Paramount Global (PARA) 2008 Q4 法說會逐字稿

Good day and welcome to today's CBS fourth quarter and full-year earnings conference call.

Today's call is being recorded.

At this time, I would like to turn the call over to Adam Townsend, Executive Vice President, Investor Relations.

(technical difficulty) Executive Vice President and CFO.

Sumner will have opening remarks and will turn the call over to Les and Fred, who will discuss the strategic and financial results.

We will then open the call up to questions.

Let me note that statements on this conference call relating to matters which are not historical facts are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ.

Risks and uncertainties are disclosed on CBS Corporation's news releases and securities filings.

A summary of CBS Corporation's fourth quarter and full-year 2008 results should have been sent to all of you.

If you did not receive it, please contact Poonam Desai at 212-975-3667 and she will get it to you.

A webcast of the call, the earnings release, and other information related to this presentation can be found on our website at CBSCorporation.com.

Now I will turn the call over to Sumner.

Thank you.

Good afternoon, everyone.

I thank you for being with us today.

I doubt that we have ever seen a global economy as difficult as the one we are witnessing right now.

The fact is that as conditions worsened throughout 2008, every industry has been affected.

And unfortunately, as of now, '09 is showing little sign of improvement.

But one thing is clear.

In a difficult environment, CBS is doing an exemplary job of managing its businesses for today's challenges and, equally important, tomorrow's opportunities.

Our focus is on producing world-class content.

The kind that people want to watch, want to hear, want to read, and want to stream.

We have always recognized that content is king, but while we focus on our content, I must tell you, we are also focusing on our costs and our balance sheet at a time that all will agree it's crucial to do so.

Now for those of you who did not hear me express my views about National's negotiations with its lenders on the Viacom call, I will simply reiterate my statement that we are making very good progress with our creditors, and as I have also said before, we have not, since our original sale, sold a single share of CBS or Viacom, and our lenders are not urging us to do so.

Now with respect to the CBS dividend, I can tell you that the topic has been discussed with the lenders, and it will not impact the successful conclusion of the discussions.

So that's the update, and again, because of the ongoing nature of the discussions, I must decline to further comment.

Let me say this in conclusion.

With all the difficulties in the economy today, it is a clear advantage that we have a world-class management team at CBS to lead the way.

And so, it gives me a great deal of pleasure to turn this call over to CBS's CEO, my friend and, by the way, a truly great executive, Leslie Moonves.

Thank you very much, Sumner, and good afternoon, everybody.

Thanks for joining us today to discuss our 2008 fourth quarter and full-year results.

By now, you have listened to enough of these calls to know that I am going to tell you we are operating in a very difficult environment, some say the worst since the 1930s.

Clearly, the marketplace has been sharply affected by the recession, as well as the very unstable credit markets, particularly in the last quarter of the year.

Our advertising businesses, obviously, have been caught in this downturn, especially our local business is having a significant impact on our television and radio stations as well as Outdoor.

Network and Interactive revenue are holding up better and our ratings and Internet traffic success are bringing in rate increases even in this economy, albeit not nearly at the levels we would like.

As you know, many of our businesses are dependent on advertising, but it's also important to point out that advertising now accounts for just two-thirds of CBS's revenue.

We like the advertising business over the long term.

We love its margins.

But right now, we also like the way our non-ad-supported businesses are providing a buffer in this marketplace.

Like most companies today, we are primarily focused on managing our businesses, so that we can capitalize on the upturn when it occurs.

We feel the majority of the topline pressure we are experiencing is related to the economic environment and not secular issues.

Given the success of our content, led by the number one television network, we are confident that our results will improve when the overall economy is strong again.

Now, over the past year, we have taken a number of steps to position ourselves for future success.

First, we continue to deliver on our long-term strategy to produce the best content out there.

Regardless of the environment, creating premium content is at the core of what we do.

Second, we took our Interactive business to a whole new level with the CNET acquisition.

We are in the very early stages of what we'll ultimately be able to do with this business.

But CBS's Interactive record fourth quarter revenue and profits provide a nice preview of what is to come.

Once again, for the future, we are a content company.

And the Internet is the newest form of content.

Third, to get ahead of the negative trends we knew were coming, we acted early to radically lower our cost structure throughout 2008, reducing staff in every one of our businesses and reducing expenses across the organization.

As a result, all of our businesses had underlying profitability on an operating basis in 2008, even those most pressured by the economy.

And finally, we continue to aggressively manage our balance sheet.

