High TV ratings, low stock price: That's been the bittersweet script for CBS Corp. this season.
Like most media stocks, CBS shares have slumped badly amid the recession. That's true even though the company's core TV network is going full blazes and scored the season's No. 1 new show with the crime drama "The Mentalist."
Now, Wall Street may finally be changing its tune. On Tuesday, Caris & Co. analyst David Miller upgraded the stock, arguing that the recent share price below $4 reflects roughly the value of its Showtime pay-cable channel, without even weighing the value of the CBS broadcast network and other assets.
CBS shares perked up 32 cents to close Tuesday at $4.15, an 8.4% gain.
CBS is the only broadcast network that has seen ratings grow across the board this season. Through Sunday, it had won 19 of the last 25 weeks among all viewers, according to figures from Nielsen Media Research. Season to date, the network is averaging 11.8 million total viewers, up 12% compared with the same period last year. By comparison, NBC and ABC have both slipped 4%; Fox, which aired the Super Bowl last season and has suffered declines at its No. 1 hit "American Idol" this year, has plunged 18%.
Last year, CBS' prime-time lineup was hammered by the effects of the three-month writers strike, so it may not be surprising that it looks much stronger this season. Even so, the network has seen strong results for virtually its entire lineup, from the sitcom "How I Met Your Mother" to the newsmagazine "60 Minutes."
It's true that CBS may not have the trendiest programming. Its procedural crime shows such as "CSI: Crime Scene Investigation" and "NCIS" tend to attract viewers older than 50, a crowd that many advertisers still treat as invisible. But even among the much more desirable demographic of viewers ages 18 to 49, the network has logged a 3% uptick while its rivals are all down.
In his research note, Miller applauded CBS for licensing shows from other producers and not just cramming the schedule full of products from its sister studio.
"Placing too many company-owned shows on a prime-time schedule can be very risky and can amount to substantial losses if the shows are canceled," he wrote.
But can CBS capitalize on all this prime-time success later this year, when it moves to pre-sell ad inventory for next season in the "upfront" market? It's a dicey call. The ad market remains horrendous, with recession-spooked big companies pulling back on spending wherever they can.
The company has hinted that, rather than lower ad prices, it may offer less commercial time for sale during the upfront than it usually does, in the hopes that it can sell ad time on more favorable terms later, during the so-called scatter market.
"We will not reduce our pricing," CBS chief Leslie Moonves said at a securities conference March 3. "We may have to sell a little bit less" commercial time during the upfront.
Obviously, such a plan is banking on hopes that the recession will ease by late this year or early next.
If it doesn't, CBS won't be the only media company suffering the consequences. But unlike many of its rivals, CBS is actually increasing its audience at a time when audiences for nearly everyone else are eroding.
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Top CBS series
1. CSI: Crime Scene
19.7 million viewers (average)
3. The Mentalist
4. Criminal Minds
5. Two and a Half Men
Top prime-time shows, ages 18 to 49
For the week ended Sunday:
1. American Idol (Tues.)
Fox, 12.5 million viewers
2. American Idol (Wed.)
3. Dancing With the Stars
4. Desperate Housewives
5. Grey's Anatomy
Source: Nielsen Media Research
On prime time
For prime-time network TV rankings for last week, go to CALENDAR, D9.