CBS 2Q revenue, profit seen down amid fee fight

CBS 2nd-quarter revenue, profit seen down amid fee fight with Time Warner Cable

Associated Press

LOS ANGELES (AP) -- CBS Corp. reports its second-quarter earnings after the market closes on Wednesday, as an ongoing fee dispute with Time Warner Cable Inc. could play a big role in how profitable the company is going forward.

WHAT TO WATCH FOR: CBS and Time Warner Cable have been locked in fee negotiations for months, primarily over how much Time Warner Cable pays for the right to retransmit signals from CBS's owned and operated TV stations in New York, Los Angeles and Dallas.

Executives may give some clues as to how negotiations are going.

Deadlines have been extended since the previous agreement expired at the end of June. A blackout could be damaging to both sides.

CBS CEO Les Moonves told a conference of television critics on Monday that he hoped the stations would not go dark to some 3 million Time Warner Cable subscribers, but that CBS believes it is not being paid fairly for its content. Time Warner Cable has said it is holding the line to prevent monthly bills from going up drastically on consumers.

THE BIG PICTURE: CBS makes most of its revenue from advertising, but fee negotiations are increasingly important. A deal with Time Warner Cable would provide a benchmark for other retransmission deals, including those involving TV stations that are CBS affiliates.

Morgan Stanley analyst Benjamin Swinburne expects that the two sides will agree to a deal, paving the way for similar terms for about 40 percent of CBS-owned stations by the end of 2016. Swinburne expects that such deals will help CBS exceed its goal of bringing in $1 billion in retransmission fees by 2017.

Retransmission fees are contractually negotiated, rise every year, and don't fluctuate with economic swings. That will help CBS to reduce its reliance on volatile advertising revenue.

WHAT'S EXPECTED: CBS is expected to post earnings of 72 cents per share on revenue of $3.51 billion for the quarter ended in June.

LAST YEAR'S QUARTER: That's up from the earnings of 65 cents per share and revenue of $3.48 billion the company posted in the same quarter last year.

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