Paramount Global (PARA) 2013 Q2 法說會逐字稿

Good day, everyone, and welcome to the CBS Corporation's second-quarter 2013 earnings release teleconference.

Today's call is being recorded.

At this time, I'd like to turn the call over to the Executive Vice President of Investor Relations, Mr. Adam Townsend.

Please go ahead.

Good afternoon, everyone, and welcome to our second-quarter 2013 earnings call.

Joining me for today's discussion are Sumner Redstone, our Executive Chairman, Leslie Moonves, President and CEO, and Joe Ianniello, Chief Operating Officer.

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

We will then open the call up to questions.

Please 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 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.

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

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

Thank you, Adam.

Good afternoon everyone.

Another quarter, another outstanding performance.

I could not be more pleased with CBS's results.

The reason of course -- the reason behind our success is simple, of course.

We have great content.

We have the right strategy.

We have the people who know how to get the job done.

That's why I am certain that CBS will continue to reach new highs for many, many years to come.

Of course, to tell you more about it, I am going to turn this over to my good friend and colleague, a man I rightfully call a super genius, CBS's President and CEO, Les Moonves.

Les, the ball is in your court.

Thank you very much, Sumner, for those very kind remarks.

And good afternoon, everybody, and thank you very much for joining us.

I'm pleased to tell you that CBS has delivered yet another quarter for the record books.

We had double-digit revenue growth of 11% to $3.7 billion, our best ever in a second quarter.

And our profits were the best we have achieved in any quarter in our history.

OIBDA of $952 million was up 5% with growth in every single one of our businesses.

Operating income of $838 million was up 6%, and EPS of $0.76 was up 12%.

Again, all of these profit measures were all-time highs for the CBS Corporation, and they were achieved against a spectacular quarter a year ago.

Looking ahead, we are well on our way to another record-setting year with lots to look forward to in 2014 and beyond.

The driving force behind our ongoing success is our world-class content.

Throughout our company, our programming is commanding top dollar across every platform and our non-advertising revenue sources are becoming more and more meaningful all the time.

During the second quarter, non-advertising revenue represented 43% of our total revenue.

That's quite a jump from not too long ago when less than 30% was the norm.

And we continue to reload our content pipeline for the future.

This summer, we debuted two exciting new franchise hits, Under the Dome on the CBS Television Network and Ray Donovan on Showtime, both of which have just been renewed for second seasons, and both of which we own 100%.

These are just the latest assets that we can monetize in the content value chain and help us grow our steady and recurring revenue streams in the years ahead.

Meanwhile, the advertising marketplace is improving.

Network advertising posted strong growth in the second quarter, and beginning this fall, we will reap the benefits of CBS's leading performance in the upfront marketplace where once again we took share from our competitors and we were the leader in both volume and pricing.

So, in addition to our continued growth from re-trans, reverse comp, streaming, sub fees and international sales, our base advertising business is also set up to perform very well right into 2014 and the future.

Our strategic Outdoor initiatives are also well underway.

I'm extremely pleased that we reached an agreement to sell our Outdoor operations in Europe and Asia at very good value, and the IPO of our Outdoor Americas business also remains on track for the first quarter of 2014.

Joe will have more on this a little later.

These actions in our Outdoor business, along with the other growth drivers I just mentioned, give us great confidence in our future.

One expression of that confidence came last week when we announced an expansion of our share repurchase program to $6 billion.

This was the single largest increase we've ever made to our program.

Along with our focus on our ongoing dividend, it demonstrates once again CBS's continued commitment to its investors.

We've always said that one of the best uses of our strong free cash flow is to return capital to our shareholders, and doing so will remain a key priority for us in the future as well.

Before I give you some more highlights about each of our businesses, just a quick word about our negotiations with Time Warner Cable.

Our current deal has been extended until Friday at 5 PM Eastern, and we will update you when we have more news.

Receiving fair value for our content is core to who we are, and we will remain resolute in this principle now and in all future negotiations as well.

And that's all we are going to be able to say on this topic today.

Now, let's take a look at each of our segments, starting with Entertainment.

During the quarter, the CBS Television Network finished the season as the most-watched network in America.

As you all know by now, we've done that 10 times in the last 11 years, and this time we beat our closest competitor by 4 million viewers, the widest margin of victory of any network in 24 years.

We also won in all key demographics, including adults 18 to 49, for the first time in more than two decades.

Looking ahead to the upcoming television season, the strength of our schedule allowed us to renew 20 existing shows.

We'll also be launching five new series and these new shows will feature some of the biggest names in the business from producers Jerry Bruckheimer and Chuck Lorre to actors Robin Williams, Sarah Michelle Gellar, Dylan McDermott, and Will Arnett.

