Paramount Global (PARA) 2010 Q4 法說會逐字稿

Good day, everyone, and welcome to the CBS Corporation fourth-quarter fiscal year-end 2010 earnings conference release conference.

Today's call is being recorded.

At this time, I would like to turn the conference over to Executive Vice President of Investor Relations, Mr.

Adam Townsend.

Please go ahead, sir.

Thank you, Lisa.

Good afternoon, everyone, and welcome to our fourth-quarter and full-year 2010 earnings call.

Joining me for today's discussion are Sumner Redstone, our Executive Chairman; Leslie Moonves, President and CEO; Joe Ianniello, Executive Vice President and CFO.

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

We will then open the call up to questions.

Please note that during today's conference call, financial results and comparisons, with the exception of revenue, will be discussed on an adjusted basis, unless otherwise specified.

Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website.

In addition, 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 in CBS Corporation's news releases and securities filings.

A webcast of this call and the earnings release related to today's presentation can be found on the investors section of our website at CBSCorporation.com.

With that, it's now my pleasure to turn the call over to Sumner.

Thank you, Adam.

Good afternoon, everyone.

I thank you for being with us today.

Now, I'm not given to overstatement, but the performance of CBS this year was nothing less than sensational.

What an extraordinary finish to an extraordinary year.

Every single division improved on its performance, and Les and his team, as usual, they did everything right.

Our strength lies in our extraordinary content.

CBS's content leads in every single area where CBS competes.

On the network, which is yet again rank one, and all the global markets where people watch our hit programming on our major-market TV and radio.

Nationwide and on our top global websites, CBS has the content that by far leads its competitors, the content that audiences want most, and that content and our performance gets better and better and better.

We saw it in the 2010 results, we are seeing it continue in 2011 to date, and I am certain we'll keep seeing it for years to come, and it will be never, never ending.

The winning streak for CBS is bound to continue under the great management team, and it is a great management team, led by Les Moonves.

So, now let's hear from my very close friend, CBS's CEO Les, and Les, I congratulate you.

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

Thank you for joining us.

I'm very pleased to discuss our fourth-quarter results with you today, results that capped a tremendous 2010 and speak to the momentum we saw throughout the year and are now seeing this year as well.

Every one of our businesses grew during the quarter with solid revenue increases and double-digit OIBDA growth across all of the Company's operating segments.

Our success continues to come primarily from the performance of our content, and the increasing demand we are seeing for that content in an improving economic marketplace locally, nationally, and internationally.

Today's very strong fourth-quarter results close out a terrific year in which we have consistently delivered on our promises.

We've capitalized on the sharp increase in advertising, while at the same time continuing to diversify and de-risk our business model by building profitable secondary revenue streams that don't depend on advertising.

We have prudently managed both our cost structure and our balance sheet, and at the same time, delivered more value to our shareholders.

And through a number of long-term strategic deals throughout the Company, we've set up CBS for a very bright future, one in which we are ideally positioned for continued growth this year and beyond.

Not only was it a very good quarter and year, but given the growing value of our content, the trends we see in our businesses, and the media landscape as a whole, we expect these results to continue for a long, long time.

Before I turn it over to Joe and we take your questions, I'm going to spend a few minutes to walk you through our financial and operational highlights, beginning with our full-year and fourth-quarter results.

Revenue for 2010 of $14.1 billion was up 8% and quarterly revenues of $3.9 billion, was up 11%, once again speaking to our building momentum throughout the year.

2010 OIBDA of $2.4 billion was up 32% and fourth-quarter OIBDA of $770 million was up 32% as well, illustrating our ability to turn increasing revenue into even better profits.

And most importantly, EPS for the year was $1.11, up 102% from 2009, and fourth-quarter EPS of $0.46 was up 77% from last year's fourth quarter.

CBS also threw off $1.45 billion in free cash flow in 2010, up 75% from our total in 2009.

So as you can see, in every single key measure, we had a remarkable quarter and a remarkable year.

Plus, we had an OIBDA margin of 20% in the fourth quarter, three percentage points higher than last year's quarter, and we are confident we will deliver even better margins in 2011 by continuing to manage our expenses, growing our secondary revenue streams, and realizing better economics from our recent Comcast and NCAA deals.

And going forward, we are positioned to exceed peak margin levels within the next couple of years.

Finally, last month we began executing on our $1.5 billion share buyback program.

It is going very well, and we are pleased to be continuing our commitment of returning value to our shareholders.

So, clearly, we are in great financial shape across the board.

Now, let's take a quick look at some fourth-quarter highlights throughout our businesses, beginning with our Entertainment segment, where fourth-quarter revenue was up 11% and OIBDA was up 31%.

At the CBS Television Network, ad revenue was up more than 8% with primetime and sports performing particularly well.

We are having a terrific 2010-2011 season.

