The all-seeing eye in CBS'
Although CBS reported a modest 3.7% increase in net income, to $781.7 million or $1.02 per share, the boost included a tax benefit of $0.17 per share. Overall sales decreased 0.9% to $3.48 billion, while earnings from continuing operations increased 29%.
Radio emerged as a sticking point for CBS. Revenues there decreased 8%, perhaps in part because of the defection of star radio personality Howard Stern to Sirius Satellite Radio
On the other hand, CBS saw good results from its outdoor advertising business, and its publishing arm, Simon & Schuster, posted a 1% increase in revenues.
It's no surprise to any media-watcher that the TV segment also seemed to suffer. Operating income in TV decreased 3%. CBS blamed lower revenue from DVD sales for its 1.1% decrease in sales in the segment, but traditional TV advertising (providing more than half of CBS's revenues, according to its most recent 10-K filing) has become increasingly troubled. According to CBS, second-quarter TV ad revenues were basically flat year over year. (Maybe that's why CBS decided to egg us on recently -- wooing viewers is important to companies like CBS, since marketers have grown increasingly interested in more high-growth platforms like Internet advertising and buzz marketing.)
A WSJ article pointed out that most broadcast players are part of huge conglomerates -- think News Corp.'s
In a previous article, I argued that traditional radio struggled with serious illness, and that music lovers were bound to continue tuning into alternative options that gave them infinitely better choices, increasingly threatening the digital model. I think the same now applies to TV as well. Disruptive influences across the media spectrum have made once-passive viewers and listeners more active consumers of entertainment than ever before, and that's a big threat to traditional media's existing business model.
CBS seems to know this. In the company's conference call, President and CEO Leslie Moonves proclaimed that CBS is a company in motion, with a mandate to change with the times. Investors probably hope they won't get motion-sick as this evolution unfolds.
In my opinion, media companies like CBS are more intriguing as examples of the shifting industry landscape than as compelling long-term investments, despite their dividend payments and other fiscal perks. Given media firms' enormous challenges at the moment -- and the perfectly reasonable argument that these companies' growth might be stunted for the short term, at the very least -- I'd say that the companies who benefit from industry disruption are more attractive investments in long run than the companies fighting to survive that disruption.
XM Satellite Radio is a Motley Fool Rule Breakers recommendation. To find out what other companies David Gardner and his team of analysts have pegged as disruptive influences well positioned to take advantage of current trends, click here for a 30-day free trial.