Screening the Future

The television industry has been revolutionized in recent years by the advent of Netflix, Amazon on Demand, Hulu, and many other new ways of streaming video entertainment. The way many people watch “TV shows” is completely different from what it was just 10 years ago.

In such a fast-changing industry, is there still any room for the old-fashioned broadcast networks? They can if they adapt to the new video marketplace, as CBS (NYSE: CBS) has done.

CBS has changed a lot since the days when it was known as the Tiffany network. The Westinghouse Electric Corporation acquired the network in 1995 and eventually adopted the name of the company it had bought to become CBS Corporation. In 2000, CBS came under the control of Viacom, which began as a spin-off of CBS in 1971. In late 2005, Viacom split itself and reestablished CBS Corporation with the CBS television network at its core. CBS Corporation is controlled by Sumner Redstone through National Amusements, which also controls the current Viacom.

CBS shows may not be the ones that get the most buzz in Manhattan-based magazines, but their viewers are very loyal. For example, CBS stuck with The Big Bang Theory and it is now the highest-rated comedy on the air. CBS’s police and detective shows, such as the NCIS franchise, remain strong.

CBS also owns the rights to very popular NFL games, and has extended that franchise into the “Thursday Night Football” broadcast.

The network typically ranks first in overall viewers at the end of the television season in May, although some other network (often Fox) frequently argues that it is first with the desirable 25-54 demographic.

CBS has announced a new agreement with President and Chief Executive Officer Leslie Moonves, who has been leading the company during its successes of recent years.  The new agreement supersedes his prior contract, which was to conclude in 2017, and extends his term with CBS Corporation by two years, through June 30, 2019.

At the end of his new term, Moonves will become an executive advisor to the Company for an additional five years, and will have the option to establish a production company under CBS’s auspices.

Moonves came to CBS in 1995 as President of Entertainment. He was promoted to President and CEO of CBS Television in 1998, became its Chairman in 2003, and was later named Co-President and Co-Chief Operating Officer of Viacom and Chairman of CBS in 2004. In 2006, when Viacom split its businesses into two publicly traded companies, Moonves was named President and CEO of the newly formed CBS Corporation.

About a month ago CBS reported results for the third quarter of 2014, which included higher revenues and earnings per share compared with the same prior-year period.

“CBS continues to succeed on the strength of its tremendous content,” said Sumner Redstone, Executive Chairman, CBS Corporation. “Les and his team are optimizing the Company for future growth at every turn, and I have the utmost confidence in their ability to increasingly drive shareholder value in these dynamic times of great opportunity.”

The third quarter growth reflects the success of the company’s efforts to create and monetize its premium content. The CBS Television Network got off to an encouraging start to the 2014-2015 season, which has reloaded its owned content pipeline in a big way with

Shows such as Madam Secretary, Scorpion, and NCIS: New Orleans, along with new owned hits from sister networks Showtime and The CW.

The company’s local affiliates had a strong quarter as well, including increasing political spending and higher retransmission consent fees. Also during the quarter, CBS renegotiated new station affiliate contracts with LIN Media, Tribune Broadcasting, Media General, and Gray Television, bringing it that much closer toward its stated goal of $2 billion in retransmission consent and reverse compensation revenues by 2020.

But can the venerable company expand into the emerging platforms of 21st century content? CBS has recently launched CBS All Access, which allows “super fans” to watch CBS wherever they are.

“We are returning more value to shareholders than ever before, and we continue to have great confidence in our future as a content company in this ever-expanding marketplace,” said Moonves.

The company’s price-earnings ratio is just 11 – quite a bargain. It’s a buy up to 64.

Tom Scarlett is an investment analyst with Personal Finance.