We are the leading network by a lot, once again, and the margin continues to grow.

CBS was the only network to successfully launch its entire new fall lineup, and three of our new series, Blue Bloods, Hawaii Five-0, and Mike & Molly, are the top three new shows of the season.

At the same time, our returning shows continue to dominate.

For example, number one ranked drama NCIS just broke another series record, attracting nearly 23 million viewers to a show that's now in its eighth season.

Looking ahead to next season, we could almost play a pat hand.

There's going to be very little change necessary in our schedule because we have so many successful programs.

One thing is for sure, any new show that does make it onto our schedule is going to have to be pretty extraordinary.

This means reduced costs for development, reduced costs for promotion, et cetera, et cetera.

Having the number one schedule also is helping us lead the way in the scatter market, which was extremely hot in the fourth quarter and continues to be even hotter through the first with prices 40% over upfront.

So looking ahead to May and June, you've got a pretty good idea where pricing is heading in this year's upfront.

In sports, our programming is also being sold into a very strong marketplace with pricing significantly higher than a year ago, and our ratings growth is a terrific story, too.

The NFL on CBS was up 10% this year, the highest viewer average in 23 years.

And the AFC Championship game between the Jets and the Steelers delivered nearly 55 million viewers, the highest total in the game's history.

And we are soon gearing up for the NCAA men's basketball tournament, where we and our new partners at Turner have virtually sold out inventory already at very favorable pricing.

Our deal with Turner de-risked our exposure in this terrific property without taking away our upside.

As a result, we have a very profitable deal over the next 14 years.

Last week, we also made some management moves that will have a positive effect on our sports and news divisions.

CBS Sports programming obviously means more and more to our Corporation all the time, so we took Sean McManus, whose real passion has always been sports, and allowed him to focus all of his time growing that division.

At the same time, we took Jeff Fager, a universally admired journalist who has been running the critically and ratings acclaimed 60 Minutes, the most successful news program in history, and put him in charge of CBS News.

In doing these moves, we have significantly strengthened both organizations.

Finally at the network, the Grammy Awards on Sunday delivered its highest audience in 10 years with more than 26.5 million viewers.

Just like in sports, big-ticket events continue to show ratings growth, proving once again that broadcast television is the best game in town.

Meanwhile, throughout the rest of our Entertainment segment, we continue to grow our non-advertising revenues well.

Content licensing, global syndication, and retransmission consent are becoming increasingly important as the broadcast model evolves in CBS's favor.

Let me address a few of our accomplishments in these areas during the quarter now, starting with syndication, which continues to be strong for us.

During the quarter, we sold the second cycle of CSI, which was a key driver in the Company's content licensing and distribution fees, which grew by 21%.

In addition, we continue to benefit from selling new shows overseas, thanks to an exploding international marketplace.

All three of our new dramas this year, Hawaii Five-0, Blue Bloods, and The Defenders, were profitable before we aired a single episode in the United States.

The current seasons of all three of these shows are now being monetized in more than 200 markets.

Our three CSIs, in addition to our two NCISs, all CBS-owned shows, consistently rank as top programs in markets around the world, and thanks to more channels being offered by international distributors, our presence on top 10 lists in emerging markets is growing all the time.

At the same time, our new international channels in the UK, India, and Australia are already steadily increasing their audiences.

These channels are allowing us to build our brand internationally and establish demand for our content in new growing markets.

And of course, the rapid growth of retrans also continues to diversify our revenue base.

We beat our full-year target of $100 million by a nice margin, and we're working on new deals all the time.

Finally, in the world of new media, we continue to be well positioned to capitalize on the competition for our premium content.

There is clearly tremendous demand for network programming from all of the online video distributors coming to market.

As you know, we've been very judicious about the ways in which we grow this new revenue stream.

We will continue to look to do nonexclusive deals that provide recurring revenue and are incremental to the big picture.

Speaking of new media, CBS Interactive turned in a very strong fourth quarter as well, with display advertising revenues up 18% year over year.

CBS.com has now been the number one TV network website for 25 straight months in terms of unique viewers.

At the same time, more and more advertisers are buying across both TV and the Web, and we're seeing this virtuous cycle -- circle reflected in our results.

CBS Interactive continues to grow our presence across mobile platforms as well.

We produced more than 40 apps for iPads and other tablets during the year, each of which generate revenue for us, and we've doubled the page views across our mobile site and apps versus 2009.

Our Entertainment segment also includes CBS Films, which had a good showing these last few weeks with the release of The Mechanic.

The film opened well and, most importantly, will be profitable for us.

Once again, we are slowly going into this business.

We've done four small films so far.

We've got our toe in the water and we like where we stand right now.

Moving to our Cable Network segment, we had a solid finish to 2010.

Fourth-quarter revenue was up 6%.

