CBS CEO Moonves: Over-the-air viewers 'not the most advertiser-friendly'

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CBS Corp. (NYSE: CBS) CEO Les Moonves told analysts Wednesday that he believes the 15 percent of CBS viewers who rely on rabbit ears and other over-the-air antennas to watch original programs such as Big Bang Theory and NCIS "are not the most advertiser-friendly and the most appealing to our advertisers."

His remarks on the company's second-quarter earnings call were somewhat jarring, as Moonves acknowledged that CBS needs cable and satellite TV distribution in order to reach consumers who are the most desirable to media buyers. That's something that could give leverage to Time Warner Cable (NYSE: TWC) and other distributors negotiating retransmission-consent agreements for CBS owned-and-operated stations and affiliates.

"Over 85 percent of our airing, our viewing is done through satellite cable or the phone companies," Moonves told an analyst who questioned why CBS believes it is entitled to increased retransmission-consent fees and addressed impact that services such as Aereo could have on negotiations with distributors.

Aereo has managed to block attempts from CBS, Fox and other broadcasters to get a court order to shot down its service, which captures over-the-air signals with antennas and distributes programming through the Web and mobile devices. But Moonves said Aereo is "an illegal service that would be, in essence, stealing our content."

Moonves also said pay TV distributors should pay more to package CBS stations in their basic cable tiers because it is ranked as the most-viewed network by Nielsen. "He who has the most eyeballs should get paid the most," Moonves said.

On Tuesday, Time Warner Cable, which has complained that CBS is demanding a 600 percent increase for retransmission-consent fees in major markets such as New York, Los Angeles and Dallas, dropped CBS stations for less than 30 minutes. CBS and TWC later announced that they agreed to extend their retransmission-consent agreement until 5 p.m. ET on Friday.

Time Warner Cable said little about the CBS talks during its second-quarter earnings call Thursday, and Moonves also had few remarks about his battle with TWC. "Receiving fair value for our content is core to who we are, and we will remain resolute in this principle now and in all future negotiations as well," Moonves said.

CBS reported that second-quarter revenue jumped 11 percent to $3.7 billion. It saw affiliate and subscription revenue increase by 18 percent, which it said was driven by increased retransmission-consent fees, reverse compensation from CBS affiliates, "underlying cable affiliate fees" and revenue from the Floyd Mayweather Jr. – Robert Guerrero fight. CBS sold the pay-per-view event with its Showtime subsidiary.

For more:
- see the CBS earnings release
- see the transcript from the earnings call

Commentary: What CBS and Time Warner Cable could learn from Disney and Comcast

Related articles:
CEA: Fewer Americans using over-the-air antennas
CBS prepares for Time Warner Cable blackout
CBS credits Showtime and 62% jump in retransmission-consent fees for Q1 revenue gain