Meanwhile, before we even get to the fall, we are changing the face of summer programming right now with Under the Dome.

This has been the summer's biggest drama since 1992 and proves that network television can launch new programming any time of the year.

The first episode alone was watched by approximately 20 million people on TV and online.

Since then, Under the Dome has continued to dominate Monday nights with viewers in key demos.

And it's providing a tremendous platform to promote our fall lineup.

This show is another example of an owned franchise that we can monetize in all sorts of ways.

In addition to advertising, we struck a terrific streaming deal with Amazon and we have done very well selling the show internationally where the series is being licensed in more than 200 markets.

It is already a big hit in Canada and Australia, and of course it's been helpful in re-trans and reverse comp negotiations as well.

In addition, Big Brother is once again performing very well for us this summer and you can expect us to continue to be more aggressive about using our network platform on a year-round basis going forward.

And speaking of demand for our content around the world, we held our international screenings in May for our new shows.

The response was very strong, leading to significant global sales for our CBS, Showtime and CW-owned content.

Once again, this process allows us to ensure revenue for these shows before they even air in the US and has profoundly changed the business model for owners of the best content.

Streaming continues to be a terrific growth driver for us.

We recently extended our deal with Netflix through 2015, and we also announced a deal with Amazon to stream our CBS and Showtime content in the UK and Germany.

As you can imagine, there are lots of players out there looking to get into this space and we are constantly having discussions with them about further monetizing our content.

Meanwhile, CBS Interactive has been doing extremely well and turned in another quarter of double-digit revenue growth.

CBS.com is the number one website among all TV networks in unique viewers, and its revenue is up 35% for the quarter.

Interactive revenue in China was up 30% and CNET was up 25%.

Plus, we are posting extremely strong growth in mobile ad revenue, which was up 93% for the quarter.

At CBS Film, we have some releases coming up this year that are generating significant buzz.

In November, we'll have Last Vegas starring five Academy Award winners, Michael Douglas, Robert De Niro, Morgan Freeman, Kevin Kline, and Mary Steenburgen.

We'll follow that up in December with the latest from the Coen Brothers, Inside Llewyn Davis, which won the Grand Prix at this year's Cannes Film Festival.

Again, these two movies fit our model of medium-size films with good upside potential.

Turning to cable, Ray Donovan has come out of the gate as a big wholly-owned hit for Showtime.

It set a record for the debut of a new Showtime series, drawing even more viewers than Homeland did at its launch.

Now it's pacing 48% of Homeland's freshman season, which has been one of the most celebrated shows in the past few years.

In addition, next month, we will prepare the new series, Masters of Sex.

No, this is not a show about the New York City mayoral race, but it is yet another show in which we have ownership.

Our success with owned content at Showtime is increasingly allowing us to replicate the long-term content value chain that we have been employing so successfully at the CBS Television Network.

At the same time, Showtime's investment in sports is also paying off.

The first Floyd Mayweather fight since bringing him over from HBO was a great success, reaching nearly 1 million pay-per-views.

And we are looking forward to the next Mayweather fight on September 14 when he defends his title against Mexican undefeated middleweight Canelo Alvarez.

This is shaping up to be the biggest fight in very many years.

In Publishing, we once again posted solid profit on the strength of our hit titles and our ability to sell these titles on multiple platforms.

This includes the rerelease of Stephen King's Under the Dome, which was a huge seller for us in the second quarter.

Under the Dome is another terrific example of why Simon & Schuster is a great content business for us and fits very well inside CBS.

And speaking of rereleases, the excitement about this summer's Great Gatsby film led to a 440% increase in book sales for that title in the quarter, proving once again that ownership of great content can pay off for decades.

In Local Broadcasting, our strong summer ratings are giving a lift to our TV stations.

Remember that approximately half of local stations' revenues comes from ads in prime time and the late news, meaning that when CBS does prime so well, local stations benefit considerably.

Of course, this is also why we are increasingly getting paid compensation from our affiliates.

In radio, we continue to grow our CBS Sports Radio Network franchise.

Since we announced the venture last year, we have expanded from less than 70 affiliates to more than 300.

We now have programming in all the top 10 markets and in 38 of the top 50.

Once again, the CBS Sports Radio Network is a terrific example of the way we can grow a business by leveraging resources from across the Company.

So, as you can see, we had another tremendous quarter setting us up for yet another tremendous year.

Every one of our segments contributed to our success, obviously led by our content businesses which continue to prove that this is a golden age for those who have the best programming.

All of the growth drivers we've been telling you about for years are performing ahead of our expectations.

