CBS Slashes Dividends, Blames Ad Market


CBS reported fourth quarter revenues of $3.5 billion, down 6% from $3.76 billion during the same quarter a year ago. 

Analysts expected $3.56 billion revenues.

CBS Interactive revenues increased 218%, due mostly to the company’s $1.8 billion CNET acquisition.

CBS also said it will cut its dividend from $.27 to $.05 per share.


The company blamed the poor earnings on a poor ad market.

Here’s how revenues broke out by segment:

                   Three Months Ended            Twelve Months Ended
December 31, Better/ December 31, Better/
Revenues 2008 2007 (Worse)% 2008 2007 (Worse)%

Television $2,209.6 $2,401.9 (8)% $8,991.1 $9,108.0 (1)%
Radio 366.7 447.1 (18) 1,539.1 1,753.7 (12)
Outdoor 526.3 618.6 (15) 2,170.6 2,187.3 (1)
Interactive 186.3 58.6 218 421.7 166.1 154
Publishing 245.1 242.3 1 857.7 886.1 (3)
Eliminations (7.1) (9.7) 27 (29.8) (28.3) (5)
Revenues $3,526.9 $3,758.8 (6)% $13,950.4 $14,072.9 (1)%

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Notes from the earnings call:

4:27, No Muzak here, the hold music is from “The Who”

4:33, Hold music stops. We’re starting.

4:33, Sumner will take the phone first.

4:34, “I doubt we’ve ever seen a global economy as difficult as we are seeing right now,” says Sumner. “Unfortuantly, 2009 is showing little sign of improvement.”

4:35, Sumner reiterates his statement about National Amusements: “We’re making very good progress. We have not sold a single share of CBS or Viacom [since last time].”

4:36, Sumner hands the phone over to CBS CEO Les Moonves.

4:37, Les, “By now you’ve listened to enough of these calls to know I’m going to tell you we are operating in a very tough environment. Perhaps the worse since the 1930s.”

4:38, Les: Advertising now accounts for just 2/3 of CBS’s businesses. We like advertising for the long term, we love its margins, but we like having a buffer right now.

4:38, We feel the top line pressure we’re facing is due to the economy environment, not secular issues.

4:39, Creating premium content is at the core of what we do. We took our interactive business to a whole new level with the CNET acquisition. For the future we are a content company and the Internet is the newest form of content.

4:39, We continue to aggressively manage our balance sheet. $1.7 billion in free cash flow in 2008. “We think its time to retain more of our cash until we have more visibility into the depth and breadth of this recesiion.”

4:41, Mid-2010 till any “significant debt” matures.

4:42, The CBS television network is dominating the season. Up in every key demo. No other network is up in any of these categories. Number one on four nights a week. We are number one by almost 3 million viewers per night. Number scripted, drama, comedy and news magazine. Number one new program in drama. Four of five shows intro’d this year are still on the calendar.

4:43, I’m also very proud of how Katie Couric and our entire news team distinguished themselves in 2008. Les mentions Katie’s interview with Captain Sullenberger. (Go Sully!)

4:44, The CW has a niche in women aged 18 to 34.

4:45, Ancillary revenue streams (DVDs, downloads) turned in double digit revenue gains in 2008. They are Showtime, syndication, publishing and re-transmission consent fees. Showtime added 1 millioin subscribers in 2008.

4:46, The Tudors spent 9 straight days as iTunes most downloaded series.

4:46 Television DVDs continue to be a very solid businesss for us.

4:47, Signed a deal with EchoStar. Within the last six weeks deals with number 1 telco, second largest cable and second largest satellite. “We said we would get paid for network and we are.”

4:48, On to interactive. “We are pleased with the successful integration of CNET and CBSi.”

4:48, Last month added thousands of videos to what was already a thriving community. More than 5x the videos it had a year ago. “ is clearly going to be a very, very big player in what is clearly a fast growing category.”

4:50,  There’s no doubt that our local assests in radio, outdoor and television are being hurt right now.

4:51, Efforts to reduce headcount will continue.

4:52, We believe the second half of 2009 will improve even if the economy doesn’t.

4:53, CFO Fred Reynolds gets the call. Click through for the full release to see the numbers>

4:53, Fred wants to talk about how CBS reacted to the crappy economy. During the fourth quarter CBS took restructuring charges of $83 million. Radio, TV stations and outdoor account for 73% of that. All of our businesses took steps in the fourth quarter to reduce costs. Reduced annual on-going costs by over $220 million. Restructuring charges for the year: $136 million.

4:55, 2008 non-advertising revenues were up 17% y/y. I think I heard him say up to $4.5 billion.

4:57, Interactive had a very good Q4. Revenues were up 3-fold over the same quarter 2007. The acquisition drove all that. Revenue growth coupled with significant savings have driven profit. Cost-savings have been more than double what CBS expected (so around $30 million).

5:02…technical difficulties…

5:03, Fred’s talking about the dividend reduction now.

5:04…technical difficulties…

5:05, We’re on to questions.

5:06, “It’s a buyer’s market” in advertising says Les.

5:06, Question: How are you thinking about the upfront?

5:06, Second quarter options are fairly normal. We’re feeling fairly good about them. With our ratings we are getting the lion’s share of the scatter market. Pricing is not nearly as strong as we’d like it to be. Believe it or not we’re looking forward to the upfront because we have a story to tell. There is going to be an upfront, there is going to be an upfront market and we’re going to take advantage of it.

5:08, Question: What’s your expectation for your pension contributions?

5:09, Fred: There is no mandatory call on the pensions as we sit here today. Cleary we had some unrealized losses. A large part of our pension plan is in fixed income. WE might have had some mark-to-market issues, but otherwise…We don’t expect to have to make a mandatory payment in 2009.

5:10, Question: Of the $220 million cost-savings, what portion will you realise in 2009?

5:10, Most of the action came in Q408, most of it will benefit 2009.

5:11, Question: Where is the $220 million coming from?

5:11, Fred: Local TV and outdoor account for 60%. Largely people costs.

5:12, Question: Can you further break down non-advertising business?

5:12, “Showtime, DVD, syndication, iTunes, retreads, etc.” It’s 1/3 of our revenue. Nothing is as profitable as advertising. The worry is creating segments that’ don’t make sense. It is something the people aren’t seeing how profitable we are.

5:13, Queation: In the outdoor ad business, have the trends detiorated in the first quarter?

5:14, Fred: Domestic billboard market is faring better than TV and radio. Whiile they’re down, they’re not down to the extent of TV and radio. In int’l the dollar is making it look worse than it is.

5:16, Question: Can you explain more about what went into dividend cut?

5:17, Les: Lots! “We approached it from all sides.”

5:17, Question: Will the syndication business be up y/y even though the ad network isn’t doing well?

5:19, When the primary sale is to basic cable, it’s primarily a per episodic fee. There isn’t any barter, so we’re not worried about advertising.

5:21, Question: Any plans to self-produce movies?

5:21, Yes, we’re doing 2 or 3. The first one begins production April 6. We won’t spend more than $40 million on any of them.

5:22, Question: How did the outdoor ad market tank so bad between Q3 and Q4?

5:22, It clearly was the last into the soup of the recession. It was doing fine and it still continues to do better.There was a lack of demand and lower pricing. Our occupancy was the same or higher, it’s just that pricing was down. Pricing went to the buyer and it went rather rapidly.

5:24, Question: Why will the second half of 2009 be better than the first?

5:24, 1. Right now is just so terrible. 2 There have been some cost-cutting things. 3. We expect the network to be as strong as it is and we’re dominant unlike we were.