OIBDA was up 10%, with a margin of 46%.

Showtime subs continue to grow, and we ended the year at just under 20 million subscribers.

So we've closed the gap considerably with our top competitor, and we have plenty of growth left ahead of us.

In fact, 2010 marked the seventh straight year of annual growth in subscribers for Showtime.

Showtime's original programming continues to be the catalyst for our growth.

The most recent seasons of Dexter and Weeds were their highest yet, and newer shows like Nurse Jackie and The Big C have become new hits for us as well.

This quarter, we debuted Shameless, starring William H.

Macy.

Shameless launched as Showtime's best numbers ever for a freshman drama, and six weeks in, continues to outperform every new show we've ever premiered with viewership rising every single week.

In Publishing, revenues for the fourth quarter were up 5% year over year and OIBDA was up 32%.

Like our other businesses, it's leading content that's driving our growth, and also like our other businesses, digital is an increasingly important part of our results.

Sales of Simon & Schuster eBooks were up 160% for the year in 2010, and we had a terrific holiday season.

All the people who got e-readers for Christmas needed to buy books to load them.

The week after Christmas, we sold electronic versions of 78% of the books in our entire digital catalog, showing the breadth of titles that are now being bought in this new format.

We continue to digitize our library.

We're now approaching 10,000 titles, demonstrating once again that great content endures and we can monetize it forever.

Turning to Local Broadcasting, this business built on its momentum throughout 2010, producing its best results of the year in the fourth quarter and the best segment performance in the entire Company.

Revenue was up 21% with television stations; advertising revenue up 20% in television stations and radio ad revenue up 14%.

At the same time, Local Broadcasting OIBDA increased 43% year over year, and our OIBDA margin was 39%, up six percentage points from last year's quarter.

Political advertising certainly contributed to our results, but the resurgence in local advertising was the story here.

In fact, given the intense demand we're seeing from local advertisers, before the election we could've taken the inventory we sold to the candidates and sold it in the open market at very attractive pricing.

Momentum continues in Outdoor as well.

Fourth-quarter revenue was up 6%, as the advertising market there continued to improve as well.

OIBDA increased 22% year over year on higher revenues and a lower cost structure.

We see ongoing improvement in this business, and as the market has recovered, we have strategically resumed our digital buildout, pursuing some high-profile installations in major cities like New York and Washington, DC, while we still stay well within our CapEx guidance.

So as you can see, every one of our businesses contributed to our best results of the year in the fourth quarter, and we are confident they will drive our success going forward as well.

We finished 2010 on a high, and we've been busy laying the groundwork for an even better 2011 and 2012.

We have every reason to believe we will build on our success, and here is why.

The CBS Television Network continues to build hits and provide an unparalleled platform to launch new ones.

Advertisers are recognizing this with extraordinary pricing in the scatter market, and it will pay off in this year's upfront as well.

The success of our own shows continues to grow.

That means we can keep getting paid for today's hits for many, many years to come.

At the same time, we're growing retrans and affiliate compensation at a very healthy rate, and the CBS Television Network has become a true dual revenue stream business.

The local ad marketplace continues its broad-based recovery.

Our 2011 outlook for local business is very optimistic, even without the Super Bowl or political.

On the cost side, we continue to watch our operations closely and improve contracts so more revenues now fall to the bottom line.

Plus, our balance sheet is stronger than ever, and we'll save about $90 million in interest costs annually following all of our debt actions last year.

Finally, we are delivering on our promise to return more value to shareholders.

I mentioned earlier that we started our share buyback in January, on schedule.

As the economic recovery continues and as our businesses keep generating healthy free cash flow, we remain committed to returning value to our shareholders going forward.

Thank you, and with that, I'll turn it over to Joe.

Thanks, Les.

Good afternoon, everyone.

Today, I'll provide some more detail on the results for the quarter and full year, and update you on what we're seeing in 2011.

I'll start with our total Company results for the quarter.

Our 11% revenue growth for the quarter can be broken down as follows.

Advertising revenue was up 12%, reflecting the continued strong ad market, both locally and nationally.

Content licensing and distribution was up 21%, driven by strong domestic and international syndication sales.

Fourth-quarter affiliate and subscription fees were up 1%, due to the impact of a one-time reclassification in the prior year.

To give you some color on the underlying growth within this category, cable affiliate revenue was up 7% and retrans revenue up nearly 50%.

So, for the full-year 2010, affiliate and subscription fees were up 9%, which is much more indicative of the performance going into 2011.

As Les said, OIBDA of $770 million was up 32% from the prior year.

This quarter, we are adjusting for $15 million of restructuring activities, as well as a $44 million charge for the early extinguishment of debt that we discussed on our last call.

You will see the benefits of these actions in 2011.

During Q4 of 2009, we also had restructuring charges of $13 million and impairment charges of $186 million.