And when you look at our importance to cable, satellite and telco providers, the appetite for our content from the biggest companies in streaming, the explosion of international outlets looking to license our content both on television and online, you can see why this is happening.

At the same time, momentum in our base advertising business is building with prime time network advertising better than that it's been in a long time and a political year just around the corner.

So we had a record quarter, we are on track for another record year, and clearly we have a very bright future ahead.

With that, I will turn this over to our newly elected Chief Operating Officer, Joe Ianniello.

Thanks Les.

Good afternoon, everyone.

Today, I'm going to provide some more details about our results for the quarter and year-to-date.

Then I'll discuss what we see ahead in Q3 and give you an update on our Outdoor initiatives.

Let's start with the second quarter.

As you just heard, CBS delivered very strong topline growth and our best quarterly profits ever.

And we did this while investing in more hours of owned content.

Our strategy of creating and distributing our premium content across all platforms continues to drive our results today and it's creating even bigger opportunities for growth in the future.

In the second quarter, revenue was up 11% to $3.7 billion, with solid gains in every one of our key revenue types.

Advertising grew 5%, driven by an 11% increase at the CBS Television Network, which is an acceleration from the first quarter.

Content licensing and distribution revenue grew 22% as a result of increases in international syndication and digital streaming.

And affiliate and subscription fee revenue grew 18%, driven by re-trans reverse comp and underlying cable affiliate fees as well as our Mayweather pay-per-view fight.

These revenue increases drove second-quarter OIBDA up 5% to $952 million.

Plus, with lower interest expense and share count, we turned this OIBDA increase into strong diluted EPS growth of 12% to $0.76.

Once again, these profit measures were all-time records for us.

You can get an even better perspective of the strength and consistency of our performance by looking at our results on a year-to-date basis.

For the first half of 2013, revenue was up 9% to $7.7 billion with strong growth across the board.

Advertising was up 7%, content licensing and distribution revenue was up 9%, and affiliate and subscription fee revenue up 16%.

Meanwhile, year-to-date OIBDA was up 9% to $1.9 billion.

Operating income was up 12% to $1.6 billion.

And diluted EPS was up 17% to $1.49.

Now let's turn to our operating segments.

In Entertainment, second-quarter revenue of $2 billion grew 18%, driven by increases in TV license fees, advertising, and affiliate fees.

Growth in TV license fees was a result of higher international revenue from both streaming and traditional syndication.

And as I just mentioned, network advertising was up 11%, partly benefiting from the timing of the NCAA tournament semi finals.

Underlying network advertising grew 4% with such categories as financial services and healthcare up strong double digits.

And CBS Interactive had another strong quarter with revenue also up double digits.

Entertainment OIBDA of $429 million for the quarter was up 1%.

Some of this was affected by expenses related to the timing of the Final Four and our increased investment in programming.

Looking on a year-to-date basis, OIBDA grew 9% to $909 million.

Turning to Cable, second-quarter revenue of $518 million was up 16%.

We had affiliate revenue increases across all types of distributors, traditional cable, DBS, and telco.

Plus licensing revenue for our original content grew 41%.

Cable OIBDA for the second quarter was up 9% to $207 million, reflecting the cost of our investment in sports and original programming, including our new hit, Ray Donovan.

On a year-to-date basis, Cable revenue increased 11% to $996 million and OIBDA grew 10% to $438 million.

In Publishing, second-quarter revenue was even at $189 million.

Publishing OIBDA grew $12 million to $21 million in the quarter.

Our Publishing business continues to benefit from the shift to digital.

For the first six months of the year, e-book sales grew 25% and represented 30% of total Publishing revenue.

In Local Broadcasting, reported revenue for the quarter was down 1% to $698 million.

Non-political TV station revenue increased 1% from last year's second quarter, led by telco and entertainment categories.

Meanwhile, radio revenue was even with last year's quarter with auto and professional services up 3%.

Local Broadcasting OIBDA of $255 million was up 3%, showing the ongoing benefits of our focus on cost controls achieving a 37% margin, up 200 basis points from last year.

On a year-to-date basis, local broadcasting revenue was up 1% to $1.3 billion, while OIBDA of $454 million was up 8%.

In Outdoor Americas, second-quarter revenue was up slightly to $335 million driven by the US, which grew 2%.

Domestic billboards, which is our most valuable piece of the Outdoor business, was up a solid 5%.

Tech and auto categories were up both double digits.

Entertainment -- excuse me, Outdoor OIBDA for the quarter grew 4% to $107 million, reflecting our continuing efforts to renew contracts on better terms.

Let's turn to cash flow and how we use that cash.

During the second quarter, we generated $414 million of free cash flow net of a $150 million discretionary contribution to our pension plan.

