M+E Connections

CBS CEO: Company’s Expanding OTT Services are ‘Starting to Hit Their Stride’

CBS is expanding its over-the-top (OTT) streaming TV services on multiple fronts and the company continues to see enormous opportunities from them and the various “skinny” bundles that it’s participating in, according to CEO Leslie Moonves.

While announcing CBS results for the second quarter (ended June 30), the company said Aug. 7 that it will expand its CBS All Access streaming service globally, starting with Canada in the first half of 2018, with other countries to follow.

During an earnings call the same day, Moonves also disclosed that his company is “broadening” the reach of its CBSN digital news service by making it available on CBS All Access and adding it as a standalone channel to unspecified skinny bundles.

CBS is also “taking the experience we gained developing CBSN” to create an around-the-clock live streaming channel for sports as part of its OTT strategy, he told investors on the call. That’s just “in the early stages” now and CBS plans to roll it out later this year, he said, noting the company didn’t name the new sports channel yet.

CBS All Access and Showtime OTT, meanwhile, are “set to exceed 4 million subscribers combined” by the end of 2017, he said, pointing out that’s “more than halfway” towards achieving the company’s previously stated goal of having 8 million subscribers by 2020 and it’s only year two of its five-year plan.

Those two services are “just starting to hit their stride with much more and bigger programming to come, so being this far along so early in the game is a terrific development,” he said.

After expanding CBS All Access to Canada, additional countries on “multiple continents” will follow “shortly thereafter,” he said, adding: “Over time, we will add content from across our corporation to make our service more and more attractive. We are very aware of the international success that other streaming companies have had. We now see a huge opportunity for CBS to go direct to consumer on a much bigger scale worldwide.”

At Showtime, the upcoming pay-per-view boxing matchup between Floyd Mayweather and Conor McGregor will also be made available direct to consumers on an OTT basis, he said, noting that will mark “the first time we’ve made a boxing or pay-per-view event available in this way, and it means that even if you’re not yet a Showtime subscriber, you’ll be able to purchase the fight directly from Showtime’s app or web site.” Viewers who watch the fight over the top will get a free trial to Showtime OTT, which he said “will drive new subs for us as well.”

Moonves also called CBSN a “terrific growth engine” for the company so far, saying streams grew 38% in the second quarter.

From CBS All Access and Showtime OTT to CBSN and the new CBS Sports streaming service, the company is “building extremely valuable OTT assets as bundles keep getting redefined and reimagined,” he said, adding: “Clearly, there’s a lot of upside here. And as distribution continues to change, the rise of virtual MVPDs and skinny bundles are also a great story for us. These are smaller bundles that focus on the most compelling content and that pay us more per sub than the traditional bundles do.”

So far this year, CBS signed on with the skinny OTT services being offered by Hulu, YouTube and fubotv, and “these new services have begun contributing to our results in a meaningful way,” he said.

A few hours before the second-quarter earnings and CBS All Access expansion announcements, CBS also revealed that it was adding its networks to the DirecTV Now OTT streaming service.

“As Nielsen continues to add these skinny bundles to its measurement, we are benefiting from a dual-revenue stream that includes advertising from ratings and increasing affiliate fees from carriage,” Moonves also said on the call.

CBS shares were up 2.76% at $66.30 in early afternoon trading Aug. 8, after the announcements.

The company reported total revenue grew 9% from a year ago, to $3.26 billion, driven by growth across all its significant revenue streams, it said. Operating income increased 3% to $669 million, while profit from continuing operations increased 6% to $397 million.

The revenue growth was “well above” the 4% expected by Pivotal Research Group analyst Brian Wieser, he said in a research note Aug. 8. The comments made by CBS executives about growth in distribution-related revenues for its broadcast network, expectations for 4 million All Access subscribers by the end of the year and ongoing growth in content licensing “reinforce our expectations that CBS should generally be able to outperform most of its cable network-centric peers for years to come,” he said.