What 'Extant's' Ratings Mean For CBS's Business Model

| About: CBS Corporation (CBS)


Last year CBS began changing its summer TV strategy to include a more balanced lineup of original scripted and reality programming.

Sci-fi drama "Extant" was greenlit following the success of last summer’s fantasy blockbuster hit "Under The Dome," which returned down in its sophomore season.

"Extant" debuted to 9.4 million viewers and a 1.7 rating in the important 18-49 demographic, which is the highest viewer total for any broadcast series this summer.

Following a less successful than usual season last year, CBS needs its summer lineup to succeed as a way to solidify its overall positioning.

Traditionally the TV season runs from September to May, with the summer used to prepare new shows for the usual cycle we've all become accustomed to. However over the past decade (and perhaps longer), the emphasis has shifted to year-round programming with perennial regular season champ CBS (NYSE: CBS) only really coming on board as late as last year. Wednesday night the network rolled out its final summer series premiere in "Extant," which was a key part of executives' plans to fill in whatever small holes it had left in its business model… something investors need to take note of.

Reality rules… or did.

Before we look at "Extant" and the network's other summer offerings, we need to circle back, as for the longest time CBS was content to use its summer schedule for reruns and reality TV. When you're number one you can do that and still pull in high numbers, but after other networks, including cable rivals began to see the benefits of year-round programming, CBS realized it had to take steps to regain that market share it was losing.

After all, for a while you could say CBS was actually ahead of the game as it recognized the promise of reality TV before ABC, NBC and Fox. Remember "Survivor," which is widely referred to as the one that started it all (in terms of reality competitions), debuted during the summer with fellow flagship franchise "Big Brother" bowing not long after. Both pre-date "American Idol," "Dancing With The Stars" and "America's Got Talent," which all got summer starts.

The problem is that when CBS moved "Survivor" to the regular season, it never found a suitable partner for "Big Brother," which opened the door for its rivals to get a foothold. It's not like CBS wasn't trying, it just ended up with reality bust after reality bust ("The Greatest American Dog," "Live To Dance," etc.). However, last year executives shifted focus and decided to take a big risk by expanding to scripted programming in the summer, which proved to be a smart move.

Summer Dome-ination

"Under The Dome" became the network's first attempt at utilizing this strategy. A high-profile, top-tier series, it is based on the novel by famed author Stephen King and follows the residents of Chester's Mill, whose lives are forever changed when a giant clear dome appears out of nowhere and fully encompasses their small town, cutting them off from the outside world.

It was a huge success when it first launched, drawing 13.5 million views and a 3.3 rating in the all-important advertiser coveted 18-49 demographic. That total was enough to make it the most watched series premiere on broadcast TV since NBC's "The Singing Bee" pulled in 13.3 million back in 2007, and the most watched on the network itself since "Big Brother" first bowed in 2000 with 22.3 million. It was an impressive feat and while it eventually slipped a bit in the ratings, it proved a point in that audiences did like having new scripted options during the summer on CBS.

It also scared the hell out of the other networks, as everyone knows when CBS find something that works it runs with it… in some cases over and over again. Enter "Extant," which stars Oscar winner Halle Berry and is executive produced by another big sci-fi name in Steven Spielberg. While it didn't hit the same heights as "Dome," the show's bow the other night was still solid with 9.4 million viewers and a 1.7 in the all-important 18-49 demo (adjusted time-shifted numbers will come in early next week). Paired with the return of "Dome," the continuing success of guilty pleasure "Big Brother" (which will outlive all of us), and drama series "Unforgettable" and "Reckless," it creates a balanced stable that is positioning CBS to continue working on becoming a more complete powerhouse.

Investors' Analysis

From a business perspective, this is a big deal and here's why. CBS is different than both NBC and ABC in that its stock is anchored by the network. NBC is a subsidiary of Comcast (NASDAQ: CMCSA) and ABC is under the Disney (NYSE: DIS) umbrella. The same goes for cable networks TNT and HBO (both a part of Time Warner (NYSE: TWX)) and USA (again a part of the Comcast family).

Unlike those rivals, the actual CBS network isn't just a piece of a larger company, it is the main company. In turn, its successes or failures often tie right back to its financial performance and that of its subsidiaries that include Showtime, The CW and its television distribution wing. No longer apart of Viacom (NASDAQ:VIAB), CBS has broken out in a big way over the last decade, and this revised summer strategy is an important part of that attempt to dominate year-round.

The timing is also right for CBS as while ABC, NBC, Fox and cablers USA, TNT and HBO (among others) have previously had the summer market cornered, the majority of those networks, especially on the broadcast front, are now beginning to have a harder time launching new series to sustain that momentum.

This year alone, ABC saw its grand reality experiment "Rising Star" get off to slow start (partially thanks to smart counter-programming by NBC) and Fox, which had long championed year-round programming, only had two real offerings this "off-season" with the limited run return of "24" and the debut of holdover "Gang Related." Both haven't really set the ratings on fire.

The lone exception has been NBC, which has been powered by the resurgent "America's Got Talent," the increasingly popular "American Ninja Warrior" and the successful launch of medical drama "The Night Shift." If CBS wants to be the king of the summer, it's going to have to go through NBC, which is a challenge executives are more than willing to accept.

However, investors also need to be wary because despite the overall success of its summer slate, CBS has some red flags that should be examined. With "Dome," expectations had been high for the show's return, but it ended up being a more tepid season premiere with 9.4 million viewers and a demo rating of a 2.1. While that's a sizable slip for live viewing, to be fair time-shifted numbers shot that number right back up to a 3.2, which had to have given CBS executives and investors a big sigh of relief, but the fact that many viewers aren't watching live anymore (industry wide) is still frightening.

In addition, while "Extant" premiered to respectable numbers, it still needs to hold that audience across the summer, and that can prove to be a hard task. For example look at "Unforgettable," which was originally one of the highest rated fall shows of its rookie class only to eventually be cancelled when it declined. It was specifically resurrected last summer as part of the network's summer strategy as a way to give audiences a procedural alternative more in line with the network's regular season model. It's now doing "okay" in the ratings, but will soon be flip-flopped on the schedule with rookie "Reckless," which hasn't caught on. The hope is the time-switch will aid both series.

It's important for CBS to come away from this summer with a win because ratings equal ad buys and both can influence stock price. After not only failing to launch a new successful drama last season, but also ending the year falling behind NBC in the overall ratings and ABC in the demo (but still holding strong in terms of total viewers), "Extant" is looking like CBS' best weapon to help begin to right the ship, while at the same time shoring up its summer game plan. With the network already giving the go-ahead to a third sci-fi series for next June/July (James Patterson's "Zoo"), you can bet investors, analysts and audiences will be paying extra attention to "Extant's" ratings as we enter the second half of the summer season.

Disclosure: The author is long CBS.

Business relationship disclosure: All opinions expressed are the authors and no compensation outside of Seeking Alpha is being received. The author has a business relationship with a subsidiary of CBS but is not a full-time employee.