We expect this to be the last cash contribution to our pension plan for at least the remainder of the year.

For the first half of 2013, we generated nearly $1 billion in free cash flow, again net of this discretionary pension contribution.

We continue to believe that buying back our shares is the best use of excess cash.

As Les said, we recently expanded our share repurchase program to a total of $6 billion.

This action once again reaffirms our commitment of returning value to our shareholders, and it reflects the confidence and visibility we have going forward in our businesses.

Since the start of the programming, January of 2011, through the end of this year's second quarter, we returned $3.75 billion and retired a little over 112 million shares at an average price of $33.41, obviously a great value from where we are trading today.

Also during this period, we returned $673 million to our investors through our quarterly dividends which currently stand at $0.12 a share per quarter.

Now let me give you a few observations about Q3.

We see several drivers to our three main revenue types.

First, we expect underlying advertising growth to accelerate.

At the CBS Television Network, keep in mind that Under the Dome and Big Brother both premiered at the end of June, so you'll see substantial benefits of this investment in summer programming beginning in the third quarter.

In addition, we'll have more inventory to sell than last year's third quarter when we had several political preemptions.

Also, there are no Summer Olympics this year to eat into any of the advertising spend.

And of course, we will begin to reap the rewards of our new upfront pricing gains when the new season begins at the end of the third quarter.

All of this is why we see underlying network advertising accelerating.

On the local side, Broadcasting is pacing flat to up low single digits for Q3 despite tough political comps.

And Outdoor Americas is also pacing to be up low single digits.

Turning to our content licensing revenue, we note that, in the third quarter, we'll have the first-cycle domestic syndication sale of NCIS Los Angeles and The Good Wife.

And Blue Bloods and Hawaii Five-0 are coming up next year.

In affiliate and subscription fee revenue, we will continue to grow our re-trans and reverse comp and we have the next Mayweather fight coming up in the third quarter.

Now I'd like to give you a quick update on our outdoor transactions.

As we announced two weeks ago, we agreed to sell our Outdoor business in Europe and Asia to Platinum Equity for $225 million.

We anticipate closing this transaction before the end of this year.

And as Les said, the separation of our Outdoor Americas business is on track.

We submitted our private letter ruling request with the IRS to convert our Outdoor business into a REIT.

And we filed a preliminary registration statement with the SEC on Form S-11 in June.

Also, we made significant progress on our internal infrastructure to set up Outdoor as a separate stand-alone public company.

So the process is moving ahead as planned, and we look forward to realizing the benefits of these initiatives in 2014.

So, in summary, CBS is building on its great momentum.

We delivered a double-digit revenue increase and our highest quarterly profits ever while continuing to take strategic actions to grow our business.

Our investment in programming has afforded us new content that we can monetize in the days and years ahead.

And our Outdoor initiatives will help further transform CBS into a company that is even more focused on its content.

So we are still in the early stages of our transformation, and the growth prospects we've outlined for you today will continue to drive our earnings into the future.

With that, Robbie, we can open the line for questions.

(Operator Instructions).

David Bank, RBC Capital Markets.

Thanks very much.

A couple of questions.

I guess you guys talked a little bit about some of the expense pressure in the Entertainment segment related to the price of content.

And I'm wondering if that's sort of a structural issue or a timing issue, or maybe related to ratings performance in the past year, leading to more pilots or something like that, if you could give a little more color around that.

And in the spirit of one question, I'll give you a second part of the question that's [premium] related.

As we expressed, Under the Dome is a brand-new form of entertainment.

We haven't done, nor has anybody done, an original drama of this size in many, many years.

Now, the good news for us is, because of the Amazon deal, and because of the international sale, we were able to make this show profitable before it even went on the air.

Now, the fact that it went on the air and is a huge hit is really almost gravy and will bring in a ton of profits into the third quarter.

However, this is new programming at north of $3 million an episode.

So figure that out.

That's in addition to our programming costs that didn't exist last year.

It's things like that where you will see us invest more in programming, but also invest with the knowledge that we are going to get it back and then some.

That show is going to be very profitable for years to come, and it's the greatest way to invest our money.

Okay, so but it's not really about having to have produce more pilots or something as a result of the prior season; it's just this summer programming.

Since I've been here in 1995, we have always done between 18 and 22 pilots.

And it's remained the same this year.

When we were in last place, when we were in first place, we do the same number of pilots.

Thank you very much.

Jessica Reif Cohen, Bank of America Merrill Lynch.

I have one for Les, which is sort of a follow-up to the first, and then one for Joe.

Les, given the incredible success, as you've said in this call, of Under the Dome, can you talk about how much appetite there is by SVoD players, by these streaming players, and what do you expect?

