CBS Corporation Class B (NYSE:CBS) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Entertainment Segment Expense
David Bank – RBC Capital Markets: A couple of questions. I guess you guys talked a little bit about some of the expense pressure in the Entertainment segment. Related to the price of content and I’m wondering if that’s sort of a structural issue or a timing issue or maybe related to ratings performance in the past year leading to more pilots or something like that. If you can give a little more color around that. And then in the spirit of one question. I’ll give you the second part of the questions that’s going to be needed.
Leslie Moonves – President and CEO: As we expressed Under the Dome it is a brand new form of entertainment. We haven’t done, nor has anybody done an original drama of this size in many, many years. Now the good news for us is because of the Amazon deal, and because of the international sale. We were able to make this show profitable before it even went on the air. Now the fact that it went on the air and it is a huge hit is really almost gravy and will bring in a ton of profits into the third quarter. However, this is new programming at north of $3 million an episode so figure that out that’s an addition to our programming costs that didn’t exist last year. It’s things like that, where you will see us invest more in programming, but also invest with the knowledge that we are going to get it back and then some. That show is going to be very profitable for years to come and it’s the greatest way to invest our money.
David Bank – RBC Capital Markets: It’s not related about having to have produced more pilots or something as a result of the prior — it’s just this summer programming…
Leslie Moonves – President and CEO: Since I have been here in 1995. We’ve always done between 18 and 22 pilots, and it’s remained the same this year. When we were in last place when we were in first place. We do the same number of pilots.
Under the Dome
Jessica Reif-Cohen – Bank of America Merrill Lynch: I have one for Les, which is sort of the follow-up to the first and then one for Joe. Les, given the incredible success as you said in this of Under the Dome, could you talk about how much appetite there was by SVOD players by the streaming players and what do you expect, you already said that you’re going to bring Under the Dome back, but is there a lot more room to do more of this kind of first run high quality programming?
Leslie Moonves – President and CEO: I really believe there is, obviously the response was tremendous, Amazon is very pleased that they joined up early in the partnership with us, Jeff Bezos actually spoke to me personally about how pleased they were that they’re experimented with this. I think you will see every network and I know they are developed and try to replicate the model that we did. I doubt many of them will have the same ratings as Under the Dome did it was like the second highest rated new drama of the year. The numbers look pretty sensational, but I think there is a huge appetite with the SVOD players out there to join us plus the international desire for our content is not slowing down at all…
Jessica Reif-Cohen – Bank of America Merrill Lynch: And is it just like a summer window that you have or do you think there are other times of the year?
Leslie Moonves – President and CEO: Look, we program all times of the year normally, we put on the question was Under the Dome when we renewed, we put it on in February or the summer, we decided to go with the summer. It’s doing numbers that would have made it the second highest drama on television on network television. So, we consider that, but what it means is we’re going to program all year along from September to September.
Jessica Reif-Cohen – Bank of America Merrill Lynch: And then, Joe, you just increased the buyback and I was wondering if you could us some sense of timing and what your comfort level will be on leverage post the Outdoor IPO/REIT?
Joseph Ianniello – COO: Yeah, sure. Obviously we reloaded the program, getting ready for the Outdoor transaction. So, as we lever that business up and IPO, it will have the capacity to buy back our stock quickly. We’re continuing the same pace as the underlying program goes and we’re going to continue to re-look at our ratios as we become more content focused and less advertising dependent. So we think we’re creating a tremendous financial flexibility and this program gives us the ability to capitalize on that.