Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

The Death Spiral

Is CBS Making Money?

President Donald J. Trump (R-New York) might harm a company that has been one of his strongest allies with his crusade against the National Football League (NFL). Analysts like JPM Morgan Chase (NYSE: JPM)’s Shawn Quigg believe CBS Corp’s (NYSE: CBS.A) stock will lose value because Trump is telling his rabid fans to boycott the NFL.

Quigg thinks falling sales of jerseys for players that sit or kneel during the national anthem indicate fans are turning on the game, Bloomberg Markets reported on September 26. CBS; which is struggling with an epic income decline, depends heavily on advertising revenue from NFL games.

Ratings for the 2017Thursday Night Football season opener were 5% lower than the 2016 season opener, Deadline Hollywood reported. That game featured the Chicago Bears and Green Packers, so it was clearly in Trump country.

Tellingly, CBS (NYSE: CBS) streamed the 28 September game on Amazon Prime where it attracted 488,000 viewers. That brought total ratings for the game to 15.1 million and broadcast ratings to 14.6 million. Good, but a fraction of the ratings the same game would have received back in 1987.

CBS’s stock price has been steady despite the rating trouble, but the company is in a pretty bad place. Its’ income is collapsing before our eyes which points to serious problems soon.

CBS’s Incredibly Shrinking Income

The latest income figure for CBS; that from June 30, 2017, was 11% of the number it reported just a year earlier.

CBS reported a net income of $1.583 billion on June 30, 2016, that number fell to $171 million just 12 months later on June 20, 2017. If those numbers, taken from ycharts, are correct, CBS lost around 89% of its income in just a year. If this decline continues CBS might report a loss on its next earnings report which is scheduled for 2 November 2017.

That means Quigg might be right the national-anthem frustration can hurt CBS badly. This is a company that might not be able to make money any longer. One thing is certain; CBS is definitely overvalued at the $58.65 a share it was trading at on 2 October 2017.

CBS’s Cash is disappearing before our Eyes

CBS is making a little money right now, but that cash is disappearing before our eyes. These pathetic numbers demonstrate how CBS’s cash is drying up:

  • A “free cash flow” of $178 million.


  • Cash and short-term investments of $170 million. That means CBS may have to start borrowing money to finance its’ operations. A sure sign of the death spiral.

  • $1.372 billion cash from operations, this was down from $1.782 billion in June 2016.


  • Assets of $22.65 billion. This was down from $23.16 billion in June 2016.


  • A market capitalization of $23.56 billion on October 1, 2017. This was down slightly from $24.20 billion on September 30, 2016.


  • An enterprise value of $32.31 billion on September 29, 2017, that was down slightly from $32.48 on 30 September 2016.

Is Trump Responsible for CBS’s Woes?

CBS has a great deal of trouble that has nothing to do with Donald J. Trump. Broadcast TV ratings, ad revenues, and football viewership were all falling long before Trump threw his hat into the presidential ring.

There is some evidence that the anthem controversy is having an effect. TickPick; one of America’s two largest ticket brokers, reported that NFL ticket fell by 17.9% between the week of September 17 and September 24, a CBS story indicates. The nation’s other big-ticket broker, TicketCity reported that they fell by 31%.

Something to keep in mind here is that many journalists think Trump has some sort of superpower that allows him to control the minds of the great unwashed. Such observers will ignore any other explanation for the NFL’s woes.

The really lousy play on the field; as demonstrated by the Bears’ 35 to 14 loss on Thursday night, might have something to do with it. The concept that Americans who hate Trump might share the President’s opinion of the anthem controversy never seems to occur to media elitists.

CBS’s Problems go Way beyond NFL

A more bothersome number was that for CBS’s biggest fall Premiere Star Trek: Discovery. The dull franchise reboot attracted around 10 million viewers on September 24 which is terrible for a high-profile TV event.

Discovery only managed to get 1.9% of viewers under 50, Vulture reported. That demonstrates CBS’s biggest problem; the network simply cannot get Millennials (persons under 34) and Generation Xers (those between 35 and 52) to watch network TV.

Not even a reimagining of a beloved TV classic can catch their interest. Note: CBS might have driven away fans under 50 by basically throwing out The Next Generation, Deep Space Nine, Voyager, and Enterprise; which Millennials and Xers grew up watching. To add insult to injury they added a racist reimagining of the Klingons.

Will Star Trek: Discovery Flop?

This is not a good omen for CBS’s All Access Digital Streaming Service, of which Discovery is supposed to be the flagship. My prediction is that in a few months, CBS will end up hiring a Trek alumni like Outlander and Battlestar Galactica producer Ronald D. Moore; or Doctor Who recreator Russel T. Davis, to completely redo Star Trek in a desperate effort to attract some viewers.

The most glaring fact of all is that CBS has no plans to show Discovery on broadcast TV. It will be seen on streaming video, which indicates that Les Moonves and his team have given up on the medium.

Yet this might be too little too late, because Amazon, Hulu, and Netflix (NASDAQ: NFLX) may already own sci-fi on video. Amazon (NASDAQ: AMZN) has already commissioned three new science fiction shows to capitalize on its success with The Man in the High Castle.

Each show will be a very different vision of the future based on popular fiction rather than a tired and clichéd series, Ars Technica reported. Material Amazon wants to mine for sci-fi gold includes Larry Niven’s classic Ringworld (one of my personal favorites), Neil Stephenson’s cyberpunk epic Snow Crash, and Lazarus based on a comic book I’ve never heard of.

This kind of dark-edgy material and not Cold War clichés of a utopian future seems to be what today’s viewers want. Things might get worse for CBS; if Netflix and Hulu start mining other science fiction novels for TV. Robert A. Heinlein’s works; particularly Friday, H. Beam Piper’s Space Viking, and Jerry Pournelle and Larry Niven’s The Mote in God’s Eye all have strong potential as series. There is also several shelves’ worth of Phillip K. Dick stories that producers have not yet touched.

Will Amazon buy CBS?

A Star Trek: Discovery flop would be bad news for CBS because it might doom All Access. That might have some interesting repercussions for the eyeball network and Donald J. Trump.

A dying, money-losing CBS; will become an acquisition target. A potential buyer that the Donald would hate is Amazon. Amazon CEO Jeff Bezos likes to save old media; he owns Trump’s least favorite newspaper The Washington Post.

Acquiring CBS makes a lot of sense for the Everything Store. Owning CBS would give Amazon; a library of full popular shows, the TV and video rights to the Star Trek franchise, a news department, production facilities including a studio in Los Angeles, a sports department, and the right to show NFL games on Amazon Prime. Trump would hate that because it will probably end CBS’s gentle treatment of him.

Under Bezos’ guidance, 60 Minutes might decide to start doing Trump Mafia stories and investigating Donald’s past business practices. The president and his family might also find themselves unwelcome on CBS News as well. Once again it looks as if Trump is biting the hand that feeds him.

Strangely enough, CBS’s cavalier treatment of the Trek universe might prompt an Amazon buyout. Bezos himself is a Trekkie and a huge fan of Star Trek: The Next Generation. Discovery’s lack of respect for that classic might prompt him to act.

CBS is a lousy investment right now because its’ future looks bleak. Neither its’ alliance with Trump nor a Star Trek reboot can save this broadcast dinosaur from extinction. Investors should stay far, far, away far away from CBS unless Bezos decides to buy this turkey.