(Reuters) – CBS Corp generated less quarterly profit and revenue than Wall Street expected, but the network announced plans on Thursday to have 25 million streaming subscribers by 2022.
FILE PHOTO: The CBS broadcasting logo is seen outside the CBS Broadcast Center in Manhattan, New York, U.S., July 30, 2018. REUTERS/Shannon Stapleton/File Photo
An 11.3 percent drop in revenue from sales and licensing of CBS programs to other distributors helped send shares down nearly 3 percent in after-hours trading.
Excluding certain items, the company earned $1.50 per share, below analysts’ expectations of $1.52 per share.
The company, known for shows such as “The Big Bang Theory” and “NCIS”, pinned the blame on the timing of international licensing sales and several large domestic sales that occurred in the fourth quarter of 2017, and emphasized subscriber growth as it competes against Netflix Inc and other streaming services.
“We have now reached 8 million direct-to-consumer subscribers between CBS All Access and Showtime, nearly two years ahead of our original schedule,” said acting Chief Executive Officer Joe Ianniello. “As a result, we have set a new target of 25 million domestic subs combined from both of these direct-to-consumer services by 2022.”
The New York-based company’s results come nearly a month after former Chief Executive Officer Leslie Moonves, who led opposition of a merger, challenged the company’s decision to deprive him of $120 million in severance pay after he resigned amid a wave of allegations of sexual assault and harassment.
While media majors Walt Disney Co and AT&T Inc are tapping into their extensive film and TV libraries to launch streaming rivals to Netflix Inc and Amazon.com Inc’s Prime video, smaller players CBS and sister company Viacom Inc are focused on providing original content to other distributors.
In late January, CBS board members were briefed by bankers who presented various scenarios for the company that included mergers and options to remain independent, sources have said, who added that no decisions were made. The exact scenarios are not yet known.
The company is also moving ahead with looking for a permanent chief executive, these sources said.
On Feb. 11 CBS shareholders filed an amended complaint to their class-action lawsuit, alleging that Moonves and three other CBS executives inappropriately sold stock ahead of negative reports about Moonves.
In a statement CBS said: “The vast majority of sales mentioned in this complaint were made as part of pre-planned selling arrangements designed to comply with applicable securities laws. The remaining sales were subject to CBS’ customary pre-clearance policies and procedures and were properly disclosed.”
Both CBS and Viacom, controlled by National Amusements, are expected to rekindle merger talks in the coming months after attempts to combine the two fell apart last year.
CBS said advertising revenue during the reported quarter rose 7.3 percent to $1.87 billion.
CBS Chief Financial Officer Christina Spade said that in the first half of the year, the company will allocate 100 percent of its cash to invest in the business and improve financial flexibility. In the second half of the year, Spade said, it will be opportunistic in buying back stock.
The company said affiliate and subscription fee revenue, which includes income from cable, satellite and streaming TV providers as well as its own All Access offering, rose to $1.03 billion from $923 million a year before.
Net income from continuing operations rose to $561 million, or $1.49 per share, in the quarter ended Dec. 31 from $40 million, or 10 cents per share, a year earlier.
The company recorded a $129 million charge related to the changes in the U.S. tax law last year.
CBS said total revenue rose 2.6 percent to $4.02 billion, below estimates of $4.13 billion, according to IBES data from Refinitiv.
Reporting by Vibhuti Sharma in Bengaluru and Helen Coster in New York; Additional reporting by Kenneth Li in New York; Editing by Lisa Shumaker and Anil D’Silva