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In This List

CBS bolsters streaming offerings with addition of kids fare, more local news

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CBS bolsters streaming offerings with addition of kids fare, more local news

CBS Corp. is continuing to bolster the content roster for its streaming business, with plans to enter the kids market, while gearing up for a significant expansion of its local news roster.

The company is adding children's programming to CBS All Access subscription service, inking deals with DHX Media and Boat Rocket Studios for new seasons of "Cloudy With a Chance of Meatballs" and "Danger Mouse," respectively. In addition, CBS All Access will add more than 1,000 episodes of library children's programming, including "Inspector Gadget," "The Adventures of Paddington Bear," "Madeline" and "Heathcliff." The company expects to order more kids content before adding the fare to CBS All Access later this year.

"With the vast majority of our All Access subscribers in the 18 to 49 demo, many have families. The addition of the kids programming will make the product more sticky and reduce churn," CBS President and acting CEO Joe Ianniello said during the company's Aug. 8 earnings call, adding that within families, "everybody has different preferences. So we want to serve all those appetites."

Asked whether the kids gambit is coming in response to Walt Disney Co.'s planned bow of Disney + streaming service, which includes genre fare, Ianniello noted that CBS All Access has been around for five years, and started as a vehicle for super fans to catch up CBS fare, then added live programming to its mix. "Then, we really started producing original spend and that is all based on data that we've got back from our consumers," he said. "So this is a natural progression for us."

CFO Christina Spade said CBS All Access and the over-the-top versions of premium network Showtime are on pace to reach the accelerated target of 25 million combined subscribers by the end of 2022.

Meanwhile, CBS Television Stations and CBS Interactive are expanding their local direct-to-consumer news service beyond its current footprint in New York and Los Angeles, which bowed last December and in June, respectively. CBSN Boston is slated to launch shortly and will be joined by San Francisco in the fourth quarter. Nine other markets will come online in 2020: Chicago (local news content provided by WBBM-TV), Dallas-Ft. Worth (KTVT-TV); Philadelphia (KYW and WPSG-TV); Minneapolis-St. Paul (WCCO-TV); Denver (KCNC-TV); Miami (WFOR-TV); Sacramento, Calif., (KOVR and KMAX-TV); Pittsburgh (KDKA and WPCW-TV); and Baltimore (WJZ-TV).

Ianniello said by early next year, local versions of CBSN will be in the 13 major markets, a rollout schedule that will enable the company to have a more robust multiplatform approach as "the next election cycle really gets going so we can fully capitalize on what we expect will be a record year for political spending."

Chief Advertising Revenue Officer Jo Ann Ross told analysts that CBSN and the local direct-to-consumer services in New York and Los Angeles have been part of a broad advertising offering, encompassing linear broadcast and cable properties, which enables marketers to effectively scale and target their campaigns.

CBS Corp.'s potential recombination with Viacom Inc. was not discussed on the call.

Total revenues in the second quarter ended June 30 rose to $3.81 billion from $3.47 billion in the prior year, with growth across all significant streams. Advertising, benefiting from CBS airing the national semifinals and national championship game of the NCAA Division I Men's Basketball Tournament, rose 7% to $1.42 billion, while content licensing and distribution revenues advanced 12% to $1.22 billion, behind higher domestic business.

All four of the company's segments contributed to top-line growth. The primary entertainment unit — comprising CBS, CBS television studios, global distribution group, Network 10, CBS Interactive, CBS Films and the CBS Sports Network (US) — improved to $2.74 billion from $2.40 billion a year ago. The performance benefited from 9% advertising advance at the broadcast network, aided by the aforementioned basketball coverage, with underlying ad revenues ahead 3% in the quarter

Cable networks revenues edged up 2% to $562.0 million, owing to gains at the Showtime streaming service and the inclusion of POP (US), in which the company acquired the 50% stake it did not own in March. The amelioration was countered by the timing of international licensing sales.

Local media revenues inched up 1% to $423 billion, lifted by ad sales against the marquee basketball matchups and higher retransmission revenues, blunted to some degree by lower political ad sales when measured against the midterm election cycle in the year-earlier period.

Publishing revenues grew 5% to $218 million, led by higher print book and digital audio sales.

Net earnings in the period improved 10% to $440.0 million, or $1.17 per share, up from $400.0 million, or $1.05 per share, in the second quarter of 2018. Adjusted net earnings increased to $435 million, or $1.16 per share, from $427 million, or $1.12 per share, in the year-earlier quarter.

The S&P Global Market Intelligence consensus estimate for the just-ended quarter was $1.13 and $1.12 on a normalized and GAAP basis, respectively.