Our businesses still generate healthy cash, in good times and bad, nearly $1.7 billion of free cash flow in 2008, and we have used that cash judiciously, always with an eye towards meeting our financial obligations, protecting our investment-grade credit rating, and, of course, returning value to our shareholders.

Given the current uncertainty in the marketplace, however, we think it's time to retain more of our cash until we have more visibility into the credit markets, and the depth and breadth of this recession.

As you saw in our release today, we reduced our quarterly dividend to $0.05 per share, effective as of our April dividend payment.

At this level, CBS's yield will continue to be at the forefront of the media industry.

Fred will take you through the specifics in more detail, but I would like to stress that we are taking this action now because we feel it is wise and prudent.

We have until mid-2010 before we have any significant debt that matures, and expect to be able to self-fund upcoming maturities through cash flow generated by our businesses.

This step will maximize our financial flexibility in meeting our debt obligations.

When the economy and the credit markets improve, we will revisit the amount of our dividend at that time.

As I mentioned at the outset, the effects of the slowdown were most evident in the last quarter of 2008.

Our fourth quarter revenues of $3.53 billion were down from $3.76 billion last year, and our adjusted OIBDA of $591 million in the fourth quarter '08 was down from nearly $850 million for the same quarter of the previous year.

Now, let's take a brief look at some of our businesses.

In television, the CBS television network is dominating the season.

We are up in every single key demographic, including viewers, households, 18 to 49, and 25 to 54.

No other network is up in any of these categories.

We are also first in viewers, households, 25 to 54, and a close second in 18 to 49.

We're number one on four nights of the week and we have four of the top 10 and 11 of the top 20 programs, more than any other network.

We are number one by almost 3 million viewers per night.

We have the number one scripted series, the number one drama, the number one comedy and the number one newsmagazine.

And we continue to cultivate new hits.

We have the number one new program in drama with The Mentalist, and four of the five shows we introduced this year are still on our schedule.

Our leadership position will not change next week, next month, or even next year, and when the marketplace improves, we will benefit first and we will benefit the most.

I'm also very proud of how Katie Couric and our entire news team distinguished themselves in 2008.

Evening news viewership is up and 60 Minutes has continued its tradition of setting the standard for in-depth coverage, including the first interview hosted by Katie with USAirways pilot, Capt.

Sully Sullenberger.

As the media landscape becomes increasingly crowded, shows like 60 Minutes only become more valuable.

In sports, we finished the NFL season with more viewers than anyone else.

We're also looking forward to the NCAA tournament next month, including CBS's Interactive March Madness On Demand, which is on track to break last year's revenue record.

We're seeing rating success with the CW as well.

The network has truly found its niche with women 18 to 34, and was the only one to score year-to-year gains in this key demo.

Gossip Girl, One Tree Hill, and the new 90210 were all hits this year, with double- and even triple-digit ratings gains over the prior season.

The CW is realizing the largest viewership gains of any network from DVR usage, more proof of what I've said all along.

DVR helps, rather than hurts, the popularity and reach of our programming.

Across the board, these ratings successes are very encouraging.

Clearly, we would rather be able to monetize a new hit show like The Mentalist or an established one like CSI in a better marketplace.

But it's important to remember that creating franchise content now leads to revenue growth down the road in areas like syndication, mobile, iTunes, and DVD sales.

These ancillary revenue streams are an increasingly important part of our future, and many of them are becoming a bigger piece of the pie now as well.

As I said, non-advertising revenue accounted for one-third of our total in 2008.

These businesses turned in double-digit revenue gains in '08 and continue to perform very well in the current marketplace.

These non-advertising assets include Showtime, syndication, DVDs, publishing, and retransmission consent fees.

At Showtime, we have exceeded our expectations, both financially and creatively.

Showtime added 1 million subscribers last year, bringing the total to 16.5 million, driven by our critically-acclaimed original programming.

Our newest addition, The United States of Tara, has now joined Weeds, Dexter, Californication, and The Tudors as an established hit, each of which continue to succeed across multiple platforms.

For example, through CBS's Interactive deal with iTunes, The Tudors recently spent nine straight days as iTunes' number one downloaded series.

And The Tudors' second season debuted in the top 10 among DVD sales, a feat rarely achieved by television DVDs.

While others have expressed concern about the DVD business, television DVDs continue to be a very solid business for us, up mid-teens for the year.

Our other non-advertising-supported businesses turned in strong results as well.

Showtime's success helped affiliate revenues grow 6% in 2008.

And led by the CSI franchise, domestic and international syndication had a terrific year, up 41%.

We expect a great '09 as well, Criminal Minds, Everybody Hates Chris, Ghost Whisperer, Medium, and Numb3rs are all being sold into syndication this year.

