CBS Rules Shrinking Market, Complicating Moonves's Ad Pitch

Updated on
  • Most of viewer losses this season look like one-time problems
  • Annual upfront means more when you don’t have any cruise ships

Leslie Moonves

Photographer: David Paul Morris/Bloomberg

When CBS Corp. Chief Executive Officer Leslie Moonves meets with major advertisers this week, he’ll declare victory for the 14th time in 15 years -- once again the network is the most-watched in the U.S. Only this time, the taste isn’t so sweet.

A paragon of stability in a turbulent TV business, CBS is showing signs of fatigue. The network’s prime-time audience is down 12 percent this TV season that’s just ending -- and 20 percent lower in the demographic that counts most to advertisers.

That makes this week’s pitch to marketers at the annual upfronts in New York especially important. Unlike competitors with film studios, theme parks and even cruise ships, CBS is largely dependent on its flagship, ad-supported TV network. And it’s heading into the showcase event for next season’s lineup amid an industry slump in revenue, with ad sales flat or shrinking.

Moonves, 67, the consummate pitchman for TV, says he’s unconcerned. Even after a tough quarter for the entire industry, CBS’s CEO told analysts on a May 4 earnings call that he sees only good times ahead. That’s the message he’ll give advertisers Wednesday at Carnegie Hall.

“I know I sound like a broken record every year at this time, but the upfront to me is going to be exceedingly strong,” he said on the call. “We’re looking at a year where we think it’s going to be much better than last year. So I know I’m Mr. Broadcast and I’m the cheerleader, but I got to tell you I’ve been right.”

CBS shares fell as much as 1.9 percent Tuesday to $60.90, a five-month low.

Some of CBS’s audience losses this season are the result of one-time factors. In 2016, the network had the Super Bowl, TV’s biggest event, and this year it was on Fox, guaranteeing a drop in viewers. Moonves also aired one less NFL playoff game, and the hotly contested political race in 2016 led to more program pre-emptions and drew audiences to cable news.

The network is also doing far better than Fox or ABC, both of which are perpetually rebuilding their prime-time lineups. Only NBC draws more viewers in the younger 18-to-49-year-old audience that advertisers target.

Football, Trump

Yet football and Donald Trump don’t tell the whole story. Many of CBS’s most-popular shows are losing viewers. “NCIS,” the long-running crime drama, is down 9 percent, while “The Big Bang Theory,” the No. 1 comedy on all of TV, is off almost 9 percent.

“If ratings are lower, they are being paid less,” said Tom Eagan, an analyst with Telsey Research.

Advertisers are being less generous with their TV dollars this year than they were a year ago. Industrywide, TV ad sales fell in the most recent quarter for the first time since 2010, according to earnings reports from other major media powerhouses like Walt Disney Co. and Time Warner Inc. At the same time, much larger online rivals like Google and Facebook posted gains of 19 percent and 46 percent.

Ad rates are also rising more slowly in this year’s upfront marketplace, when marketers buy spots for the upcoming TV season, according to Brian Wieser, an analyst at Pivotal Research Group LLC. And while rates are supposed to rise at a mid-single-digit rate, much less than a year ago, a shrinking audience doesn’t bode well for the overall market, he said.

Despite all that, CBS still has a better message than most of its peers. Viewership at ABC fell more than 8 percent this past year, and Fox would have had a miserable year if not for the Super Bowl. NBC beat CBS in the younger demographic thanks to “Sunday Night Football” and the breakout hit “This is Us,” but couldn’t win in total viewers.

Largest Audience

With an audience that still approaches 10 million viewers a night, CBS still offers marketers one of the only places to predictably reach so many people at the same time.

CBS also continues to boost its income from newer sources, including fees pay-TV operators, sales of shows to other entertainment companies and new paid online services like Showtime and CBS All Access, all of which look set to grow more.

“We have tremendous upside ahead across all of our main sources of revenue,” Moonves said on the earnings call.

(Updates with trading in sixth paragraph.)
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