By BRIAN STELTER
Published: April 14, 2008
Katie Couric may be the least of Leslie Moonves’s worries.
While the fate of Ms. Couric and the “CBS Evening News” is in the headlines, the entire CBS News division represents only a fraction of the CBS broadcast network’s revenue. More perplexing is the prime-time schedule, where no new hit has emerged this year, and as a result, CBS is likely to lose the crown of most-watched network to the Fox network.
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And there are concerns over other parts of the CBS Corporation. The radio division is lagging. Pressure to make a digital acquisition is intensifying. Advertising revenue is softening. The good news includes the CBS billboard business, which seems to be doing pretty well.
The challenges facing the company fall squarely on the shoulders of Mr. Moonves, chief executive of CBS since 2004, a year before it was spun off from Viacom. Without the cushion of Viacom’s other properties, CBS has been more exposed to the struggles of the advertising market. In 2007, it earned $1.25 billion, down from $1.66 billion the year before. CBS stock closed at $21.40 on Friday, compared with $30.99 a year earlier.
Mr. Moonves’s next public hurdle, assuming that the situation with Ms. Couric is resolved, will be the earnings report on April 29.
Like many Wall Street analysts, Jessica Reif Cohen of Merrill Lynch expects a 3 percent decline in revenue, in part reflecting the fact that the network did not broadcast two major sports events in the first quarter of 2008 — the Super Bowl and the Final Four basketball tournament. And like most other analysts, Ms. Reif Cohen praises Mr. Moonves, who has been considered one of the smartest programmers and executives in the business.
He is also one of the better paid. While the news media focused their attention on Ms. Couric’s estimated $15-million-a-year contract, Mr. Moonves’s compensation rose to $36.8 million in 2007, from $28.6 million in 2006, according to the company’s proxy statement, an increase of more than 28 percent.
“Les wants to win,” Ms. Reif Cohen said. “It’s difficult to envision him leading a company that is showing no growth or declining growth. He’s very aggressive, he’s very smart, and I just don’t see him standing still.”
CBS has slumped in prime time, starting the season with a 10 percent decline in its total audience and a 15 percent drop among viewers in the 18-to 49-year-old group from the levels a year earlier. The lack of scripted shows as a result of the winter writers’ strike accelerated the losses, leaving CBS with 20 percent fewer viewers. The only network to post steeper year-over-year declines is CW, a small network co-owned by CBS and Warner Brothers.
CBS spokesmen declined to make Mr. Moonves available for comment. The network’s chief scheduler, Kelly Kahl, said the year-over-year figures were largely irrelevant because of the writers’ strike.
In the last three weeks, as new episodes of scripted shows have returned, CBS ratings have returned to their levels before the strike. The lone standout among the ratings has been Fox, which weathered the strike better than others by stockpiling unscripted shows and relying on television’s most popular show, “American Idol.”
Ms. Reif Cohen, a staunch supporter of the broadcast television business, who calls herself “a little less bullish” these days, said the writers’ strike and the economic contraction present the networks with an opportunity to rethink costs.
“The networks are going to have to look very different,” she said. “Audiences are going to get content very differently,”
Steering CBS through these changes and finding new hits for prime time will presumably be priorities for Mr. Moonves. Last week, the network canceled a talent showcase called “Secret Talents of the Stars” after only one low-rated episode had been broadcast.
While CBS renewed 11 series last month, many of its franchises — including “CSI,” “Survivor” and “Big Brother” — have shown signs of decline. Of the five shows introduced last fall, only a comedy, “The Big Bang Theory,” has been renewed.
At its upfront presentation to advertisers next month, CBS is expected to add three to five new shows to the schedule.
Within CBS News, “60 Minutes” — which largely operates on its own — continues to show strength, but the news division’s other programs are less stable.
Viewer age remains a concern. While CBS has traditionally attracted more total viewers than its competitors, its average viewer tends to be older, beyond the demographic groups that many advertisers prefer to reach. To date this season, the network’s median age is 52.9, compared with 45.2 for Fox, 48.4 for NBC and 49.6 for ABC. This year, perhaps trying to appeal to younger viewers, CBS will introduce four mixed martial-arts shows on Saturday nights.
