents a share from 27 cents a share. Mr. Moonves said the current business climate represented a "time to retain more of our cash until we have more visibility" into the credit markets and "the depth and breadth of the recession."

Mr. Moonves, a former actor who is known for his unflagging optimism, said he expected CBS to put on a strong face during the coming upfront sales season, when the major networks sell the majority of their prime time inventory for the fall season. Citing the fact that the network has the most stable lineup in prime time broadcat TV and the best ratings in many categories among broadcast networks, he said advertisers had not pulled an abnormal amount of their second quarter options, and that "with our ratings, we are getting the lion's share of the scatter market," he said, adding that "volume is not nearly as good as we would like it to be."

Even so, CBS may be playing in a more difficult market. Mr. Reynolds said scatter pricing in the fourth quarter was less than what it had been in 2007.

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