On the retransfer front, we have signed some significant carriage agreements so far this year, one with Verizon and a major new deal with Time Warner Cable.

And today, as you may have seen, we signed a deal with EchoStar for retransmission through the Dish Network as well.

So this year, within the last six weeks, we have announced major deals with the number one telco, the second-largest cable, and the second-largest satellite distributor, all of which recognize the value of our content.

We said we would get paid for our network, and we are.

Simon & Schuster, which also does not derive revenues from advertising, was able to buck industry trends and finished the year with higher fourth quarter revenues.

They have digitized more than 17,000 titles and are increasingly entering the e-book marketplace, where sales increased fourfold during the year.

Building ancillary revenue is a key strategy for all of our traditional media businesses, and our new ones as well.

Which brings me to another growing revenue stream for CBS, our Interactive segment.

We are pleased with the successful integration of CNET and CBS Interactive.

Quincy, Neil, and their team are driving audiences and revenue, increasing profits, and creating new growth opportunities.

They have redesigned CNET.com, and last month, TV.com added thousands of videos to what was already a thriving online community.

Today, TV.com has five -- more than five times the number of video streams it had a year ago, and 20 times the total minutes streamed online.

TV.com is clearly going to be a very, very big player in what is clearly a fast-growing category.

In addition to CNET and TV.com, most of our sites hit all-time traffic highs in the fourth quarter and we're seeing success in our integrated sales approach, which allows marketers to buy across multiple CBS Interactive properties, and throughout our company.

CBS Interactive was able to post topline growth at a time when many of our online competitors were flat to down.

Going forward, even in a slower revenue and growth environment, we're focusing on taking share and dramatically improving our margins.

We laid the groundwork in '08 by realizing procurement and public company cost savings there, as well as streamlining senior management and implementing substantial cost reductions.

As I said earlier, we have only begun to explore all we can accomplish with this business.

The early results are already encouraging.

With Interactive, as with all our businesses, our strategy continues to be producing the absolute best content and delivering it to our audience how, when, and where they want it.

At the same time, there is no doubt that our local assets in Radio, Outdoor, and television are three areas that are being hurt right now.

In Radio, we're advancing our strategy on focusing on the largest markets.

We recently made deals with Clear Channel and the Wilks Group to sell or swap five midsize-market stations.

Most important to our long-term growth, we significantly rationalized the cost base for this business, reducing headcount and operating costs throughout '08 and into '09 as well.

As we right-size this business, large-market radio remains a key part of the CBS portfolio and a prime opportunity online as well.

We also believe in the long-term viability of our Outdoor business as an advertising medium, but right now, Outdoor is feeling the pains of the operating environment.

Late last year, advertising fell off sharply, but billboard lease and transit costs did not, which is why our results were disappointing.

We have rationalized our expense base in Outdoor in all places we control at this time, with reductions in headcount and operating costs, and those efforts will continue.

And so will our focus on the growth areas of this business, digital, and international.

Once again, we will manage this business to be well positioned when things turn.

Across the Company, our strategy is clear.

We will continue to build out our content on our established businesses, increasingly on the Internet as well.

We will continue to maintain a strong balance sheet.

Our businesses continue to generate healthy levels of free cash flow, and we are now retaining more cash in order to be equipped to handle any economic climate going forward.

And we will continue to manage our businesses through the current climate, including a very disciplined approach to CapEx and other expenses.

Looking forward, as others have pointed out, it's a very difficult time to forecast the near impact of the current U.S.

and global economic picture.

Given the very positive ratings trends we see at the network, and our strong syndication sales, with five series hitting the books in the back half of '09, we believe that the second half of '09 will be stronger than the first, even if the economy does not improve.

Once again, while we can't control the macroenvironment, we can control how we run our businesses and the quality of our content.

And I am pleased with our continued progress on both fronts.

Now I will turn the call over to Fred Reynolds, our CFO, for some additional insights on our financials.

Good afternoon to all of you.

I'd like to focus my comments on key actions we took to meet the challenges we faced in the fourth quarter and to discuss highlights of our operating performance during 2008.

In response to the rapid drop at the end of 2008 in the local and national economy, our businesses moved quickly to further reduce their ongoing costs.

As you know, we began to take actions to lower the costs of our local businesses at the end of 2007, and we have continued this difficult process throughout 2008, as the U.S.

economy accelerated its decline into a full-blown widespread recession by the end of 2008.

During the fourth quarter, we took additional restructuring charges of over $83 million, which is reflected in each segment's operating income before depreciation and amortization and is highlighted further in today's earnings release information.