So, clearly, our reported results were up significantly more than our adjusted results we are discussing here.

We expanded our OIBDA margin for the fifth consecutive quarter to 20%.

Meanwhile, operating income was up 45% for the quarter and diluted EPS came in at $0.46, up 77% from the prior year.

Let's quickly recap our full-year results, which speak to the continued strength of our businesses.

Total Company revenue was up 8%, OIBDA was up 32%, operating income up 49%, and diluted EPS of $1.11 up 102%.

This operating leverage demonstrates the strong flowthrough of high-margin advertising and affiliate revenues, and our continued -- and our continued cost efforts remain.

Turning to our five segments, Entertainment revenue of $2 billion was up 11% for the quarter, driven by content license fees from both domestic and international syndication.

Advertising revenue also grew sharply, with network advertising up 8% due to solid pricing gains in primetime and sports.

Top categories included automotive and financial services.

Fourth-quarter scatter pricing was upwards of 35% above upfront pricing.

OIBDA for the Entertainment segment came in at $249 million, up 31%, driven by the strong revenue performance.

At Cable Networks, revenues of $368 million for the quarter was up 6%, primarily as a result of increases in both subs and rates.

Cable OIBDA of $169 million was up 10%, which is a 46% margin for the quarter.

Due to the timing of expenses, we always look at the margin on a full-year basis, which came in at 39%, up from 34% in 2009.

We expect to continue to expand our margin in 2011, while investing more in original content where we retain more rights and thus more profits.

Publishing revenue of $232 million was up 5%, driven by higher digital content sales as well as strong title sales in the quarter.

Digital content represented 10% of total Publishing revenue in Q4 of this year, versus 5% in the prior year.

And we expect this will continue to grow in 2011.

Publishing OIBDA of $20 million for the quarter was up 32%, driven by the change in the revenue mix and our continued aggressive cost-containment measures, partially offset by a higher provision for doubtful accounts relating to the Borders situation.

We have been monitoring this closely for some time and have reduced our receivable exposure to a minimal amount as of December 31.

Local Broadcasting revenue of $822 million was up 21% for the quarter.

TV station advertising was up 28%, and radio ad revenue was up 14%.

Political advertising contributed to the growth.

However, the increased local demand was impressive.

For example, auto, retail, and financial services were all up in the teens for the quarter.

Even with this growth, the overall spend of major categories is still off by more than 20% from 2007 spend levels, leaving us plenty of room to grow.

Local Broadcasting OIBDA was $322 million, up 43% for the quarter.

As Les mentioned, the margin at this segment hit 39% this quarter, the highest since the fourth quarter of 2006.

As you can see, our disciplined cost containment, we can achieve historical margins.

Outdoor revenue for the quarter was up 6% to $511 million.

In constant dollars, the Americas and Europe combined grew 9% with the Americas leading the way with revenue growth of 13%, driven by higher occupancy rates and the onset of better pricing.

As expected, we are now seeing more dollars float to this business as the recovery continues.

OIBDA for Outdoor of $101 million increased 22% from prior-year's fourth quarter as we continue to focus on restructuring our business model.

We expect healthy margin expansion at this segment in 2011 as well.

Turning to our balance sheet and cash flow, free cash flow came in at $40 million for the quarter, which included a discretionary pre-funding of our pension plans of $167 million.

For 2010, free cash flow was $1.45 billion, up 75% from prior year.

CapEx for the full year came in at $284 million, right within our guidance range of $250 million to $300 million.

We have used this year's cash flow primarily to strengthen our balance sheet, reducing debt by $1.4 billion and pre-funding our pension plans.

Our cash on hand at the end of the year was $480 million.

As you know, in January we initiated our $1.5 billion share buyback program, and it is well underway.

We will update you on the activity for Q1 with our first-quarter results, but as we have said previously, we expect to complete this program in about 18 months.

Looking into 2011, here's what we're seeing.

Starting with our advertising trends for Q1, as Les mentioned, the scatter market pricing at the network is robust, up 40% above last year's upfront, which is a very positive sign for this year's upfront.

Online display advertising is expected to be up in the teens.

TV stations' advertising revenues are pacing to be flat, even with the difficult comp of no Super Bowl or political advertising, meaning our base business strength is offsetting both these prior-year events.

Radio stations are pacing to be up low to mid single digits.

Our Outdoor group is currently pacing to be up mid to high single digits on a constant-dollar basis, again led by Americas pacing up double digits.

For the first quarter, there are two specific items to be aware of for comparison purposes -- first, the Super Bowl, and second, our new NCAA contract.

Obviously, we didn't have the Super Bowl in Q1 2011, which will impact our year-over-year growth rates at both the Entertainment and Local Broadcasting segments.

