CBS profit drops as TV strike shakes up business (Reuters)

NEW YORK (Reuters) - CBS Corp reported a 15 percent drop in quarterly profit on Tuesday but declined to blame the economic slowdown or writers strike, saying that three months of labor trouble actually may help business.

CBS instead attributed its profit decline to the sale of TV and radio stations and the loss of some outdoor advertising contracts. As for the economy, executives said they had yet to see a "recession in our day-to-day operations."

Chief Executive Les Moonves also said during a conference call with analysts that the strike against major TV and film studios resulted in a helpful shake-up in the way the television business is run, particularly when it comes to developing new shows.

"Many of the economic benefits we were able to achieve during the strike have changed the way we do business and will allow us to operate more efficiently going forward," Moonves said.

Among the changes caused by the strike, CBS signed half as many deals to develop TV shows as normal, commissioned far fewer pilots, and managed to cut overall production costs by 60 million or 75 million when the writers union halted work.

Like other executives, Moonves said some of those changes may become permanent, such as cutting back on pilots, which are essentially test shows but can cost millions to put together.

"When I look back over the various shows I have been involved in that have been hits, it hasnt been the most expensive shows that have hit it out of the ballpark, and theres some feeling that you dont need to spend 5 million on a pilot to know whether you have a potential hit series," Moonves said.

He also said the media company would simply decline to sign as many development deals for potential TV shows.

"We will never get up to the number we had before," he said. "These changes will be fundamental."

The trick for CBS and other networks is sticking with those changes next year, when they will undoubtedly be under pressure to come up with strong new programs if audience ratings continue to decline.

"Well have to wait and see how it actually does shake out. Hopefully, its not a case where the industry goes back to business as usual," said Robin Diedrich, a senior analyst with Edward Jones. "This could be something that could really improve the profitability of these companies, at a time they need it, too."

As for the economy, she said, "I believe they will see some of that softness. It takes a little bit of time. When consumer spending starts to slow, and that trickles into corporate profits, then that cuts into advertising budgets."

More than the economy, CBS results for the fourth quarter appeared to be affected by the TV and radio station divestitures, the loss of some billboard contracts, and record political advertising sales in the prior years quarter.

Net profit fell to 286.2 million, or 42 cents a share, from 335 million, or 43 cents a share, in the same period a year earlier.

When the shedding of those stations and other one-time events are taken into account, the media company reported an adjusted share of 54 cents against analyst expectations of 52 cents for the fourth quarter.

Revenue slipped more than 3 percent to 3.76 billion, but also managed to surpass the 3.73 billion for the quarter analysts polled by Reuters Estimates had expected.

Shares rose 18 cents to 25.18 on the New York Stock Exchange.

(Editing by John Wallace and Derek Caney)