Radio, TV stations, and Outdoor account for 70% of the $83 million restructuring charge, as our local businesses eliminated numerous positions.

Also, in anticipation of continued weak market conditions in 2009, all of our businesses took steps in the fourth quarter to reduce their costs.

For all of 2008, the actions we took reduced our annual ongoing costs by over $220 million by eliminating discretionary spending and eliminating positions, resulting in restructuring charges for the year totaling over $136 million.

Let me now brief you -- briefly discuss our fourth quarter and full-year financial performance.

I will end with a discussion of our balance sheet and our strategy for using our strong free cash flow, given the very uncertain economic times we currently are faced with.

For the full-year 2008, our revenues were almost $14 billion, down only 1% from '07.

About 66% of our revenues in 2008, or $9.2 billion, came from advertising.

Our advertising revenues were down about 8% from 2007.

The other 34% of our revenue, or $4.7 billion, is from non-advertising revenues, such as license fees for the use of our content, syndication fees, affiliate revenues from subscribers of our Showtime network, and also revenues from home video sales, digital downloads, and Simon & Schuster.

Our nonadvertising revenue in 2008 of $4.7 billion was up 17% over 2007, led by license fee growth of plus 40%, DVD sales of over $230 million, which was up 16%, affiliate revenue up 6%, and all other nonadvertising revenues up over 3% from a year ago.

Now turning to profits for the full year, our adjusted operating income before depreciation and amortization was almost $2.8 billion, down 13% to 2007.

Adjusted operating income before depreciation and amortization excludes the impairment and restructuring charges, stock-based compensation expense, and the CNET acquisition.

Adjusted earnings per share for 2008 was $1.73, compared to $1.98 in 2007, a decline of 13%.

And as Leslie mentioned, free cash flow for 2008 totaled $1.67 billion, versus $1.71 billion in 2007.

Taking into account our discretionary pension contributions from both years, free cash flow in 2008 would have been even with 2007.

For the fourth quarter of 2008, free cash flow totaled $308 million, and that's up from $122 million from the fourth quarter of 2007 as we decreased capital spending by over $40 million and we continue to focus on lowering our use of working capital as we drove our asset turnover ever higher.

Turning to the fourth quarter of 2008 performance, revenues totaled $3.4 billion on an adjusted basis.

Adjusted OIBDA totaled $592 million, down 30% from the fourth quarter of 2007, and let me look -- take you through the segments quickly.

Television revenues were $2.2 billion, down 8% from the fourth quarter of '07, with half the decline coming from the networks' time period sales.

Time period sales fell 13% as our strong growth in networks' ratings could not offset the preemption of nine primetime hours for election and debate coverage, and while scatter pricing was higher in the fourth quarter than the upfront pricing, scatter pricing was not nearly as high as it was in the fourth quarter of 2007.

TV stations account for the balance of the drop in revenue for the quarter.

Strong political advertising from October through November 4th of over $60 million could not offset the rapid decline in our base advertising business, led by a dramatic pullback in advertising spending by local automotive dealers and retailers.

The drop in television's operating income before depreciation and amortization reflected these lower revenues and a $25 million restructuring charge.

Radio's fourth quarter revenues of $367 million was down 18% from '07, as soft local advertising, along with recently announced radio station divestitures, reduced revenues versus the year-ago period.

Radio's operating income before depreciation and amortization in the fourth quarter was $79 million, and that reflected a restructuring charge of approximately $44 million.

Outdoor's revenues of $526 million declined 15% compared to the fourth quarter of '07.

Foreign exchange from the strengthening U.S.

dollar represented about 7% of the 15 points of decline, and Outdoor's operating income before depreciation and amortization for the fourth quarter totaled $98 million, down from $199 million the year before.

The OIBDA included $6 million of restructuring costs, plus the strong U.S.

dollar in the fourth quarter lowered profits by $12 million, and that was coupled with higher transit costs, largely for the London Underground.

Interactive, our newest segment, had a very good fourth quarter of 2008, as revenues were up over threefold versus the fourth quarter of 2007.

The acquisition of CNET drove the revenue increases.

Operating income before depreciation and amortization for Interactive was almost $52 million for the fourth quarter, up sevenfold from a year ago.

Revenue growth and the CNET acquisition, coupled with significant cost savings, drove the profit growth in the quarter.

As we discussed at the time of the acquisition, we expected cost savings largely from the elimination of public company costs to be in the range of $15 million to $20 million a year.

Actual savings have already more than doubled our acquisition expectations.

The opportunities for efficiencies by combining our business have been significant.

