NEW YORK (Reuters) - Comcast Corp and CBS Corp showed the TV business is even stronger than billed, reporting earnings that surpassed most forecasts and setting the stage for healthy price increases in the next round of ad sales.
Rising advertising rates come as a major relief for a TV business that was under heavy pressure coming out of the recession, when corporations cut their marketing budgets and consumers fell ever more deeply in love with social media.
Today, with the economy making progress and marketers willing to spend on national campaigns to promote cars, clothes and cell phones, the TV advertising market is blistering.
Need to buy some last-minute commercial time? Advertisers can expect to pay 30 percent to 40 percent more than they would have when buying time under longer term deals a year ago, according to executives.
CBS Chief Executive Les Moonves, whose company is the home to the most-watched U.S. broadcast network with hit shows such as “The Big Bang Theory,” predicted that rates for TV commercial time would rise by double digits during next month’s advanced sales period.
“We are very encouraged by the ongoing strength of the advertising marketplace,” he said on a conference call. “Broadcast television is still the best game in town.”
Ad revenue at the CBS network, when excluding two special events, the Super Bowl and NCAA basketball tournament, was up 12 percent from 2010’s first quarter.
Comcast, the No. 1 U.S. cable operator, might take issue with CBS’s notion that nothing beats broadcast TV. In the first period it reported quarterly results that included NBC Universal, it posted a 14 percent rise in advertising revenue for its cable networks, including USA, CNBC, and Bravo, among others.
Revenue at NBC’s broadcast network was up a more modest -- but still healthy -- 8 percent.
NBC will present its 2011-2012 prime-time schedule to advertisers on May 16. Fox, CBS and ABC will follow, and then negotiations for advertising time will begin in earnest, with some $8.5 billion to $9 billion at stake for the big four networks.
While Comcast appears to have well-timed its acquisition of NBC Universal -- it closed the deal to take 51 percent control in January -- its key business remains selling subscriptions to video, voice and broadband services.
In that, the company also surpassed expectations, adding more than 418,000 high speed Internet subscribers during the quarter and 260,000 phone subscribers. Analysts at Collins Stewart had estimated that Comcast would add 300,000 Internet subscribers and 207,000 phone subscribers.
Comcast lost just 39,000 video subscribers, the lowest number of video subscribers in four years since it started facing stiff competition for video customers from phone companies’ digital video services including Verizon Communications’ FiOS and AT&T Inc’s U-verse.
”The cable numbers were strong and the financials were in line or better than expected,“ said Craig Moffett, analyst at Bernstein Research. ”For all the attention around NBC Universal, it’s still a cable story.
Overall, Comcast net income rose to $943 million, or 34 cents a share, up from $866 million, or 31 cents a share. Excluding costs related to the NBC Universal transaction, profit came in at 36 cents.
CBS, which also has publishing, outdoor advertising and radio divisions, reported first quarter earnings of $202 million, or 29 cents a share. Analysts had expected earnings of 19 cents a share, according to Thomson Reuters I/B/E/S.
Revenue of $3.51 billion, while down slightly from a year ago when it broadcast the Super Bowl, also came in ahead of the $3.46 billion analysts expected.
In after hours trade, CBS shares rose 4 percent and Comcast advanced 1 percent.
Editing by Phil Berlowitz