• by Wayne Friedman , Staff Writer, December 16, 2005

For all that the networks have done with Apple's iTunes Music Store, DirecTV, Comcast VOD, and mobile phone deals, the underlying feeling is that their core revenue business--network advertising sales--is slowing.

Case in point, the newly formed CBS Corp.'s potential growth has put some market analysts on the defensive. According to The Hollywood Reporter, Bernstein Research analyst Michael Nathanson said slowing demand for network advertising, and a sketchy outlook for local stations due to their crucial auto industry advertising sales going south, places CBS' long-term revenue growth at 4 percent and operating profit growth at 3 percent.

And that's not the worst of it. He says this growth "may not be bearish enough." Of course, it isn't surprising stock market analysts have been downgrading all pure broadcasting company plays--due to advertising slowdowns in traditional media. CBS isn't alone.

On first blush, those eye-popping on-demand programming deals over the last several weeks looked cheery. Weeks later--in the stark backlight of an iPod--those moves may now be in the more desperate range.

For all the credit CBS President/CEO Les Moonves is given for turning around the CBS network in prime-time ratings, Nathanson says this move only yielded a modest 1.7 percent compounded growth in revenue and 4.5 percent growth in earnings before interest taxes, depreciation and amortization.

Bottom line: It could be years before any of the big media companies' on-demand, alternative distribution deals make money. Even by those executives' own standards, they are unsure what to expect, thus the push to make as many different types of alternative distribution deals as possible.

Of course, media companies' network chiefs are wide-eyed optimists--that's their job. But there is some reality as well.

Says Moonves: "New media is exciting, but it's still not going to be our bread and butter for a long time. It's going to be our gravy."