The full integration of CNET with CBS Interactive has been completed very successfully and very quickly.

Finally, let me share with you our strategy to maintain our solid balance sheet and strong financial flexibility, given the current environment where we believe the economically-sensitive market which our businesses operate in will continue for the foreseeable future to experience very difficult trends.

And near term, the credit markets will remain unstable and uncertain.

Given this economic situation, and our longstanding commitment to maintain a solid investment-grade balance sheet, requires that we reallocate the use of some of our strong free cash flow.

Our strategy today is to be fully prepared to self-fund all of our 2010 to 2012 debt maturities.

We believe we have sufficient cash, plus free cash flow, given the current downturn in the U.S.

economy, to self-fund all our near-term maturities, including the July 2010 $1.4 billion of our 7.7% senior notes that are maturing.

At the end of 2010, our $3 billion revolving credit facility matures.

In May of 2011, $950 million of our 6 5/8 senior notes mature, and in August of 2012, notes and debentures totaling about $850 million mature.

After 2012, the next large maturity is not until 2030.

As you can see from our earnings release, during the fourth quarter we purchased at a discount about $200 million of our 2010 senior notes, recognizing a gain in the quarter of over $8 million.

And in January of 2009, we paid off $300 million of our $550 million accounts receivable securitization facilities, as lenders have become very, very reluctant to commit financing to collateralized debt obligations such as an account receivable securitization program.

The cost of this program used to be very, very attractive to us, and now it has become very expensive compared to other available sources of financing, which is why we paid off $300 million of the $550 million.

As the credit markets begin to stabilize and become more predictable, with borrowing costs becoming more attractive in the U.S.

economy in general, and the particular economic sectors we rely upon for an important part of our local businesses begin to recover, we will revisit our self-funding strategy.

But in the meantime, we will reduce our debt outstanding, lower our capital spending to under $350 million a year starting in 2009, and reduce our dividend payout to a level that fits with our self-fund strategy, while still providing what we believe will be an attractive dividend yield to our shareholders.

Our Board of Directors approved our recommendation to reduce our dividend from $0.27 a quarter to $0.05 a quarter, starting with our April 1 dividend payment.

We're very fortunate to have businesses which produce a significant amount of free cash flow, year in and year out, in good times and in times of such we are now all experiencing.

We are focused on using our free cash flow to not only position our businesses to grow, but to discharge all of our obligations, maintain a solid grade -- investment-grade balance sheet, and return cash to you, our shareholders.

So I thank you, and with that, we will open the phone lines.

Darren, if you would open the lines for the questions.

(Operator Instructions).

Doug Mitchelson, Deutsche Bank.

Any chance you could give us a little more visibility into ad pacings in the first quarter, what you're seeing by media, and maybe, Les, if you want to talk a little bit more about what you're seeing by category as well.

That would be helpful.

We don't like to give a sales pace.

Clearly, the sales in the first quarter are challenged, like you've heard elsewhere, particularly with the local TV, Radio, and Outdoor businesses, and particularly with us, because you may recall for the first quarter of 2008, we had record political sales.

At this point, we're kind of rolling over almost $30 million of political, so I don't think the first quarter is really indicative of what we're seeing.

I would say that we are not seeing the markets decline any further, but clearly, they're down from where we would like them to be.

I know this may come as a great surprise, but autos are down.

It's, obviously, a challenged category and an important one to us on a local level.

Telecoms are actually very strong and the options for the network have all been picked up there.

Pharmaceuticals for us are actually doing very well, retail somewhat down, financials somewhat down.

So it's a mixed bag, and nothing that would surprise you in terms of categories.

Fred, maybe if I could just follow up.

Can you give us a sense of how much visibility you have for the first quarter?

Are you 60% sold out, 80%, 50%?

Is that a helpful way to do it?

How much visibility do you feel you have in the first quarter?

I think we have pretty good visibility through February.

But everything is coming in late, as I'm sure you've heard on every call, and an unprecedented amount of pace that we tend to pick up within the month.

And so, what used to be a good leading indicator was the sales pace isn't as good anymore, because things are coming in later.

But again, clearly, pricing is down, and it's a very competitive market out there.

It's certainly a buyer's market.

Jessica Reif-Cohen, Bank of America Merrill Lynch.

Thank you.

First thing is -- the second quarter options were due.

Can you talk about what actually you saw for second quarter?

And given the divergent trends in ratings versus the ad market, can you talk about how you're even thinking about the upfront and how you're going to position for the upfront?

In terms of options, once again, second quarter options are fairly normal.

There are certain categories that are a little slower and certain ones that are very strong.

