Despite rampant speculation, CBS Corp. chief Leslie Moonves made it clear Thursday that the Eye is not in active discussions to reunite with Viacom, its former corporate sibling within Sumner Redstone’s empire.
“We are not in active discussions for anything like that,” Moonves said Thursday during his Q&A at the Bank of America Merrill Lynch Media, Communications and Entertainment investor conference. “We are very happy with the position we are playing now. We think we have a great future as the CBS Corporation now.”
Talk of the potential for CBS and Viacom to recombine — a decade after they were split up by Redstone — has increased in the wake of the shakeup that saw Viacom chairman-CEO Philippe Dauman exit the company this week. Many Wall Streeters have opined that CBS and Viacom would be better off together.
Moonves cautioned that his first priority to is make sure any deals or M&A options that arise are good for CBS shareholders — a hard case to make at present given Viacom’s woes. Moonves said CBS has looked at M&A opportunities in the U.S. and overseas but hasn’t found anything immediately attractive.
“We are a stand-alone public company. We are really happy with the hand we are playing. We are never going to do something that is bad for CBS shareholders or the employees.”
Moonves emphasized that CBS is firmly focused on expanding its content production business at home and abroad. The appetite for high-end programming around the world has significant changed the changed the dynamics of the company’s focus from operating networks to creating content that can be exploited in after-market sales around the world.
“The back end of the shows are as important as the front end” airings on CBS, Moonves said, stressing that the greatest profits now come from syndication and digital licensing sales. The expansion of Netflix and Amazon in overseas territories has juiced demand for programming among all buyers in growing territories in Europe, Asia and Latin America.
In the wide-ranging Q&A with Merrill Lynch’s Jessica Reif-Cohen, Moonves painted a bright picture of CBS prospects in advertising, TV and film production and for grabbing a prime slot in the emerging market for skinny bundles offered by traditional MVPDs and new digital entrants such as Hulu. “Without CBS, you ain’t got a real service,” Moonves said.
The CBS chief reiterated his disclosure from the Eye’s quarterly earnings call last month in telling Reif-Cohen that the CBS All Access and Showtime SVOD services, launched in 2014 and 2015, respective, have racked up about 1 million subscribers apiece — a stronger than expected showing, as Reif-Cohen noted. And Moonves is nothing if not competitive: “From what we can tell our (Showtime OTT service) is doing as well if not better than HBO’s,” he said.
Among other highlights of the conversation:
- The decision to delay the premiere of CBS All Access’ marquee original series — “Star Trek: Discovery” — until May cam down to the fact that producers Bryan Fuller and Alex Kurtzman felt they needed more time. “I’d rather it be a few months late and great than early and not great,” he said. Moreover, the global licensing deal that CBS struck with Netflix for rights outside the U.S. to “Discovery” and all previous “Star Trek” series was rich enough to ensure that “Discovery” will make a profit from day one.
- Moonves said he expects to be able to cut a deal with the NFL “in the not too distant future” to make CBS’ football telecasts available on the All Access platform (at present they are blacked out). He acknowledged when pressed by Reif-Cohen that CBS’ “Thursday Night Football” package is a break-even proposition for the Eye but he stressed that CBS’ Thursday and Sunday NFL packages together are very profitable. Moreover, football delivers an invaluable ratings and promotional boost. Asked about the potential for rights fees to continue to climb, Moonves was candid. “They’re the 800-pound gorilla. The NFL says ‘jump’ and you say ‘yes sir.’ “
- Flush with free cash flow, CBS plans to return some to shareholders soon and also to continue its stock buy back program. The Eye has plenty of “dry powder” should intriguing M&A options arise, or opportunities to invest big in content. “My primary goal is to get more content going,” he said.
- As it marks its 10-year anniversary next week, the CW “has never been in better financial shape,” he said. The joint venture of CBS and Warner Bros. posts a modest loss on its network operations but that red ink is more than offset by profits from selling the shows in aftermarkets. “The backends of these shows are enormously profitable for both companies,” he said.
- Showtime is delivering about 25% of CBS Corp.’s profits. The premium cabler’s expansion in licensing its brand name and content overseas will only grow that number. “Outside of ‘Game of Thrones’ the Showtime content is as good if not better than the HBO content,” he asserted.
- CBS’ local TV and radio stations are cleaning up on political advertising, particularly down-ballot Senate and gubernatorial races. “We are anticipating the best presidential election (cycle) for local ever,” he said.
- CBS’ plan to divest its radio station group is proceeding and leaning toward a spinoff transaction. However, they have had conversations with prospective buyers from the private equity and international side, as well as competing radio groups.
- Moonves gave a plug to the latest CBS Films release, “Hell or High Water,” calling the Jeff Bridges starrer “the best movie in America” right now. He likes the smallish size of CBS’ theatrical operation, given the struggles that larger studios are facing. “Probably getting bigger would be a bad idea right now,” he said.