With respect to the new NCAA agreement, we will only recognize revenue associated with the games that air on CBS and not the games that air on Turner networks.

As a result, we expect a reduction in revenue in Q1 versus the prior year.

But you will also see a greater reduction in expenses, which will drive higher profits and a significant margin expansion for both the Entertainment segment as well as the Company.

Looking at the full year of 2011, as we said on our last call, we expect to improve our profits and continue our margin-expansion trend.

We are estimating CapEx for 2011 to continue to be in the range of $250 million to $300 million for the third consecutive year.

With this lowered CapEx, depreciation will continue to trend down slightly, but the bigger benefit will be realized in a few years from now.

Interest expense and cash payments for interest will be down considerably year over year because of lower debt levels.

Our effective tax rate for 2011 is expected to be approximately 39%, which is comparable to 2010.

So in conclusion, we are more excited about the future growth prospects of CBS than ever before.

We've made long-term changes to our operating cost model, and the structural changes to our revenue mix are real and meaningful.

With lower calls on cash from our debt obligations, we are focused on returning value to our shareholders now and in the future.

With that, Lisa, we can open up the lines.

(Operator Instructions).

Jessica Reif Cohen, BofA Merrill Lynch.

I guess -- well, whoever wants to take it, but, Les, if you think about the changing landscape and your positive commentary about secondary revenue and trends, could you talk a little bit about content monetization?

What -- how you're thinking about things like Netflix or Amazon's new streaming service?

What windows will you sell your content to?

How much of an opportunity is it for CBS?

And I do have a second question.

Jessica, we obviously spend a lot of time talking about this, and there are a lot of new platforms out there, and it's a topic of conversation among many companies, and different companies have different attitudes towards it.

Advertising on our network is our number one priority, and secondary is the syndication value, both domestic and internationally, which are all in the numbers of billions of dollars.

We are looking at some of these platforms and we are determining what will augment those two forms of revenue, first and foremost, without in any way hurting what we're doing.

Our syndication operation is at full tilt, and obviously with this kind of upfront, as well as scatter marketplace, the numbers that are coming into the network are truly remarkable.

So, we're not going to do anything to damage that.

At the same token, we have the largest television library in the world.

So we have many assets and many ways of looking at things.

So, what's great about these assets, we are still selling I Love Lucy, along with CSI.

So we're looking at these new platforms, and on a case-by-case basis, we are judging what will help us and what won't hurt the core business and what won't hurt the family jewels.

The great news is all these platforms want and need our content, and they are offering us phenomenal deals, and we will make some of these deals.

Great.

And then, just on radio, you guys are way outperforming the market.

Is that all rating -- all from your ratings, your format changes, and can you talk about what your top 10 markets did in terms of revenue growth in the fourth quarter?

I'll take the first half and I'll give the second half to Joe.

Yes, so we changed the formats in 25 radio stations, and 23 of them, the ratings are up at least double digits.

So, Dan Mason and his team have done a remarkable job of changing it.

We've straightened out the cost structure.

We've restructured our radio groups, and they are just performing at a remarkable rate.

And as you said, they've outperformed the marketplace, and that's partially from programming and partially because of efficiency.

Jessica, it's Joe.

The top 10 are definitely leading the way in terms of the revenue growth; so again, total group was up 14%, so you should just assume the top 10 performed better than that.

Anthony DiClemente, Barclays Capital.

I guess my question is, from a big-picture standpoint, it just -- it feels as though TV has got a tremendous amount of momentum and the ad dollars are coming in the door at a very robust rate.

I'm just wondering, from your seat, guys, if you could comment on how much of this is share shift from other forms of media, and if you just kind of give us an update on television advertising's place within the overall U.S.

advertising landscape, and then, so how much of it is really the pie growing versus TV's piece of the pie growing within it?

That would be great to hear kind of an updated perspective.

Okay, it's Joe.

Look, it's probably a combination of both.

Clearly, obviously, we're -- there was a recession a couple of years ago, so I think the total pie is growing, but I do think there is a share shift in the television category, whether it's coming from print and other kind of advertising categories.

So, that section is growing, and we're taking share within that category.

So, again, it's content that's performing is growing, and they are getting the incremental dollars, and you're seeing that.

So, I think it's both -- there is truth to both of that.

In addition, once again, content remains so important and the big events are so important.

So you look across the landscape, every network that had the NFL did extraordinarily well.

Those numbers were way up.

Every major event over the last year, be it the Academy Awards, the Grammys, et cetera, have all done exceedingly better than the previous year.

American Idol is not dying, as people predicted it would.

Network television is still unbelievably strong.

It never went away.

All the doomsayers about, oh, the new media is going to take away.

New media is great.

It augments broadcast.

But broadcast is still the place where you can reach 111 million people.

One more on the topic of new media, which would be, you did mention in your prepared remarks that online display ads were up in the mid teens.

