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 Eyes 25 Million Combined ‘All Access,’ ‘Showtime OTT’ Subs by 2022

CBS is projecting 25 million combined subscribers by 2022 for over-the-top video services CBS All Access and Showtime OTT. The guidance follows the two subscription streaming services reaching 8 million combined subs at the end of 2018 – two years ahead of schedule.

All Access launched in 2014 for $5.99 monthly with ads ($9.99 without) featuring original, primetime and catalog CBS programming online and streaming devices without long-term contract.

Showtime OTT bowed in 2015 featuring the premium channel’s original content and third-party movies for $10.99 monthly fee.

“We are generating significant momentum with our direct-to-consumer platforms, which provide a great return-on-investment and represent one of our most powerful long-term growth drivers,” Joe Ianniello, acting CEO said in a statement.

Indeed, growth in Showtime OTT subscribers through Amazon Channels helped drive cable networks revenue up 8% to $551 million for the fourth quarter (ended Dec. 31, 2018) from $508 million in the prior-year period. Other revenue drivers included higher international licensing sales, and revenue from the Deontay Wilder/Tyson Fury pay-per-view boxing event in December.

Operating income of $193 million decreased 7% from $207 million for the same prior-year period, reflecting an increased investment in programming.

Entertainment segment revenue — which includes All Access — dipped 1% to $2.83 billion from $2.86 billion, reflecting 14% lower content licensing and distribution revenue, mainly as a result of the timing of international licensing sales and several large domestic sales in the fourth quarter of 2017.

Affiliate and subscription fees grew 17%, led by growth from All Access and higher revenue from station affiliation fees and virtual MVPDs. Advertising revenue increased 2%, reflecting revenue from Network 10, which was acquired in the fourth quarter of 2017.

This increase was partially offset by the absence of the broadcast of “Thursday Night Football” in 2018. Underlying CBS Network advertising for the fourth quarter of 2018 increased 2% from last year’s fourth quarter.

Entertainment operating income of $438 million for the fourth quarter of 2018 decreased 6% from $465 million for the same prior-year period, primarily reflecting the lower revenue and an increased investment in content and digital initiatives. These decreases were partially offset by the absence of programming costs associated with “Thursday Night Football.”



CBS CEO: Diversity of Distribution Driving Original Programming

With more than 8 million combined subscribers for CBS All Access and Showtime OTT expected by next year, CBS Corp. interim CEO Joe Ianniello says over-the-top video distribution is driving original content production.

“We put [content] originals on [All Access and Showtime OTT],” Ianniello said on the fiscal call — his first since replacing the ousted Les Moonves. “We saw it was working. We saw the consumers wanted more. So, we’re putting more on it. We’ve raised the [subscriber] targets. We’ve accelerated them. [And] we’re going internationally [Canada].”

CBS Studios currently produces four series for Netflix — “Insatiable,” “Dead to Me,” “American Vandal,” and “Unbelievable.” It also produces new drama, “Your Honor,” for Showtime, and psychological thrillers, “Tell Me a Story,” and “Why Women Kill,” for All Access.

As previously, reported CBS produces “Star Trek: Discovery” for All Access, and has 2018 Oscar winner Jordan Peele (Get Out) rebooting “The Twilight Zone.”

“An All Access subscriber watches twice as much content as [someone] who watches on,” said Ianniello.

“We have nice diversity in terms of the consumption of the content. And that’s why we’re putting more originals on both of these services, because it’s really driving again the intent to subscribe and it’s reducing churn. And those are the two things we’re really toggling back and forth as we make these investments.”

CFO Christina Spade said OTT video is allowing Showtime to expand beyond its 26 million pay-TV households and reach consumers untethered to traditional cable bundle.

“The world of OTT has opened up so many options with what we can do with data analytics and really unlock and target our marketing,” said Spade. “So, two years into it, we have a lot of great uses of the data, but even as we get further educated and learn even more about our consumer, the scale of the business is huge.”


Ad-Lite ‘CBS All Access’ Now Available on Amazon Channels

After generating millions of subscribers for Showtime OTT and CBS All Access through Amazon Channels, CBS has inked a deal with the ecommerce behemoth for access to All Access with fewer advertisements.

All Access – which includes CBS catalog, primetime and original programming such as “Star Trek: Discovery” and “The Good Fight” – costs $5.99 monthly with advertisements; All Access with fewer ads costs $9.99.