You already said that you are going to bring Under the Dome back.

But is there a lot more room to do more of this kind of first-run high-quality programming?

Yes, I really believe there is.

Obviously, the response was tremendous.

Amazon is very pleased that they joined up early in a partnership with us.

Jeff Bezos actually spoke to me personally about how pleased they were that they experimented with this.

I think you will see every network, and I know they are, develop and try to replicate the model that we did.

I doubt many of them will have the same ratings as Under the Dome did.

It was like the second-highest rated new drama of the year.

The numbers were pretty sensational, but I think there's a huge appetite with the SVoD players out there to join us, plus the international desire for our content is not slowing down at all.

Is it just like a summer window that you have, or do you think there are other times of the year?

Look.

We program all times of the year normally.

We put on -- the question with Under the Dome when we renewed it is do we put it on in February or in the summer?

We decided to go with the summer.

It's doing numbers that would've made it the second-highest drama on television, on network television.

So we consider that, but what it means is we're going to program all year long, from September to September.

Great.

Then Joe, you just increased the buyback.

I was wondering if you could give us some sense of timing and what your comfort level will be on leverage post the Outdoor IPO/REIT.

Yes, sure.

Obviously, we reloaded the program, getting ready for the Outdoor transaction.

So as we lever that business up and IPO it, we will have the capacity to buy back our stock quickly.

We are continuing the same pace as the underlying program goes, and we're going to continue to re-look at our ratios as we become more content-focused and less advertising dependent.

So, we think we are creating tremendous financial flexibility, and this program gives us the ability to capitalize on that.

Ben Swinburne, Morgan Stanley.

Thank you.

I thought, Les, you might announce who you are supporting for the mayoral race, but I don't want to waste my question.

I'm thinking of running.

Obviously, nobody's getting a big lead there.

If you look at the Under the Dome viewership, I think a third of it was outside of C3, just highlighting again how important it is that we broaden out -- the industry broadens out the measurement.

Can you talk about the upfront and how that went as you think about extending to C7 and also bringing on measurement for streaming in tablets, what the timeline is for there?

And then I have a follow-up.

Yes, that's a very good question.

Obviously you're right.

The initial viewing of Under the Dome was 13.7 million.

Then when you added DVR, you add streaming and VOD, it was north of 20 million people, so literally one-third of them.

Now, we did get paid for some of them on the DVR.

I think, within a year, by the next upfront, C7 will be the currency.

I think there's some C7 deals done now, because it's a question of reeducation.

But since they were at C3, they are there.

In addition, Nielsen is getting better by the day in measuring streaming.

And I think we are closer and closer to our goal of getting every single eyeball measured.

In addition, we have ways to measure beyond the C7 and put in more advertising.

So once again, all this technology and all this measurement only is going to be helpful for us because everything is going to be counted and we are going to get paid in full.

Great.

Joe, if I could just follow up, you said underlying ad growth should accelerate in Q3.

So at the network, am I thinking about 4% as the underlying network growth in Q2 if I back out the March Madness?

Is that the number?

Yes, that's correct.

So the underlying we said is clearly going to accelerate in Q3.

Thanks so much.

Michael Morris, Davenport.

Thanks.

Good afternoon guys.

I have to ask a question about retransmission not specific to any one agreement, but -- and I apologize if this seems a bit rhetorical.

I just want to get your current thoughts.

The pushback that we hear on re-trans or the concern is that your signal is available free to air or there are different services that I won't name, but that people could perhaps use to get your signal, or the content is on demand in some places.

So I guess the question is why do you think you should be able to collect this re-trans?

I realize that's basic and I'm going back in time a little bit, but I think it's important to get your thoughts on that now.

And then I have a follow-up.

First of all, right now, over 85% of our airing, our viewing, is done through satellite, cable, or the phone companies.

That's number one.

And the remaining 15% are not the most advertiser-friendly, the most appealing to our advertisers.

Once again, these services, and you're obviously referring to Aereo, and we think it's a lot more wind than reality.

It's an illegal service that would be in essence stealing our content.

We don't think it is catching on at all.

When you see, talking in general terms of the MVPDs charging the amount of money they are to the public for their content, we feel like, and they have stated it, that he who has the most eyeballs should get paid the most.

And since we are the number one network putting on NFL and putting on the number one program in NCIS, and the number one comedy, The Big Bang Theory, that we should be paid appropriately, that it's more important to take care of CBS.

Once again, all the statistics, the average home has over 100 channels but they are watching 10 to 15 of them.

And we are one of those 10 to 15 in every home.

We are actually number one in every home.