So, in talking to our sales department at the network, we're feeling very good about them.

Overall, once again, in scatter, I would argue that with our ratings -- not argue -- with our ratings, we are getting the lion's share of the scatter market.

Pricing is up, volume is not nearly as strong as we would like it to be.

Believe it or not, we are looking forward to the upfront because we've got quite a story to tell.

As I said earlier, we're the only network up in every single category and nobody is up in any single one.

So we have a better story to tell.

There is going to be an upfront, there is going to be an upfront market, and we have the best story to tell.

So, in terms of overall, it's hard to predict what it will be.

But we feel strongly that we will be in the best position to take advantage of it.

Can I just switch gears for a second?

On TV syndication, you mentioned that you have five series in the back half of '09.

Yes.

Can you talk about what percent has actually been sold and is there any change in the deal terms in light of some of the broadcast bankruptcies?

No, they have all been sold.

They all have domestic cable deals that are strong, none of the terms have changed.

They're all going to happen at the end of the year, the second half of the year, rather, of '09, and they're all completed and they're very healthy in this marketplace.

We're very pleased and there has been no attempt to reprice them or to change the terms on them.

Just to clarify, you said these are cable deals?

(multiple speakers)

(multiple speakers) Most of the drama series are sold primarily to cable, and then syndication afterwards.

That started back when we got $1.9 million an episode for CSI.

So that has continued along with all these dramas, and there are a lot of the basic cable companies who are our first buyer, be they A&E or TBS or TNT or Lifetime, etc., who are all paying very good prices.

And once again, the international marketplace for all of them, not only these five titles, but for the rest of our shows remains extremely strong.

Michael Meltz, JPMorgan.

Thank you.

You mentioned that you made a pension contribution.

What's your expectation for 2009, or is there an expectation?

And where is your pension balance at the end of the year, please?

There is no mandatory call on the pension plan as we sit here today.

The funding we made at the end of '08 was a voluntary or prepayment, as we're calling it, prefunding.

So right now, there is not to the qualified plan.

Clearly, we had some unrealized losses, although not to the extent others do, because as you may recall, a large part of our pension plan is in fixed income.

So we may have had some mark to market issues, but not the fall in the stock price because again, about 70% of our pension assets are in fixed income.

So you don't expect to have to make another contribution in '09?

At this point, right.

From what I can see now, there will not be a required or what I call mandatory payment.

Obviously, if the market deteriorates further, we will have to revisit it, but as of 12-31, that is not the case.

Of the $220 million of annualized cost take-outs, what portion of that will you realize in '09 that was not realized in '08?

Again, it was throughout the year, so I would say we would get the full-year benefit.

The local businesses took actions at the end of the fourth quarter of '07, so we got some of those.

And then, they took some more in the first quarter.

But most of the other actions of this 83 we just talked about came in the fourth quarter, so virtually none of it was of benefit to 2008.

It will all benefit 2009.

Michael Nathanson, Sanford C.

Bernstein & Company Inc..

Going back to the [costs] in question, could you spread out the cost savings?

You said 220 in '08.

Where is that going to be spread?

Can you give me a sense?

Again, I would say, of the 220, probably 60% to 70% is going to come at the local businesses -- Radio, TV, and Outdoor.

And it's largely employment costs.

Discretionary savings have already been done and they have been reflected immediately.

But those were -- largely, the ongoing is people costs.

And that's off the cost base of '08 into '09?

Yes, sir.

And the second one was you guys talked a lot today about the noncyclical businesses you have.

I wondered -- it would be helpful within TV if you could spend some time talking about the profitability in TV, which is a large bucket of your different segments.

I think that's something that people definitely want to hear about.

I missed part of the question (multiple speakers)

The nonadvertising businesses.

How big is Showtime as a profitability, how big is [judging] business, things like that?

Again, the nonadvertising businesses are, again, largely license fees of the programs like Medium.

It's syndication revenues for a Medium or a CSI.

Those are all very profitable.

But nothing is as profitable as an incremental sale of advertising, because basically all you have is a commission cost.

That's a very high incremental margin.

These are all very, very attractive margins.

Most businesses would give their right arm for them, but nothing will compare with the amount of profit -- incremental profit you make on an advertising sale.

We don't break it out.

It includes Showtime, it includes DVD sales, it includes syndication, it includes iTunes sales, etc..

And retransmission, as well.

But do you think you can break it out at some point, given how much you're stressing the differences in the business model?

As we said overall to the Company, it's one-third of our revenue.

Within the TV segment, it's -- (multiple speakers)

I guess I would say I understand from a number of questions have come up on that.

