uploads///CBS Revs distribution

CBS’s 3Q15 Earnings: 3Q15 Revenue Distribution and 4Q15 Forecast


Nov. 4 2015, Updated 7:58 p.m. ET

Revenue distribution

CBS (CBS) announced its 3Q15 earnings on November 3, 2015. The company reported revenues of $3.3 billion for 3Q15, a 3.2% fall compared to its revenues of $3.4 billion in the same quarter last year.

As the chart above indicates, around 46%, or $1.5 billion, of CBS’s revenues came from its advertising business in 3Q15. The company’s advertising revenues fell by 4% in 3Q15 due to the broadcast of fewer sports events on CBS’s television network and lower local advertising and radio advertising revenues.

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However, the company is expecting growth in its advertising revenues in 4Q15 due to better pricing of its advertising time slots. CBS sold less advertising time slot inventory in advertising upfront for its television network, but it expects to sell more inventory at the last moment by way of scatter advertising in 4Q15.

The reason CBS feels optimistic about the sale of advertising time slots in 2016 is because of the imminent US presidential elections and the broadcast of the major sporting event Super Bowl 50 on the CBS television network.

Content licensing and distribution revenues

The company’s content licensing and distribution revenues fell by 8% from the same quarter last year to $1.1 billion in 3Q15. The reason for the fall in revenues in 3Q15 was because of the impact of timing fluctuations on the sale of television licensing of CBS’s show Elementary. Usually, CBS recognizes television licensing fees at the beginning of the period in which a TV show is licensed for exhibition.

Affiliate and subscription fees

CBS’s affiliate and subscription fees rose by 9% over 3Q14 to $664 million in 3Q15. The company expects continued growth in subscription fees from its in-house OTT (over-the-top) platforms including CBS All Access and Showtime.

Another reason for revenue growth in this segment was a rise in affiliate fees and retransmission consent revenues. CBS expects affiliate fees and retransmission consent revenues to continue to grow in 4Q15.

CBS’s affiliate fees and retransmission revenues were up by 50% in 3Q15 over the same quarter last year. The company expects these revenues to exceed $1 billion next year.

CBS’s continued optimism for this business is because over the next few years, it’s set to renew a significant portion of its affiliate agreements with broadcast television stations and MVPDs (multichannel video programming distributors) such as Comcast (CMCSA).

Comcast makes up 2.4% of the PowerShares QQQ Trust Series 1 ETF (QQQ). The same ETF also holds 12.9% of Apple (AAPL) and 8.1% of Microsoft (MSFT).

CBS generated 12% of its total revenues of $3.3 billion from international markets in 3Q15.


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