M+E Connections

CBS and Showtime subscribers are “not only growing, but the growth is also accelerating” thanks to the increasing popularity of over-the-top (OTT) streaming services, including CBS Corporation’s direct-to-consumer CBS All Access and Showtime OTT, according to Leslie Moonves, its CEO and chairman.

“This was an especially astounding quarter” for the company, he said May 3 on an earnings call for its first quarter (ended March 31). Revenue grew 13% from a year ago to $3.76 billion, with growth coming from across all the company’s major revenue streams, it said in an earnings news release. Affiliate and subscription fee revenue increased 16%, thanks, in part, to growth from the company’s own streaming subscription services. Profit from continuing operations grew 13% to $511 million ($1.32 a share) from $454 million ($1.09 a share).

Despite the strong results and “many positive aspects related to” the company’s forecast from new business initiatives, Pivotal Research Group analyst Brian Wieser predicted in a research note May 4 that CBS “valuations will be held in check.”

That’s because of the “looming likelihood of a combination with Viacom and the potential for disruption that may occur as that process moves forward,” he said.

The company’s Q1 performance “truly illustrates our momentum,” Moonves said on the call. “In an era where others are concerned about losing subscribers caused by cord cutting and other matters, CBS Corporation is growing its subscribers,” he said, noting that “when you combine all of our paying subscribers across traditional” multichannel video programming distributors (MVPDs), virtual MVPDs and its direct-to-consumer services, “our overall sub base is growing at both” CBS and Showtime.

“At CBS, we’ve long said, we are prepared to grow no matter how [the] consumer watches our content, and this cross-platform subscriber growth is the proof,” he said, adding: “Central to our success is the rapid expansion of our direct-to-consumer streaming services, led by CBS All Access and Showtime OTT. Some of our key competitors are just now entering the space and we are already nearly two-thirds of the way to our goal of 8 million subs between these platforms by 2020. Plus, by going over-the-top, we’re achieving higher rates per sub than any other form of distribution, which means these services are becoming more meaningful to our bottom line all the time. And, of course, they’re attracting a younger audience as well.”

CBS is “just beginning to scale our OTT services by expanding All Access into the international marketplace,” he also said. For example, he told analysts, that last week, CBS launched All Access in Canada. It’s not stopping there. “By year’s end, we plan to bring All Access to Australia using our acquisition of Network Ten as a gateway to launch in that market. After that we’ll add more and more markets every year, leading to tremendous upside to our overall direct-to-consumer strategy,” he predicted.

CBS also continues to expand the number of its direct-to-consumer service offerings, he noted. It already launched CBSN and CBS Sports HQ. CBSN “led CBS News to another streaming record” in Q1 and, “once again, the average age of the CBSN viewer is 38, which is decades younger than the average news viewer on cable or broadcast,” he said.

The company “followed up the success of CBSN by launching” CBS Sports HQ in Q1, he told analysts, adding: “As successful as CBSN has been, CBS SPORTS HQ already has 60 percent more streams than CBSN did at this point in its launch, with significant spikes in viewers during our major sporting events.” Up next will be the launch of a 24/7 “Entertainment Tonight” streaming service this fall.

At the same time that CBS scales its direct-to-consumer platforms, the company is also expanding its CBS and Showtime subscriber bases via virtual MVPD services including those of DirecTV, Hulu and YouTube, he said.

Dish Network’s Sling TV remains the only major streaming platform that CBS still isn’t participating in. But Moonves indicated that may change, telling analysts: “I imagine that, [after] the next negotiation, we will probably be on that platform. You never know, it’s always part of a negotiation. We’re not on now, but we probably expect to be.”

CBS shares were trading more than 5% higher the afternoon of May 4, at $51.44.