So, we feel that it is justified and we should get paid for it, and that's the way of the world.

And by the way, most everybody agrees.

Most everybody agrees, and we are getting paid fairly in most places.

Thanks.

And then also, can you comment at all on the regulatory environment?

It seems that, if there is any concern on the political side, it's just in the perception of disruptions hurting the consumers.

Any thoughts you have on that as you approach negotiations?

You know what?

Some people on the other side have gone to Washington and tried to shake things up.

We have seen absolutely no movement on the part of Washington.

Obviously, local leaders are appropriately concerned about their consumers in their areas being disrupted, and we understand that concern.

We don't feel it's going to change anything.

We are certainly willing to have discussions with them and they are concerned, but we are not worried about the regulatory environment affecting our business one iota.

Great, thanks a lot.

Anthony DiClemente, Barclays.

Thanks a lot.

First off, Joe, congratulations on your new role.

I had a couple questions.

First off, Joe, I wonder if you can clarify for us and for investors how we should be thinking about the sequencing on the Outdoor IPO/REIT.

Where are you in terms of the likelihood of getting that TLR before the IPO and/or are there any benefits for the IPO actually coming before that happens?

How should we think about that?

Sure.

Look.

We said Q1 of 2014, and like I said, we remain on track for that.

We filed with the SEC, so we've got to clear the SEC and we are waiting for the ruling on the IRS.

So, the way you should think about it is the current plan would be to lever the company up in Q1 of 2014, and IPO it in the same quarter, so those proceeds we would use again to buy back our stock.

If we don't have the private letter ruling at that time, obviously we'll have to make a decision at that time based on current market conditions where we go from there.

But we still remain very confident in the process and our ruling request.

Thanks.

And then one for Les, please, if I may.

There is some growing evidence out there that mobile advertising is starting to gain some real traction.

I assume that you see that, and you wonder the best way for CBS to monetize its content on mobile devices.

I know that, given your ownership of Syncbak, you have the technology to stream CBS or stream the CBS signal direct to mobile viewers for a subscription fee, and so forth.

I guess the question is can you do that?

Would you guys consider doing that, or would your affiliate contracts require you to remain part of an authentication process with your existing distributors?

Thanks a lot.

A, Syncbak would include our affiliates as well.

We want them to be part of it, and Syncbak once again a much more legal use of our signal than Aereo might be.

So, look, mobile advertising is growing in leaps and bounds.

We are part of it.

We are right there.

We are on the iPad after eight days right now, and we will be there earlier as soon as it's counted appropriately.

So we welcome mobile.

Once again, we welcome all sorts of legal use of our content that is paying us appropriately.

What's great about who we are, we continue to do great content and we are very nimble.

We realize the models are changing.

As I referred to in Under the Dome, we are now getting paid in 100 different ways just from that one series.

So we welcome what's happening with technology and we are on top of it.

Good.

Thanks guys.

Doug Mitchelson, Deutsche Bank.

This is actually [Meghan Durkin] standing in for Doug.

I wanted to just get your feeling on how you are set up going into the new season.

It seems like you're positioned pretty well, given your comps aren't going to be as tough on Mondays and you get the political hours back and the NFL Network games were there last year for the full 13 games or whatever it was.

So how do you feel about that?

How should we be thinking about it?

You sort of answered my question.

There's a lot less political hours from conventions, from primaries, from debates.

Remember there were four debates.

Election night.

We only have five new shows.

Not every single one of them is going to work, but they are all positioned in very good time periods where they can work.

We do expect to improve on a few nights of the week, and we are very pleased with the process and how our schedule looks for the fall.

Look, this is spring training and everybody thinks they're going to do great as you get closer.

But having returned 20 shows, we sort of know we are going to be in great shape, no matter what else happens, that those 20 shows will perform.

And we'll get an opportunity to launch some of them and we think we have a couple of real super-hits there.

So we are very excited, and once again the NFL is going to be strong.

No political.

We can't wait for the fall to begin.

Thank you.

Alexia Quadrani, JPMorgan.

Thank you.

My question was on retransmission discussions in general, not specific to anyone.

But do you find they're getting more challenging now than they have been before, given that more people have their hands out?

Or is it just each one is its own animal and they are all the same kind of in a way?

I think each one is its own animal.

Look.

Each contract has different components and different requirements.

And you have different relationships with all these people.

So, look, every deal that we have made in the last two years has been an improvement from the one before.

And I think, once again, our job is to continue to produce the content that we are doing and get paid fairly for it.

Each one is the same -- each one is not the same.

A follow-up on your recent Netflix renewal, any sense of how we could look at the revenue recognition, the timing of rev-rec for that renewal?

