Netflix Licensing Deal a Boon to CBS' Quarterly Net Income

By Erin Harrison August 03, 2011

Broadcaster CBS more than doubled its net income in the second quarter, in what is just the beginning of new revenues generated from Web TV licensing deals - a boon that will likely continue to pay big dividends to traditional media companies.In an earnings call Aug. 2, CBS executives said company revenue was largely boosted by its relationships with so-called emerging platforms including Netflix and soon, Amazon.

CBS President and CEO Leslie Moonves attributed the strong quarter to not only these relationships but also diversifying its revenue base with additional non-advertising sources.

“Despite a lack of political dollars, tough comps and some challenging macroeconomic factors, revenue was up 8 percent, OIBDA was up 51 percent, and diluted EPS was up 164 percent,” Moonves said during the call Wednesday.

Q2 revenue grew to $3.59 billion, up from analysts’ forecast for $3.55 billion, the Wall Street Journal reported. “Analysts suggest CBS’s Netflix deal could be worth about $200 million over two years,” the report added.

CBS struck a licensing deal with Amazon a few weeks ago that will allow Amazon customers to stream television shows from CBS’s vast television library. Terms of the deal were not disclosed.

“This deal is another example of how we are capitalizing on the value of our content by selling it to new distributors without taking away from established revenue streams,” explained Moonves. 

With the deal, Amazon will add 2,000 episodes to grow the total number of Prime instant videos to more than 8,000 movies and television shows, and offer full seasons for 18 popular television series, including “The Tudors,” “Numb3rs,” “Medium,” the complete “Star Trek” franchise, “Frasier” and “Cheers.” 

In February, Netflix and CBS signed a “highly profitable” two-year deal CBS for older shows including “Frasier” and “Medium.”

“The broadcaster views the deal as highly profitable because it allows CBS to generate new revenue from shows that have already run on TV, in many cases years ago, beyond what those shows already made in advertising,” the Associated Press reported.

During the second quarter, CBS also repurchased 250 million of CBS stock and doubled its quarterly dividend payment to $0.10 per share.

“Our content is performing extremely well, and we are increasingly distributing it in the most profitable ways, with new possibilities opening up all the time,” Moonves added.

Erin Harrison is Executive Editor, Strategic Initiatives, for TMC, where she oversees the company's strategic editorial initiatives, including the launch of several new print and online initiatives. She plays an active role in the print publications and TechZone360, covering IP communications, information technology and other related topics. To read more of Erin's articles, please visit her columnist page.

Edited by Rich Steeves

Executive Editor, Strategic Initiatives

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