I'm just wondering, can you give us an update on what percentage of total network ad revenues that would represent, and sort of order of magnitude of how much of the growth that online display is driving?

Thanks.

It's very small, Anthony.

Obviously, the segment just for the quarters, total revenue is at $2 billion.

So, network -- we said network advertising was up 8% and the total revenue for this segment was up 11%, so that just gives you a sense of the size.

And obviously, we've been reporting historically the interactive revenue for a full-year basis in the $600 million range on a full-year basis.

So, again, it's not driving it.

It's certainly growing faster, but network advertising is, by far, driving the ship.

Doug Mitchelson, Deutsche Bank.

Les, some of your peers in the broadcast business are taking the make-goods and pushing them off to the June quarter because the first-quarter ad market is so strong.

Are you seeing that impact your ad sales, the fact that others are opening up extra inventory?

You know what, Doug, without patting ourselves on the back, our ratings are the highest and we haven't done one make-good this entire season.

The scatter is coming in.

Our sales department calls us every day asking us to yank promos and put the ads in there.

So, the marketplace was extremely strong in fourth quarter, as we said, in mid-30s.

It's higher in the first quarter.

You know, we view strength all the way along.

When you look at 40% higher than only six months ago, that's a pretty significant number.

It looks like 2Q will be even tighter than 1Q now (multiple speakers) with more make-good delivery in 2Q, and I'm trying to remember a better upfront set-up than this year, and I can't.

So --

Nor can I.

This is going to be pretty good.

I wanted to see how bold you were today and see if you wanted to predict (multiple speakers)

No, my sales department gets mad at me when I predict numbers in May, so I'm not going to do it in February.

That's too bad.

But the -- and lastly, did I hear the radio pacings right?

Did you say low to mid-single digits for the first quarter?

That's correct, Doug.

And is that a pretty reasonable place?

How do you feel about that as you look out through the year?

We feel pretty good.

Obviously, I'd love to have better longer-term visibility, but the other bullish sign you can take away from this is advertising -- advertisers are booking earlier, so we are getting a little bit more visibility, so we feel pretty good about that range.

Okay, great.

Thank you.

Michael Morris, Davenport.

Two questions.

First of all, with respect to the syndication pipeline in the coming year and the contribution you got from the content in the fourth quarter, can you help us understand how much that contributed to EBITDA at Entertainment in the fourth quarter, the growth that you had there?

And given that the business can be kind of lumpy, what should our expectations be for the coming year?

And then, just quickly over on cable, can you give us an update on what the costs are going to look like in the coming year?

Just, I guess, refresh me on where you are in purchases of original films and whether the contract rolling off there will lower your cost year over year.

Thanks.

Joe, why don't you do the syndication?

I'll do (multiple speakers)

Yes, okay, look.

The syndication -- what we sold was the second cycle sale of CSI.

As Les said, we have a vast library.

So from every single quarter, we are out there looking at what we're going to sell, what we're not going to sell.

So there may not be first cycle available, but because of the size of the library, we're going to continue to look at second-cycle sales, and in some of these instances when we do these things non-exclusively, we can sell them kind of more than once, so we feel pretty good about that.

So it's hard to predict, Mike, what we're going to do in 2011, but realize we have an inventory list of our assets and we're looking at it all the time, and if the deal is right, we are going to execute it.

And in terms of cable, yes, as we move down into next year, the cost of the movies definitely goes down.

It's not to say that we're not in very good shape because we have deals with The Weinstein Company, so last year we had the Academy Award winner Hurt Locker, and this year we have what looks like it's got a good shot to win, King's Speech, plus we have all the Spielberg movies at DreamWorks, the new DreamWorks deal, as well as the Summit movies, so we have the Twilight.

So, we have made better deals for less money.

We've put more money into original content, but the cost of the product definitely will be going down as our subs go up.

So it's a good profit profile.

And just to add my -- we did say in our prepared remarks that the margin -- we expect the margin to expand further at Showtime from the full-year 39%.

Great.

Thanks.

And just back on the first point, on syndication.

So when you do a second cycle of CSI, for example, is that nonexclusive?

Are you able to also consider other (multiple speakers)

It depends.

The answer is it depends on the deal, and obviously for the CSI is obviously the margin flowthrough will be different when we own 50% or 100% of flowthrough to EBITDA.

So, each deal is different.

Laura Martin, Needham & Company.

Yes, Les, I think we have to go back to the statement you made early on that said you expect to exceed peak margins over the next several years.

So Joe, if you could just remind us what peak margins are.

And then, Les, if you could talk about -- typically, these expansion cycles go on for five and six years.

So if you are going to exceed peak margins for the next several years, how high could your margins get in this cycle?

You started it, Les.

I'll start with the first, Laura.

This is [a CP march].