Yes, we have some flexibility as we make those shows available to Netflix.

So again, it's really going to depend -- I think again the takeaway is we knew and extended the relationship so it continues to work well into 2015.

They're pleased with our product.

So we're going to continue again, as Les said, to produce the best content and continue to figure out ways to maximize the revenue.

The timing of when it hits, in what year or what quarter, is really secondary.

All right.

Thank you.

John Janedis, UBS.

I'm wondering, with the Fox Sports 1 launch coming, are you seeing any change in the dynamic for the sports business, given the increased inventory for sale?

And is it impacting pricing?

You know what?

We haven't really seen any great effect of it.

We are obviously going into football season for us and that's doing very well.

In addition, our sports network, although relatively small in terms of advertising, is seeing growth in that area as well.

By the way, I'm very happy we have our four major sports rights tied up for the next decade, because clearly the price of poker may go up, but we have the NFL, we have the NCAA, we have the PGA Tour golf, and we have the SEC football contract.

So I'm really happy about that.

Obviously, Fox is putting a lot of money and effort into it.

They know what they are doing.

I think they're clearly competing more with ESPN than with us.

And football sales look strong for the fall.

Thanks a lot.

Laura Martin, Needham and Company.

Congratulations on great numbers, you guys.

Les, one of the things we're seeing in the Internet premium video market is prices for video ads under pressure.

A year ago, they were $23 CPM.

Today, Yahoo!

is telling us they're getting $18 CPM.

And that's a problem with infinite inventory.

But I'm wondering.

Looking at your upfront, where you came in at kind of 8%, 9%, and I think we had hoped for double digits as we've gotten the last couple of years, do you think that increasing premium video online is putting downward pressure in your business as well as the Internet premium video business?

You know what?

You know, we don't look at it that way.

We ended up close to 8%, and we sort of said high singles, low doubles, and we were high singles.

I think your assessment about Internet video becoming bigger and stronger and there is a lot available, there is scarcity, still doesn't compare to what the network can bring.

I've even noticed our competitors got substantial price increases as well, which actually surprised me how well they did.

So look, I'm glad we are in the Internet video market, but I'm even happier that we have the number one television network and getting paid the right amount for our ads.

And then my follow-up is on -- again back to this Under the Dome, which is such an interesting model.

We saw Netflix pay DreamWorks for 300 hours of kids programming, a type of programming DreamWorks has never done.

Do you think we're going to see you guys kind of front and center of a lot of these SVoD platforms coming to you like Under the Dome because of your success and we're going to see a lot of new -- like a new profit center that we are thinking about from these guys getting you to produce content for them?

That's exactly right.

We are looking forward to producing content for all these guys, for Netflix, for Amazon.

When people say oh, gee, is Netflix a competitor?

Netflix is doing original content.

They are buying a lot of good movie packages.

Are they a competitor to Showtime?

Probably.

But by the same token the CBS Company would be happy to produce for them.

Under the Dome is an exciting new model, and when you think about it, it's getting a lot of noise, but it's something that hasn't existed in many, many years.

But without Amazon's help, and without the strong international marketplace, we couldn't have done that with normal summer pricing for programming.

Now, with these guys wanting to get involved and get involved early, the sky is the limit in terms of that, and what great assets they're creating for us.

So we are happy they are around.

Very helpful.

Thanks guys.

Tim Nollen, Macquarie.

Thanks.

I have two advertising related questions please.

First, I think the answer is no, but anything you could say please about any impact from the recent Publicis-Omnicom merger forming a major media buying agency.

I just wondered if there's anything you can say in terms of how negotiations may work under that new arrangement.

Secondly, your interactive growth looks like it was excellent.

And I wonder if you could say anything about Nielsen's online campaign ratings and/or cross-platform ratings and if that is being used and if that makes any difference.

Thanks.

I'll answer the first, and Joe, you can answer the second.

The first, you know, it really is too early to tell.

I remember we had been concerned when WPP was amassing all those variety of advertising agencies, and we were able to do a lot of business with them as we do with -- we have great relations with both Omnicom and Publicis.

And once again, it's about we have good business with them.

We'll see what it becomes like in the future.

But in talking to our head of sales about it just the other day, Jo Ann had no great concerns.

She said, look, we know the guys, we know the brands, it's not going to affect how we do business.

But it really is too early to tell.

On the interactive growth, I think again what's driving the growth really again is the content.

It's the premium video that's doing it.

Clearly, obviously it helps if Nielsen is measuring this and you can always back things up with advertisers and give them metrics.

It always gives us another data point.

But I think, again, the content is really what's driving the growth.

Okay, thanks.

Alan Gould, Evercore Partners.

