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What Happened to CBS’s Local Media Business in 3Q17?

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What caused the lower revenue growth

CBS’s (CBS) Local Media segment, which consists of CBS Television Stations and CBS Local Digital Media, reported a 2.9% YoY (year-over-year) fall in revenues to $397 million in 3Q17. A weaker political advertising business was responsible for the decline in Local Media segment revenues, but this was somewhat offset by growth in retransmission revenues.

In the graph above, you can see how Local Media segment revenues fell over the past five quarters. During the same period, revenues fell at a CAGR (compound annual growth rate) of 0.7%. In 3Q17, the Media segment posted its lowest revenues in four quarters.

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4Q17 outlook

CBS believes that in 4Q17, the revenue growth of its Local Media segment will continue to be affected. In 4Q16, the segment posted its highest revenues of $526 million, driven by the huge political ads related to the 2016 US elections.

In the first nine months of 2017, the Local Media segment reported nearly $1.2 billion in revenues, compared with $1.25 billion during the same period of 2016. Both lower political advertisement sales and the airing of Super Bowl 50 during the first nine months of 2016 caused the huge difference in comparison.

CBS’s operating income in 3Q17 fell 13.9% YoY to $105 million due to lower political ad sales. Operating income during the past five quarters fell at a CAGR of 3%, and at the end of first nine months of 2017, its operating income was $355 million, compared with $402 million during the same period of 2016.

CBS’s overall ad business remained soft in 3Q17. Notably, big media players Comcast (CMCSA) and Time Warner (TWX) posted YoY 13.3% and 3.3% declines in ad revenues, respectively, during the same period.

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