NEW YORK (TheStreet) -- Many investors and analysts don't realize why CBS (CBS - Get Report) has so much upside potential. They see the company as only a mass media conglomerate that provides programs to global audiences.
That's a huge oversight.
What they overlook is the enormous value of its management, led by CEO Les Moonves. Moonves is to CBS what Steve Jobs was to Apple (AAPL).That's why at its annual meeting on May 22, Executive Chairman Sumner Redstone called Moonves "a super genius."
The CEO's brilliance shines especially bright in his focus on one of CBS's most valuable assets, its transmission revenue. Moonves knows that the big cable operators like Comcast (CMCSA) and Time Warner (TWC) desperately need the programming that broadcast networks like CBS provide.In the past, broadcasters would receive about 10% of the fees viewers paid to watch programs Yet networks like CBS were responsible for nearly 40% of the paying viewers. Moonves caught on to that disparity and did something profitable about it. He said to the cable companies, "If you want to carry our telecasts and programs you'll need to pay more, or we'll find other ways to satisfy our millions of viewers." Suddenly CBS had both leverage and clout. To illustrate how much that can drive up future revenue, consider that at the beginning of 2014 the leading broadcast networks were paid about 75 cents per cable subscriber per month. Recently CBS negotiated a deal to be paid $2.00 from Time Warner Cable. That's a 266% increase, and Moonves claims that number will increase to $2.50 per cable subscriber. At that rate, the revenue increase per month leaps to 333%! Earlier in May, CBS reported first-quarter earnings that beat analysts' estimates after buying back $2 billion of its stock and selling shares in its U.S. billboard division. CBS not only owns the most-watched television network in the U.S. It controls one of the world's largest libraries of entertainment content, making its brand one of the most recognized in the business. It's the home of "I Love Lucy," "60 Minutes," "CSI," "NCIS" an "Undercover Boss," among many others. That vast library of entertainment content generates a fortune in licensing fees and royalties. It's also one of the big bargaining chips CBS uses to leverage the lucrative transmission deals it's just beginning to execute. Before looking at other sources of hidden value that CBS owns, let's examine a five-year price chart that gives a glimpse of how the stock has performed. CBS data by YCharts