Thank you.

Les, you may be seeing this less than your competitors, given the strength of CBS, but as the cable networks are getting closer to the reach of broadcast networks, do you see a decline coming in the cable broadcast CPM gap?

You know, number one, I don't particularly see that gap changing all that much.

It has on a few shows but there's still a wide margin between their hits and our hits.

I mean, NCIS is still watched by north of 20 million people every single week.

Other than The Walking Dead, there hasn't been a cable show that's come even close to it on premium or on basic.

And once again, they are doing some quality programming.

So we don't view them as a threat in terms of taking our pricing anywhere.

Our pricing has gone up for the last number of years, and we think that will continue.

Thank you.

William Bird, Lazard.

Thank you.

Les, could you talk a little bit about just your strategy and plans for TVGN?

And then separately, how would you rate the likelihood for streaming deals with new players in the next six months?

Thank you.

Okay, TVGN, a great acquisition, cheap price for our half.

Lionsgate a great partner, great other content company.

There was a lot of low-hanging fruit.

We put on Young and the Restless repeats, and we put on Big Brother After Dark, which increased the ratings like hundreds and hundreds percent.

Now, I realize that -- that you saw the low number doing that, but it's the highest rating they've ever had.

There are a lot of plans incorporating more CBS content, more live event programming from the red carpets, etc.

So it's been so far wonderful.

And as I said, Lionsgate is a great partner and our people are very excited and we are already seeing great results from advertising agencies as well.

In terms of new streaming deals, we've had a lot of conversations.

I don't know who's going to be the first one to step up to the plate.

Whether it happens within six months, I don't know.

It's possible with some of them.

But we are talking to everybody and there are a lot of very interesting things going on out there.

So I hate to be so general but I really don't know much more than that.

Thank you.

Jim Goss, Barrington Research.

Thank you.

I have a couple of questions.

First, I was wondering.

Does the consolidation in station ownership that appears to be underway seem likely to benefit their group retransmission efforts, and therefore your potential for reverse comp?

And does it also prompt you to consider any additional property transactions in a buying or selling mode in that area?

Good question.

Look, the consolidation, the acquisitions, number one, only proves how valuable television stations are in this day and age.

We have 27 of them.

We have 27 of them.

And once again, we are happy we held onto them.

We are happy we didn't get rid of any of them because it only bodes well for the future.

Does the consolidation mean they will get more re-trans?

That's a very possible outcome of this.

It's very interesting to see where the landscape comes out.

We look forward to -- we have great relationships with all of the big companies, and we don't think our relationships should change and everybody's moving towards you have to pay for the guys who have the best content.

Okay.

Separately, does the -- how is the value of your older content faring as Netflix and Amazon focus on newer and/or proprietary series?

Some of it works.

Some of it doesn't work.

Like everything else.

We sold Netflix a huge bundle of content, as you remember, a few years back.

Some of it did extraordinarily well.

They would kill for more Star Trek episodes.

They love that.

Some of it, not so well.

But once again, as mentioned before, as Joe mentioned, we've renewed the deal through 2015.

And it has some of what was existing before and some of what's going forward.

So the good news about us is we have great current programming and we have a great library.

We will sell them both as need be.

All right.

Thanks much.

Marci Ryvicker, Wells Fargo.

Thanks.

Two questions.

The first, Joe, can you give us a little bit more color on the Q3 pace and maybe separate what's going on with the TV stations, same station radio, and then the US billboard business?

And then the second question is just have you gotten any indication from the IRS whether or not you'll get the private letter ruling even if the workgroup study is not finished by year-end?

I don't know if your comments about your private letter ruling not coming by year-end has anything to do with this workgroup study.

Look, the workgroup study again has really, again, been a nonfactor in terms of dealing with the IRS.

Whatever internal process they go through I guess is obviously up to their discretion.

But again, we continue to have an open dialogue with them and we never expected to have our ruling in hand today.

So again, right now, it's the normal course, and we will evaluate that and update you, again, as we know more.

But again, we are pretty confident in our request.

As far as color on Q3, look, US billboards again is the bread and butter, so that's deftly kind of leading the way.

But I would kind of characterize the US -- the Outdoor business again up that low single digits range, 1% to 3%.

And looking at Local Broadcasting, radio is kind of pacing flat.

And TV, remember we have a difficult comp in political.

So we'll see how that kind of shakes out exactly, but as I said earlier, it kind of flected up low single digits.

Again, it's pretty impressive given the tough political comp from a year ago.

Thank you.

Thanks Marci.

And this concludes today's call.

Thank you, everyone, for joining us.

Have a great evening.

That does conclude today's call.

Thank you for your participation.