Moonves movie plan draws Street traffic

Eye stock rises on CBS topper's pic plan

By STEVEN ZEITCHIK

Leslie Moonves' disclosure last week of the Eye's potential plans to get into the theatrical film biz was supposed to shock Wall Street and jar the CBS stock.

It's mostly earned Moonves a hug.

The CBS topper's announcement on Wednesday that the company was contemplating the financing and production of six to eight midrange films per year didn't send investors running. Instead, many actually upped their buys, and the stock rose 4% in the 2½ days after the announcement.

Price closed Friday at $26.50, very close to its all-time high since it began trading in January.

Moonves had described a plan that linked financing and production of $20 million-$50 million pics to output deals on CBS nets such as Showtime. Under the plan, the Eye would pay traditional output-deal fees to a production or studio entity in exchange for profit participation. It would not get into the distribution business.

The fluctuations of last week are likely the result of the trades of short-term investors, and it remains to be seen how longer-term investors handle the stock. And the news is still hypothetical; a lot can change if and when Moonves begins signing projects and talent deals.

But as an early gauge of Wall Street's reaction, the price rise was undeniably good news. Even analysts, who have skeptically encouraged the company to use its cash instead to further increase its dividend, showed some signs of softening.

Part of the enthusiasm may be due to the care with how and when Moonves revealed the details. The math was calibrated to dispel the concerns that has caused financiers like "Poseidon" backer Virtual Studios to reduce their Hollywood commitment. It was probably no accident that Moonves deployed the phrase "risk-free" several times.

And while remarks did pose some entertainment-biz questions -- would a studio give up a piece of the gross for an output deal? -- Moonves avoided setting off alarms on the Street by implying high capital costs ahead, for example.

Some also suggested timing was everything. As CBS begins exiting other businesses -- it recently sold its theme parks division and also has announced plans to sell off part of its radio businesses -- the movie plans reassure investors that the company can still grow.

Yet the news comes at a moment when Moonves may not want to rock the boat.

In the last three months, CBS has earned several new analyst recommendations of "buy" or "strong buy." And if it gets through what's considered a less volatile summer period, it should be positioned to enter the last quarter of its first year of trading with a solid report card. That makes this announcement a riskier move.

As one observer pointed out, Moonves is either really confident he can convince Wall Street -- or really wants to get into the movie business.