NEW YORK (AFX) - Leslie Moonves' idea to take CBS Corp. into the movie business could be interesting for viewers, but shareholders may be more wary.
Speaking at a conference arranged by PricewaterhouseCoopers Wednesday, Chief Executive Moonves said he was mulling a plan under which CBS could invest in and possibly produce six to eight pictures a year in the $20 million to $50 million range.
CBS spokesman Dana McClintock declined to comment further.
Analysts expressed confidence in Moonves' talents. 'It's not shocking (for Moonves) to get into the movie business. He's been a talented programmer,' said Alan Gould, analyst at Natexis Bleichroeder. But the idea could also chafe against those who like CBS for its high yield and reliable, albeit slower, growth.
CBS Corp. was created in early 2006 after Viacom split into two companies: Viacom Inc., a growth-oriented company that includes MTV, and CBS, a more value-oriented company centered around the CBS television network. Unlike CBS' current units, the movie business is generally seen as more volatile -- with expensive hits or misses.
Moonves, in his comments Wednesday, downplayed the risk factor. CBS currently spends millions on movie licensing deals to air films on Showtime, CBS and other networks. Under Moonves' idea, CBS could invest and own a part of the movie rights. To reduce risk, the company could tap the help of some private-equity firms, Moonves suggested.
Not everyone likes the idea.
'Personally, I'd prefer to see CBS use the excess cash flow to increase its dividend and pay a higher yield to shareholders,' Gould said.
CBS already has raised its dividend twice this year. The former Viacom unit last increased its quarterly dividend by 2 cents to 18 cents a share, in late May. Still, analysts see the opportunity for more increases. Gould, for one, sees room for the company to double its dividend.
But there is also confidence in Moonves' ability to make a steady business out of film production.
'I think he can leverage the skills and talents of his operating people,' said James Goss of Barrington Research, who doesn't see getting into the film business as being inconsistent with CBS' more value-oriented profile.
CBS may be in slower growth businesses, but 'we don't characterize (the company) as a zero-growth or dividend-only situation,' said Chris Watters, an analyst at Ariel Capital Management. Ariel is a Chicago firm with 3.1 million CBS shares. Investment in the movie business wouldn't threaten the current dividend, Watters said, adding, 'We think that the current management team out on their own can grow their business.'
CBS posted flat first-quarter earnings in April as the company's radio business cut into growth from outdoor advertising and television. Moonves has been entertaining offers for some radio stations in smaller markets where growth has been lagging.
CBS Class B shares closed at $25.95 Thursday, down 0.3 percent.
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