I think, again, if you look peak and peak to find it pre-recession in the 2006-2007 kind of cycle, it's kind of the low 20s, and I think, again, for the last two quarters, we clearly -- we've been at 20, and we said we expect to expand them in 2011.

So, I think you're right in that all of the incremental advertising and affiliate revenues had such high margin that you really see the flowthrough.

And again, as we maintain our cost structure, you really get that kind of flowthrough at a really significant high rate.

So, we're very bullish; we can do it probably a lot sooner than a lot of people predicted.

Just to expand on that, TV stations, obviously that margin has room to grow, and we're still not where we were or even up to some of our competitors in terms of that.

We are definitely growing there.

Cable, the Showtime margins will expand, and at the network, the great news is our cost structure, despite the fact that we have hits, has remained stable, what we've spent for programming over the last three or four years, and that will continue onwards.

So as advertising increases, that margin will increase.

So those are three of our largest businesses where the margin is expanding, and that's why we're looking at 2011 and 2012 with great relish.

Okay and my follow-up question is on allocation of capital.

So the returns on capital at CBS are going through the roof as your free cash flow explodes.

Joe, are you thinking you're going to continue to pay down the tax-advantaged pension debt?

I guess I'm looking at kind of your free cash flow priorities in allocation.

How should we think about what you're going to be doing with your free cash flow?

I think you should be thinking about it.

It's opportunistic.

We're looking at that, Laura, all the time.

I think, again, certainly there is some appeal, currently, right now, given where interest rates are and where we borrow and the tax-advantaged funding of the pension.

Again, in the fourth quarter, we pre-funded $167 million, so clearly we get a tax deduction on that gross number, so we're looking at that all the time.

And again, we'll continue to be opportunistic, but we will always focus on returning value to our shareholders as well.

Michael Meltz, JPMorgan.

(multiple speakers).

I've been called worse.

Can you isolate for us what was the Borders-related write-down in the fourth quarter, please?

Michael, we're not going to break that down specifically.

Just know that we've minimized our exposure as of year-end, and we stopped shipping product to them, again at the end of December, so we don't want to quantify exactly that, but we're adequately reserved.

I think their filing today put a number at $34 million out there.

Was that -- in the fourth quarter?

That is not our exposure, Mike, at the end of the year.

That is definitely not our exposure at the end of the year.

Not even close.

Okay.

Can you also isolate for us -- you gave the -- a couple of things that will skew the year-over-year numbers in Q1.

Can you actually quantify what was Super Bowl last year and what is the NCAA drag this year, please?

Okay.

As far as the Super Bowl, I think, look, that's been widely reported, estimates of what that is.

I mean, again, it's fair to say it's probably a couple of hundred million dollars, just to give you a sense of the size of what that is.

And obviously, most of that -- the vast majority of that would hit the Entertainment segment and the other piece would obviously hit Local Broadcasting.

So that's the size of that kind of magnitude.

The NCAA, it's hard to say because we haven't aired the tournament yet.

But basically, the premise for the transaction was we were going to expand the overall revenue pie between us and Turner, and we would get better economics.

So we have a lot of protection on the downside and unlimited upside.

But again, a little too early to predict exactly what that's going to be because we haven't aired the tournament.

Maybe another way of asking it is this, and I'm sorry for the drag-on question, are you comfortable with consensus for the first-quarter revenue (multiple speakers)

We don't give guidance, Michael, as you know and stuff like that, but again, we tried to guide you.

We think revenue for this contract will be down quarter over quarter, to give you a sense of what that is, so again, we are not really giving -- we don't give guidance on a quarterly or annual forward numbers.

Revenue is down, but profits are going to be up considerably.

It is a question of going from a deal that was losing us a considerable amount of money to a deal that's going to be profitable right away.

David Miller, Caris & Company.

Congratulations on the stellar results, guys.

Les, could you talk about the new deal with Turner vis-a-vis March Madness, which obviously starts in four weeks, and just some of the other advantages and disadvantages you see with the new deal and sharing this property?

It would obviously seem to me that one of the advantages is lower rights fees, which you alluded to.

But you also get less games, and there is the fear out there that people might be fumbling around with the remote controls between all the Turner networks and CBS, so on and so forth, trying to find the right game.

So could you talk about that?

And just from a programming standpoint, what you see as the advantages with sharing this sports right?

Thanks.

Obviously, economically, there was a huge advantage for us going forward to do this deal.

Our risk profile is a lot less than it was before, and as we've said many times, it is a very profitable contract for us versus the other way.

In the early rounds, there will be four games -- when there are four games on simultaneously, they will be on four different channels.

We generally will get the game that we want in the first rounds, and for those people in local marketplaces, they will get the game that they want.

At the same time, there will be highlights shown on our network of the other three games and vice versa.