And we have to see how we can do it without creating segments that don't make any sense.

We have some rules, as you know, with the SEC about how you create a segment.

So you really can't get to a profit number.

You might -- we might be able to get to some kind of gross margin or something like that, but certainly, Adam, Leslie, and I have been looking at that, because I think it is something that people are a little -- are not seeing how profitable we are and how fast-growing it is, and that's really where we're focusing.

Because our content is the big driver of most of that.

Michael Morris, UBS.

Thank you.

On the Outdoor business, can you -- I guess it's a similar question to television, can you give us a little insight into what you're seeing in the current advertising trends right now?

There's -- the comps are not as clear in terms of what's been reported, so have the trends deteriorated in the first quarter?

What else are you seeing in terms of the competitive environment there?

And also, on the cost side of that business, you mentioned the high fixed-cost nature.

But you also just referenced some of the costs from the restructuring is coming out there.

How should we be looking at what you're expecting for cost growth in 2009?

I'll take that.

As far as the -- I'll break it down to the domestic billboard market, and then international.

I would say they are both faring much better than TV or Radio are.

They're actually faring -- while they're down in pace versus a year ago at this time, they're not down nearly to the extent of the others.

It's quite a big gap.

In international, it's the case in local currency.

However, when you put sort of the factor of the U.S.

dollar strengthening to almost unprecedented levels against the Euro and the pound, which is where we're most dependent on, that is causing it to be translated back to the U.S.

dollar and looking worse.

But the underlying decline in international and domestic are about the same, and they are quite a bit lower decline than you're seeing in other businesses.

As far as costs, we're taking out -- again, it depends on the market.

In the U.S., we're taking out a lot of what I would call variable costs that we can get at in streamlining the sales force, and taking out layers.

As you know, we've exited a lot of transit contracts, so therefore, we were able to take out a lot of costs.

And they were lower margin.

In Europe, it's much more about infrastructure, overhead, because we have moved to a model where every country has sort of its own G&A to more of a pan-European approach to -- and that's significant dollars.

And that's been -- that's coming out from there.

Jason Bazinet, Citigroup.

I just had a question on the magnitude of the dividend reduction.

I think most investors expected some kind of cut, but I think the magnitude may be a bit larger.

So -- and this may be an artificial construct, but when you recommended a dividend policy to the Board, did you say we want -- to still have a respectable dividend yield where stock is now, or did you look at it backwards and say we have thiis $1.6 billion maturity in the middle of 2010.

That gives us a year and a half.

We sort of think we can comfortably do $1 billion of cash flow over the next year, and subtract the dividend of $135 million or so, and that's sort of a comfortable way to set that dividend.

Which way did you come at it?

Was it the free cash generation of the business, or a dividend payout ratio that gives us a respectable yield?

The right answer is all of the above.

Obviously, when -- a lot of time and effort went into the discussion of this and what was the right number, and when we looked at our yield, we still said we would be at the top of all media companies in terms of returning the dollars to our shareholders.

We also wanted the flexibility and we looked ahead and we looked ahead to what we have due in 2010.

And it gave us the best flexibility.

There are certain people who wanted to eliminate it altogether, certain people wanted it to be cut in half, and we felt this was the right number for us and a lot of time and effort went into it.

So when you ask which way did we approach it, we approached it from all sides.

Thank you very much.

Benjamin Swinburne, Morgan Stanley.

Good afternoon.

A couple of questions.

One, production syndication, you mentioned a number of drivers there -- DVD -- TV DVD sales are strong, international syndication is strong.

As we look at '09, given the five shows going into syndication for you, should that business be up year over year on the topline?

How much international exposure or currency headwinds are in that business?

And how much barter revenue is in there, which is actually more closely tied to advertising?

And then, as one follow-up, Les, you talked historically about retransmission revenues for the business, I think, reaching $250 million over time.

I think somewhere around $0.50 a sub.

Given that you've got a number of deals now in the bag, is that number still reasonable?

Any update upward or downward on that?

Let me start with your second question first.

On the basis of the deals that we have currently concluded, yes, we are on target for a few years down the line to hit those kind of numbers.

Without revealing what these deals are, we are very pleased with all three of these major deals, as we've mentioned before.

We have concluded about 24 smaller ones, but to have a large -- the second-largest cable operator, the second-largest satellite group, and the largest telco at the numbers that we got, we are very satisfied, we're very pleased, and onward looking, we are -- confident we're going to hit those kind of numbers.

In terms of the syndication, there is very little of that that is barter.

Fred, you may want to talk (multiple speakers)

Leslie is right.

