Media giants ride streaming, cable fees past ad uncertainty

Thu Nov 6, 2014 7:04am EST
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By Lisa Richwine

LOS ANGELES (Reuters) - Major media companies have become far less dependent on the cyclical advertising market, reporting another strong quarter of profits boosted by checks written by streaming services such as Netlfix Inc and fees from cable operators.

Time Warner Inc, CBS Corp and Twenty-First Century Fox each reported profits that beat Wall Street expectations for the September quarter, even as advertising showed pockets of weakness.

Media companies are benefiting as consumers change their viewing habits and watch more content via online streaming options. While that's hurt the TV ratings that determine what advertisers pay, it has opened lucrative new revenue sources from services such as Netflix and that need TV shows to lure subscribers.

CBS, owner of the most-watched U.S. television network, for the first time reported that less than half of its revenue came from advertising, down from more than 70 percent a few years ago. The company diversified its business by licensing content to Netflix and other streaming services, plus pressing for hefty new "retransmission" fees from pay TV operators to air its hit shows such as "NCIS" and "The Big Bang Theory."

Those fees and other non-advertising sources made up 54 percent of CBS's overall revenue for the September quarter. The company posted adjusted operating income of $814 million and revenue of $3.4 billion.

"We achieved these results because of the continued growth in our diversified set of revenue sources," CBS CEO Leslie Moonves said on a conference call.

"What we are seeing is that the world of content, monetization continues to expand across new devices and new distribution platforms."

Other media companies reduced their reliance on advertising. Rupert Murdoch's Fox generated 26 percent of its revenue from advertising for the fiscal year that ended in June 2014, down from 30 percent two years earlier.   Continued...

A woman walks past the Time Warner Center near Columbus Circle in Manhattan, New York in this July 16, 2014 file photo. REUTERS/Adrees Latif/Files