As you get down to the final rounds, we have the Final Four for the first four years of the deal, so that will be significant.

Those are significant games.

And in the regional games, they are sort of alternating games.

Obviously, occasionally, there will be two games going on simultaneously, so you'll be able to watch the one that you want.

So, as Joe said, revenue goes down, but cost goes down a lot, and probably for our viewer, they will be very happy because they will get whatever game they want to see.

So, for us, it's a major win in terms of economic things, and by and large, we're getting the games that we want, and the relationship with Turner is terrific.

Both teams are selling, and as we said earlier, the sales are going extremely well.

They're selling into a very strong sports marketplace, so I think everybody comes out a winner of it, the fans, CBS, Turner, and the NCAA.

Jim Goss, Barrington.

Thank you.

I was interested earlier when you talked about the stable schedule, you get to the inevitable problem that sometimes shows start to run their course, and I'm wondering how you determine when to pull the plug on shows these days, especially given the changing nature of schedules versus specific programs in an environment where schedules may be less important?

How does it come down?

Has it changed a lot?

It's a good question.

Number one schedules aren't necessarily that less important than they used to be.

You still can launch NCIS LA after NCIS, and it holds onto 90%-some odd.

You can launch Mike & Molly after Two and a Half Men, and it's the highest-rated new comedy on the air.

It's also a good show, but it's helped by following the number one rated comedy on the air.

What happens is, yes, it's a tough problem here at CBS.

We tell the people that are out there, look, you better be really good to make it on our schedule.

But if you do make it on our schedule, the chances of succeeding are higher because you will generally be put in a position where you are launched by a successful television show.

We also have the advantage of removing shows a year early rather than a year late, and I give you what we did with Without a Trace a year ago, where it was a successful show, it had run through its eighth year, we pulled off a show that license fee was, at that point since it was in its eighth year, almost $4 million an episode, replaced it with a show called The Good Wife, which cost about -- less than half that amount.

We also owned 100% of The Good Wife.

The ratings were just as good.

As a matter of fact, it won some Emmy Awards, and we took it off early and helped our schedule.

A similar thing if you look throughout our schedule.

We don't let shows age and just hang around because that's all we've got.

We don't have to do that.

And I think success propels further success, and I think we'll continue to do that.

The one follow-up I'd ask is, to the extent you're getting international sales, are there certain genres that are faring a lot better?

Is that becoming a meaningful revenue and profit source for you?

Well, it's absolutely a meaningful profit source and -- on all our shows.

Obviously, action adventure plays a little bit better.

In other words, a show like Hawaii Five-0 got an extraordinary amount of money overseas, as did the NCISs.

A Good Wife doesn't do quite as well, but yet it does extraordinarily well when you're comparing it to what a show like that would've done years ago.

So, once again, as we said earlier, every single one of our new shows was profitable from day one because of the international marketplace, and that keeps growing in leaps and bounds because there are new channels all over the world and new markets opening up.

So, the international marketplace has never been hotter, and it's the reason we're glad we own most of our content.

Lisa, let's take our final question, please.

Marci Ryvicker, Wells Fargo.

Two quick questions, Les.

You said retrans in 2010 exceeded your $100 million target by a significant margin, so can you give us the actual number and also tell us your target for 2011?

And then, secondly, how do you at CBS think about a potential NFL lockout?

What's the risk from a revenue and EBITDA standpoint if there are no games?

All right.

The first question, I'm not going to give you a number for 2011.

All I've said is that by the end of 2012, we'll get $250 million.

We are still on target for that.

That is our anticipated number for them, and that is not including reverse compensation from our affiliates, you know, which will also be another number that's beginning to kick in now that will be stronger in 2011, and by 2012 also will be a significant number.

Regarding the NFL lockout, obviously it's something that we're all hoping does not happen.

We hope they come to an agreement.

We obviously have an agreement with the NFL where we do give them some money, but that the contract would be extended to a certain extent if there were any games that we missed.

So ultimately, at the end of the day, we do not anticipate losing any revenue.

We think we will get the games back in some way, shape, or form.

So, there will be an immediate hit, but we're -- and I'm guardedly optimistic that Mr.

Goodell will come to an agreement with the players before the season starts, and we'll be back playing.

Well, let me ask you a question.

If the money doesn't go to the games, would it be safe to say that it could be deployed into primetime?

We don't need any -- you mean, in terms of advertising revenue?

Yes.

I don't know.

I guess that's possible.

There's a certain amount that the companies designate for football.

Anheuser-Busch spends an awful lot in prime, but they also spend a lot in football.

Could the marketplace get tighter in prime?

Probably.

That probably would happen, but not necessarily.

Great.

Thanks, Marci.

And this concludes today's call.

Thank you, everyone, for joining us.

Have a great evening.

This concludes today's conference call.

Thank you for your participation.