Amazon Channels, which affords Prime members access to third-party over-the-top video services, has been a godsend for All Access and other. During the CBS fiscal call, CEO Les Moonves said Amazon would contribute to All Access and Showtime OTT reaching 8-million combined subs a year early in 2019 instead of 2020.

“Amazon has been absolutely amazing in terms of growing our subs,” Moonves said on the Aug. 2 call. “They’ve been at the top of the list, and we like what they’re doing. And we would say we get more with them than any of our other partners, although some of the other ones are more recently in the ballgame.”

CBS believes both platforms can now reach 16 million subs by 2022.






CBS: All Access and Showtime OTT Expected to Top Combined 8 Million Subs Earlier Than Expected

CBS Corp. Aug. 2 announced that it expects over-the-top video platforms, CBS All Access and Showtime OTT, to reach a combined 8 million subscribers by 2019 – a year earlier than the previous 2020 projection.

The $5.99 and $10.99, respectively, priced services are projected to reach 16 million combined domestic subscribers by 2022 — excluding international subs.

“[They] are surpassing our expectations,” CEO Les Moonves said on the fiscal call. He said All Access is having success in Canada — the platform’s first international launch, with plans to bow service in Australia next.

“We’ll be entering territories where our content is already in great demand, and where our OTT platforms are getting huge traction, particularly among younger viewers,” Moonves said.

When asked about Amazon Channels’ impact on subscriber growth for All Access and Showtime OTT, Moonves said the commerce giant has been “absolutely amazing” helping grow subs.

“They’ve been at the top of the list. We get more [subs] from them than any of our partners,” he said. “We like what they do.”

Moonves said he could see five original shows launching on each platform network over the next couple of years.

“[They] certainly proven themselves, making a lot of hits,” he said. “We’re really pleased with their hunger to do more. More new shows means more new subs.”

The CEO, who is under internal investigation for inappropriate behavior in the workplace following an expose in The New Yorker, declined comment on the situation.

CBS said it continues to grow in content licensing, development and distribution to a host of third-party distributors such as Apple, Netflix, and TBS.

Indeed, content licensing and distribution second-quarter (ended June 30) revenue increased 3.7% to $1.09 billion from $1.05 billion in the previous-year period. Original content production was up 10% from the previous-year period.


CBS All Access, Showtime OTT Nearing 5.3M Combined Subs

CBS All Access and Showtime OTT, the over-the-top video platforms owned by CBS Corp., are approaching 5.3 million combined subscribers, CEO Less Moonves said on the May 3 fiscal call.

CBS All Access, which launched in 2014 for $5.99 featuring on-demand access to CBS primetime shows and catalog, and Showtime OTT ($10.99), which bowed in 2015, had a collective 5 million subs as of Feb.15. The services are projected to reach 8 million subs by 2020.

CBS plans to launch All Access in Australia by the end of the year, using recently acquired Network Ten to facilitate the rollout. All Access launched in Canada at the end of April.

“These international subs are incremental to our [8 million] target,” said Moonves, adding that more than two-thirds of OTT subs use the commercial-free option.

When asked if that statistic underscores the need to offer a premium-priced sports package without ads, COO Joe Ianniello said the data give CBS leverage when negotiating revenue contracts with distributors and content creators.

“We’re getting [consumers] used to consumption outside the home and on-demand with product that’s timely,” Ianniello said. “For news or sports or now entertainment news, and that’s going to be a subset of All Access.”

CBS markets All Access and Showtime OTT as bundles, with plans to incorporate the services with third-party platforms as well. All Access and Showtime OTT are also marketed Prime members on Amazon Channels.

“Some of the other streaming services that are bigger than us … [have] made a variety of deals,” Moonves said. “We’re also looking at them and we’re not averse to any ideas there.”

Meanwhile, entertainment revenue, which includes OTT sub fees, CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, Network Ten, CBS Interactive and CBS Films, topped $2.72 billion, up 16% from $2.35 billion in the previous-year period.

Operating income increased 22% to $492 million from $403 million last year.

Cable Networks revenue reached $609 million, up 12% from $543 million for the same prior-year period, benefiting from growth of ShowtimeOTT and the start of the renewal period for the licensing of Showtimeoriginal series.

Operating income of $230 million decreased 8% from $250 million, reflecting an increased investment in programming, including the launch of two new series, “The Chi”and “Our Cartoon President.



