CBS and Time Warner Should Have Cancelled 'The Big Bang Theory'

NEW YORK (TheStreet) -- CBS  (CBS) has been a great stock, there's no question. So has Time Warner  (TWX) . Obviously CBS CEO Leslie Moonves is doing something right. Ditto that for Time Warner CEO Jeff Bewkes.

However, it's important to stay ahead of the curve, and it's important to fight for shareholders -- maximizing stock value is of utmost importance.

That's why I argue that Moonves and Bewkes should have considered shutting down "The Big Bang Theory", a television program that runs on CBS television and is produced by Warner Bros. TV. Recently, there was a contract-negotiations problem holding up production. It was over money (of course). According to The Hollywood Reporter, the main stars wanted an increase from $350,000 per episode to $1 million per episode, a number that included backend participation. The situation was resolved, and the big stars of "Big Bang" as well as some of the lesser players, essentially got what they demanded.

"The Big Bang Theory" makes a lot of money. The show is worth billions of dollars of revenue in the broadcast and syndication arenas; how much of that is profit is hard to come by, but it has to be significant. Even so, it is my conclusion that Moonves and Bewkes should not have given in to the cast and instead called it a day on the show.

That sounds insane certainly, but standing up to Hollywood talent and withstanding the pressure from all sides to cave to the demands of the celebrities involved should be the mission statement for executives.

Have no doubt: here there be pressure. Massive amounts of it. Pressure from the public, from affiliates, from executives below the corner office, from agents and so on. It would be a tough thing to walk away from a show that has shown incredible revenue growth.

Who takes the risk, ultimately? Is the star talent? No. It's CBS and Time Warner. Moonves and Bewkes should have gotten together and told Jim Parsons and Kaley Cuoco no. It's a simple one-syllable word that should be used more often in Hollywood.

It's not that they don't deserve a good amount of money. Perhaps they do. Unfortunately, as a show matures, there is no guarantee that it will continue to be a hit. No one knows the future. "The Big Bang Theory" has been on the air for quite a long time; it's definitely a commodity that has demonstrated its value in the marketplace.

Rejecting demands for overpriced contracts might provide dividends in the future, however. As unthinkable a move it would be to cancel "The Big Bang Theory," it might dissuade other agents and stars from asking for too much.


There would be repercussions for CBS and Time Warner if execs decided not to make the stars of their biggest TV show happy; the shares could have been punished depending on Wall Street's mood at the time.

Yet, just once, I would leave to see a thought experiment turned into an actual experiment. Shareholders of both CBS and Time Warner should voice their disapproval of expensive demands from talent. Content production is tough; many failures have to be brought to market before the successful ones can establish themselves. Every dollar should be regarded as sacrosanct.

"The Big Bang Theory" won't be around forever, and there are always new concepts and fresh talent waiting in the proverbial wings. This is how CBS and Time Warner, Bewkes and Moonves, should be thinking.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

TheStreet Ratings team rates CBS CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CBS CORP (CBS) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, notable return on equity, reasonable valuation levels, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, CBS CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • CBS CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CBS CORP increased its bottom line by earning $2.92 versus $2.48 in the prior year. This year, the market expects an improvement in earnings ($3.33 versus $2.92).
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.

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