That's not what we're looking at.

Barter to me is advertising, so what we're talking about here is really the license or syndication fee, and so, that will be significant in 2009 because our only major syndication in 2008 was CSI: NY, which happened in the third quarter.

So now we're going with five, which is Medium, Numb3rs, Criminal Minds, Ghost Whisperer, and Everybody Hates Chris.

So, a fairly significant increase.

When you look at the new model for syndication, when you're selling primarily -- as occurred over the last half a dozen to 10 years, when the primary sale is to basic cable, the barter becomes a lot less significant than when you were selling sitcoms directly to a variety of TV stations, and there was a certain amount of cash and there was a certain amount of barter.

Now it's primarily a per-episodic fee directly to the cable network, and you're not worried about barter.

So we will not be affected by advertising in that model, and that's sort of been the model for the last number of years.

And as far as foreign exchange, it really is an indirect effect because we price largely in dollars for the big -- bigger countries.

But it's -- I think your question is would people pull back because their local currency buys fewer dollars, that gets back to the content.

These are the kind of shows that have been extremely, extremely successful overseas, our procedurals, our dramas, and there is nothing to substitute them for.

So they really don't have a lot of choice.

If you pick up a guide to one of the top 10 shows in every one of the major foreign territories that are spending real dollars, you're usually going to see at least two out of three CSIs, if not all three, and the procedural dramas we do really, really well in those countries.

You said that CSI's into the UK and Germany, those kind of markets, those deals are done in dollars primarily?

Yes.

Again, but I think you're [trying to go] indirectly saying would it hurt their purchasing power, and I guess sure, but they had a great deal a while ago when the dollar was weak.

But they've got to have the content that's going to drive their local audience.

Understood, very helpful.

Thank you.

Doug Creutz, Cowen and Company.

Thanks.

Could you talk a little bit about where you are in your plans to self-produce movies and whether the desire to preserve capital here has impacted those plans?

Thanks.

At the moment, our plans currently remain to do three to four movies this year.

We begin production on the first one on April 6.

We have announced the beginning production of two movies, the budgets are both well below $40 million on both these movies, and that's what our game plan is.

And with our Showtime deal in place, and -- the original plan is certainly working, and the capital situation does not affect it.

Marci Ryvicker, Wachovia.

I just want to go back to Outdoor for a minute.

The drop from Q3 to Q4 was so large, specifically in the U.S..

Can you tell us a little bit what happened?

Were their cancellations?

Was it just lack of demand?

How is national?

How is local?

Any color would be helpful.

I think what clearly happened, as you may recall, that through the first half of the year, Outdoor was growing mid- to high single digits.

Third quarter, it kind of went to flat, and then, the fourth quarter, as you can see, the local -- the U.S.

numbers, I mean, actually went into a decline.

And when you have a decline on a high fixed-cost base there, and we couldn't react as quickly until we started picking up the people, that's what drove the margins down.

But it clearly was the last into the sort of the soup, as I would call it, the recession, and it was doing fine versus -- relatively -- versus (technical difficulty) local assets we have.

Again, it still continued to do better, and we are working very quickly on taking a lot of costs out where we can.

(multiple speakers)

What about on the topline?

What about on the topline?

It's down, face down in the fourth quarter.

Right, but the change between Q3 and Q4, was the revenue drop-off due to cancellations or lack of demand?

We don't really have cancellations, to say.

There was just a lack of demand.

There was a pullback by a lot of categories, that just were -- or lower pricing.

Our occupancy was actually the same or higher, which sometimes doesn't make me so happy, but it's just that pricing was down.

The pricing power went to the buyer.

And it went rather rapidly.

Thank you.

David Miller, Caris & Company.

Good afternoon.

Les, in your prognostication in your prepared remarks, you mentioned that you believe that the second half of '09 will be stronger than the first half.

Is that because of one particular segment of your business that you just have greater visibility on versus the first half, or is it just because the first half just looks so ugly that it's going to comp easily against the first half, and you're fairly confident going into the second half?

If you could flesh that out, that would be great.

Number one, we have the five syndication titles that I talked about.

That's the primary factor that was not there in the first half that will be there in the second half.

In addition, there have been some cost-cutting things that will take effect in the second half of the year.

Number three, we expect the network to continue to be as strong as it is, and we are now in the dominant position, which we hadn't been, and we expect to get the lion's share of that revenue.

So we think that will be effective as well.

Thank you.

Thank you, everybody.

We will be around tonight to answer some more questions if you need it.

Thank you.

This concludes today's conference.

We thank you for your participation.

You may now disconnect.

Have a wonderful day.