CBS Struggles in Downturn

Local TV, Radio Revenue Head South in Third Quarter; Online a Bright Spot

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NEW YORK ( -- Local TV and radio are taking a hit in the economic meltdown, but CBS CEO Les Moonves claims that national advertising is holding its own, and that the network's major ad categories -- even automotive -- are "hanging in there."
Leslie Moonves
Leslie Moonves Credit: CBS

As it warned earlier in the quarter, CBS reported a $12.5 billion third-quarter loss due to a write-down on the value of its broadcast TV and radio assets. Revenue of $3.4 billion was up 3% from last year.

Earnings per share down
But even without the charge, CBS would have reported slimmer third-quarter earnings of 43 cents a share, compared to 48 cents a share in the third quarter last year.

TV-ad revenue fell 14% due to lower prime-time ratings while NBC aired the Olympics over the summer, but overall TV revenue was up 2% to $2.08 billion, thanks to increased syndication revenue, helped by the sale of "CSI: New York" to domestic cable TV.

Digital revenue, reported separately for the first time and reflecting newly acquired CNET, was $140 million in the quarter, and online-display advertising revenue rose 12% on a comparable basis with last year.

Radio revenue slumps
Radio continues to suffer, with revenue down 12% to $392.5 million from the same quarter last year. Discounting the impact of the sale of 40 stations over the past year, revenue was down 11%.

Mr. Moonves said CBS has received "attractive bids" for some of its mid-market radio stations, but "current credit conditions make it difficult to predict the timing of these transactions."

So far "we have not seen a great slowdown in national advertising," Mr. Moonves said. "While obviously we have been affected by local, our major categories are still hanging in there quite a bit," he added. "We do not have that fear of falling off the cliff."

Looking ahead, he admitted the last-minute TV scatter market was "not booming" as it has in previous years, but that cancellations from last spring's upfront had been "minimal." The network sold more than 70% of its TV ad inventory in the upfront, the TV ad marketplace that takes place each spring, and the network is selling slightly more than 20% of its ad inventory in the scatter market, when advertising is purchased much closer to airtime.

Domestic disturbance
Responding to a question on a call with investors about the automotive category, Chief Financial Officer Fred Reynolds said spending by foreign automakers was offsetting a drop-off from domestic. "Toyota, BMW, Mercedes are picking up spending," he said. "We love Detroit and love it to do well, but I can tell you today our biggest advertiser is probably more Toyota than it is General Motors."

In the wake of a surprise sale of $233 million in nonvoting CBS and Viacom shares, Chairman Sumner Redstone said he has no intention of selling either company and believes that his National Amusements holding company will be able to reach a "fair" deal with creditors.
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