CBS COO: We ‘Cannibalize Up’ Cord Cutters

In an era of cord cutting and fragmentation of home entertainment and television distribution, CBS says its total viewership data has grown.

Speaking March 6 at The Deutsche Bank 2018 media, telecom & business services confab in Palm Beach, Fla., COO Joesph Ianniello said combining traditional pay-TV subscribers with online TV and direct-to-consumer has resulted in more total subs for CBS than a year ago.

“Not a lot of media companies can say that,” Ianniello said, adding CBS is available on the “broadest tier” of distribution channels.

With more than 5 million combined subs for its over-the-top video platforms (Showtime OTT, CBS All Access), the COO contends the services have “really taken off,” in addition to enabling CBS to sell content to new distribution channels at a significantly higher price than traditional MVPDs.

“So, the value proposition we think we’re bringing to [pay-TV] distributors is compelling,” Ianniello said.

Indeed, with increasing numbers of consumers shunning pay-TV for alternative channels, Ianniello says CBS is able to “cannibalize up” those consumers in the same way Internet Service Providers increase revenue by hiking up broadband access fees.

“If a consumer switches to YouTube TV or CBS All Access, each leg [or service] we get more money the way we’ve priced it,” he said.

Ianniello said the learning curve on OTT has been significant, contending premium channel Showtime never had a real subscriber until bowing an OTT platform.

Specifically, the executive said Showtime’s pay-TV distributor, in addition to third-party broadcast ratings tracking services such as Nielsen had all the consumer data.

“Now, [via OTT] we have perfect information in terms of consumption, what [subs] watch [and] how they watch,” he said. “It makes us smarter in our programing and [makes] advertising much more effective.”

CBS All Access, which costs $5.99 monthly with limited ads; $9.99 without, will launch upwards of seven original series in 2018, including a new season of “Star Trek: Discovery” and pending reboot of “The Twilight Zone” from Oscar-winner Jordan Peele (Get Out) – in addition to select live TV, NFL game telecasts and catalog programing.

“Netflix doesn’t do live,” Ianniello said. “Netflix doesn’t have the library we have. From a value perception, we’re feeling pretty good.”

CBS Claims 5 Million Combined Subs for CBS All Access, Showtime OTT

Standalone over-the-top video platforms CBS All Access and Showtime OTT have a combined 5 million subscribers, CEO Les Moonves said on the media company’s fourth quarter (ended Dec. 31, 2017) fiscal call. The two OTT platforms had a combined 4 million subs in August.

Speaking Feb. 15, Moonves reiterated the CBS’ push into direct-to-consumer distribution through a mixture of ad-supported and subscription-based streaming services.

He said the company is readying two additional OTT video platforms, dubbed “CBS Sports HQ” and “Entertainment Tonight”— the former launching this month prior to March Madness. The “ET” platform will launch in the Fall.

“We believe we can build a significant audience by launching an ad-supported free service with full mobile and on-demand capabilities,” Moonves said.

When asked about the impact Amazon Channels has on All Access and Showtime OTT sub growth, CFO Joe Ianniello reiterated that Amazon’s third-party OTT marketplace for Prime members has had more of an impact building Showtime subs than All Access, which bowed on All Access in January.

“[Amazon] are fantastic marketers. They are able to drive sub growth … and we see lower churn, because consumers are used to that proposition,” Inniello said, adding Amazon also shares user data among the services.

Meanwhile, CBS, which produces 64 TV shows for myriad buyers ranging from TV networks to SVOD to mobile, just inked a multiyear deal with Amazon to license “The Good Fight” in Europe, Asia and Latin America.

“It’s a new opportunity to take new content launched [domestically] on All Access and license it internationally,” Moonves said.

When asked about Netflix signing Ryan Murphy, producer of “American Horror Story,” and “Glee,” among other projects, Moonves said the decision made sense considering the “hundreds of millions” offered the famed showrunner.

“Ryan Murphy is an extraordinary talent. He had to take [the deal],” Moonves said, adding that producer Chuck Lorre (“Two and a Half Men”) has three shows on CBS and two on Netflix.

“We have a lot of the talent. The landscape does change, but we find new talent and we also continue to be in business with the best talent,” he said.

Indeed, cable networks revenue increased 9% to $547 million, driven in part by revenue growth at Showtime OTT and the licensing of Showtime content. Operating income dropped 8% to $219 million, reflecting increased content costs.