Super Bowl LIII, Tax Credit Help CBS Offset Growing OTT Video Content Costs

Advertising revenue from February’s Super Bowl LIII broadcast and a tax benefit contributed to CBS Corp. May 2 reporting a 140% increase in first-quarter (ended March 31) net income to $1.58 billion, compared with $511 million in net income the previous-year period. Revenue increased 11% to $4.17 billion, from $3.76 billion for the prior-year period.

CBS said it received a “discrete” tax benefit of $768 million from the  reorganization of the company’s international operations.

The company said direct-to-consumer video subs, which include CBS All Access and Showtime OTT, grew 71% to 9 million combined subscribers, from 5.3 million in 2018.

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“We are seeing strong growth here in the second quarter thanks to premium original series such as ‘The Twilight Zone’ on CBS All Access and ‘Billions’ on Showtime OTT,” acting CEO Joseph Ianniello said in a statement. “At the same time, we also continue to produce more and more content for a variety of buyers, including Amazon, Apple and Netflix, which will debut ‘Dead to Me’ from CBS Television Studios tomorrow.”

Increased content production for Showtime OTT contributed to the cable networks business unit (which includes Showtime OTT) reporting a 26% drop in operating income to $175 million from $236 million last year. Revenue dipped 3% to $552 million from $571 million last year.

The entertainment unit, which includes CBS All Access, CBSN and other streaming services, reported a 9% increase in operating income to $530 million from $486 million for the same prior-year period. Revenue increased 15% to $3.18 billion from $2.75 billion.

CBS Ups Showtime Boss David Nevins to Chief Creative Officer

CBS Corp. Oct. 18 announced the promotion of David Nevins, CEO of Showtime Networks, to corporate chief creative officer, effective immediately. Nevins, who remains CEO of Showtime, was also promoted to chairman of the premium channel.

He will be based in Los Angeles, reporting to Joe Ianniello, acting CBS CEO, in New York.

In his expanded role, Nevins will be responsible for oversight of programming, marketing and research across CBS Television Studios, the CBS Television Network’s Entertainment division, Showtime Networks and, in conjunction with CBS Interactive, programming for over-the-top video platform CBS All Access.

He will also oversee CBS’ interest in The CW, a joint venture between CBS and Warner Bros. Entertainment. Julie McNamara (CBS All Access), David Stapf (CBS Television Studios), Kelly Kahl (CBS Entertainment), George Schweitzer (Marketing) and Radha Subramanyam (research) will continue in their leadership roles in these respective areas.

“David has a brilliant creative mind and an impressive track record of success at Showtime and in the entertainment industry,” Ianniello said in a statement.

As chairman/CEO of Showtime, Nevins manages the company’s programming, distribution, business development, finance, marketing, creative, digital media, scheduling, research, acquisitions, network operations, home entertainment, business affairs and corporate communications teams, as well as Showtime Sports and Smithsonian Networks.

Under his leadership, Showtime original series include critically acclaimed “Homeland,” “Billions,” “Ray Donovan,” “Shameless,” “The Affair,” “SMILF,” “Patrick Melrose,” “Kidding,” “House of Lies,” “The Circus,” “The Chi,” and “Twin Peaks.”

The first Showtime project greenlit by Nevins – “Homeland” was the recipient of Golden Globe and Emmy Awards for “Outstanding Drama Series,” as well as a Peabody Award.

During his tenure, Showtime has also become the industry leader in live boxing broadcasts.

CEO: Showtime ‘Punching Above Our Weight’ Competing with Netflix

Showtime, along with HBO, once ruled the edgy episodic programing market – a position increasingly under siege by subscription streaming video services such as Netflix, Amazon Prime Video and Hulu.

As a result, CBS-owned Showtime now finds itself trying to stay competitive with Netflix, which is spending $8 billion on original TV shows and movies this year. It launched a branded SVOD service in 2015 – now more than 2.5 million subscribers.

Speaking March 12 at INTV confab in Jerusalem, Showtime CEO David Nevins the onslaught of over-the-top video and episodic programing has resulted in Showtime “punch[ing] above our weight” in an effort to keep up.

“It’s a deluge right now, particularly from the streamers — Netflix more than anything,” Nevins said, as reported by Variety. “They’re still in high-growth mode. They’re not trying to deliver earnings.”

Maybe, but Netflix is delivering earnings. The streaming pioneer generated $627 million in profit on revenue of more than $11.1 billion in 2017. It now has more than 117 million subs globally.

Nevins contends that while Netflix is chasing headlines signing marquee content creators, Showtime is targeting curated programing such as “The Chi,” “Our Cartoon President,” “Homeland,” “Billions” (returning March 25), “I’m Dying Up Here” and “The Affair” (returning June 17), “Ray Donovan,” and pending “Escape at Dannemora,” from Ben Stiller, and “Patrick Melrose,” starring Benedict Cumberbatch, among others.

“There’s a counter-narrative that’s beginning that’s helpful to us,” he said.

Speaking in January at the Television Critics Association’s winter press tour, Nevins said Showtime has the budget to attract top talent in and front behind the camera. Referencing the New York Yankees, he added that unlimited spending doesn’t guarantee success.

Indeed, Showtime in 2017 had its biggest ever year of subscription revenue growth and, on a percentage basis, the best sub growth in 16 years.

“But we are … maintaining our margins,” Nevins said. “We are spending more money because we are generating more revenue.”