Of the CBS Corporation’s $14 billion in annual revenue, two-thirds comes from television. Prime time programs are only one piece of the division, which also includes local stations, the cable channel Showtime and the relatively strong television production and syndication arms. Two weeks ago, Mr. Moonves named John Nogawski the president of CBS Television Distribution, filling the post previously held by the syndication titan Roger M. King, who died in December.
Of the last third of CBS’s revenue, outdoor advertising accounts for about 16 percent, radio roughly 12 percent and publishing about 6 percent.
John Blackledge, an equity analyst with J. P. Morgan, said the radio division had underperformed the industry for the last two years. CBS owns 140 local radio stations, most of them in major media markets.
Dan Mason, the president of CBS Radio, emphasized the company’s progress on the Internet, including a deal with AOL to combine the two groups’ online radio networks. Mr. Mason also said CBS was streamlining the advertising-buying process for its radio stations, operating the stations in each local market as a cluster.
“Radio is very heavily local-driven, so when retail is down, radio is affected,” Mr. Mason said. “The flip side of that is when retail is down, radio becomes much more cost-effective versus TV or other mediums.”
A Lehman Brothers report said last week that billboards and other outdoor advertising were showing less weakness, adding that “outdoor has been by far the ‘growthiest’ segment for CBS within an otherwise slow-growth company.”
Still, a sluggish advertising market is expected to adversely affect CBS’s properties across the board. When G.E. reported its first- quarter earnings on Friday, NBC Universal said local ad sales declined by 11 percent. However, some of the advertising slowdown will be offset by political-ad purchases; CBS’s local stations are expected to draw $200 million to $220 million in revenue from the campaign season.
“They’ve been aggressive and smart in beefing up their digital initiatives,” Mr. Blackledge said. He estimated that the interactive assets generate several hundred million dollars in revenue; CBS does not break out the figures.
But Ms. Reif Cohen said that while the network had taken “baby steps” in the digital business, “it’s not enough to move the needle and probably won’t be for a while.” She maintains that CBS’s need for an acquisition is becoming apparent. Some CBS executives privately agree. On Monday, the company’s interactive unit will officially open a fully staffed office in Menlo Park, Calif., in Silicon Valley, to stir innovation and content development.
Also, in recognition that the online operation of CBS News has lagged behind competitors, the company is expected to name Jason Kint, general manager of CBSSports.com, to oversee CBSNews.com as well.
And then, of course, there is Ms. Couric and the evening news.
“It’s not working. That’s clear,” Mr. Blackledge said. “But for the investment community, I don’t think it’s that big of a deal.”
Still, the uncertain future of Ms. Couric could represent another black eye for the company, where arguments sometimes break out in public. There was Dan Rather’s protracted departure in 2005, then Don Imus’s dismissal a year ago. Last summer, in a New York magazine article on Ms. Couric, Mr. Moonves said he deserved no responsibility for the failures of the “CBS Evening News.”
“I really don’t,” he said.
Some executives and staff members express a positive view. “It’s an amazing news operation,” said Susan Zirinsky, executive producer of “48 Hours.” “But we lose sight of it because everybody — the news industry, the music industry, the entertainment industry — is facing challenges and changes.”
Others who were given anonymity so they could speak freely about internal matters expressed frustration with the intense media focus on Ms. Couric’s future to the detriment of the rest of the news division.
Some acknowledged that budget cutbacks and layoffs had left people feeling demoralized. The staff of “The Early Show,” the third-place morning program, is still reeling from the departure last month of the hard-charging executive producer, Shelley Ross. But the employees say they think they are on an equal playing field with the other network news divisions, regardless of the anchor.
“I would attribute most of the agitation to the state of the industry,” a midlevel news employee said. “Nobody likes negative growth, from the guy who shines shoes to the C.E.O. Everybody feels the pain.”
Paul Friedman, a senior vice president of CBS News, acknowledged that the ratings for the evening news have been disappointing, but said that they were not an indicator of the news division’s strength.
Over the last year, the news divisions at NBC and ABC have laid off “many more people,” he said. And a large number of “first-rate people from those networks and cable operators have applied with us for jobs,” he added, “right now many more than we can make room for.”
Asked whether anchors like Ms. Couric simply need to stick with their newscast and wait for its standing to improve over time, Mr. Friedman sounded an uncertain note.
“Traditionally, longevity has been the solution, absolutely,” he said. “I don’t know if that still holds or not.” |
