NEW YORK ( TheStreet) -- It's not easy being a major media giant that gets half of its revenue from advertising.
Just ask CBS (CBS) , which owns the country's No. 1 rated TV network and which has no doubt been frustrated as its stock has dropped 12% in 2014. The big concern for CBS is that the ad-supported TV business will suffer as more viewers migrate to digital-entertainment platforms that don't contains ads, or where placing ads doesn't cost as much.
Must Read: Warren Buffett’s Top 10 Dividend Stocks
But traditional TV remains a powerful medium, and CBS is still at the top of a roughly $70 billion television advertising market. In spite of more advertising moving to digital platforms, TV advertising appears to be surprisingly strong for now. Television ad spending rose 6.5% in the third quarter and was the only sector to see year-over-year growth, according to a report from Kantar Media made public earlier this week.
As CBS reduces its dependence on advertising, jacks up its retransmission and affiliate fees, and continues to churn out hits, it should win out in the long run. Season to date in the primetime ratings, CBS is leading with 11.8 million viewers, up from 11.6 million last year, according to Nielsen.
"Television is doing fine," Edward Atorino, a media analyst at Benchmark Co., said in a phone interview. CBS "is still No. 1, it has a great balance sheet and great TV stations."
CBS, which in addition to the CBS Television Network, owns Showtime, CBS Television Stations, CBS Radio, CBS Television Studios and Simon & Schuster, has the most exposure to advertising among the major media companies. But the media giant has reduced that exposure in recent years to 50% from 70%, partly by spinning off its ad-dependent CBS Outdoor division earlier this year.
At the same time, CBS is pushing hard and getting higher retransmission fees and "reverse retransmission fees" -- the dollars TV station affiliates are willing to pay the network to carry its programming. CBS has been the country's most-watched network for more than a decade.
At the UBS Global Media and Communications conference earlier this month, CBS CEO Les Moonves said that 20 million people still watch CBS program NCIS when it airs on the network on Tuesday nights, noting that CBS has bolster the network by adding a Thursday night NFL package. That kind of desirable programming has helped strengthen the media giant's hand in its dealings with distributors and TV stations.
This month, broadcaster struck a new carriage agreement with the Dish Network (DISH) . And Tribune Media (TRCO) agreed to pay up to become a CBS affiliate in Indianapolis after CBS' previous station partner was unwilling to fork over higher fees. All told, CBS is on track to garner $2 billion from retransmission and affiliate fees by 2020, the company says. CBS executives were not available for an interview on Monday.
"CBS is going back to distributors and saying, if you want to retransmit, you've got to pay," Brett Harriss, an analyst at Gabelli & Co., said in a phone interview. "CBS has uniquely valuable content. Because of that, they have pricing power with distributors."
In a report, Harriss touted the potential advantages of CBS reuniting with its former sister company, Viacom (VIAB) , because the combined companies would have more leverage with distributors.