Paramount Global (PARA) 2013 Q4 法說會逐字稿

Good day, everyone, and welcome to the CBS Corporation fourth quarter and fiscal year 2013 earnings release conference call.

Today's call is being recorded.

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

Please go ahead, Sir.

Good afternoon, everyone, and welcome to our fourth quarter and full year 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, then turn the call over to Les and Joe who will then discuss strategic and financial results.

We will then open the call up to your questions.

Please note that during today's conference call, the fourth quarter and full year 2013 profit measures 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 in 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 earnings release related to today's presentation can also be found in the investor section of our website at cbscorporation.com.

And with that it is now my pleasure to turn the call over to Sumner.

Thank you.

Good afternoon, everyone.

I am extremely proud of (inaudible) bright future as well.

Across the company, great content is driving our success.

But it is not enough to have great content.

You have to have the right strategy and the right leadership to make it all work.

That is why I am so pleased to turn the call over to my good friend and colleague, a man I frequently and rightly call a super genius and a miracle worker, CBS's President and Chief Executive Officer, Les Moonves.

Thank you very much, Sumner, for that very nice introduction.

Good afternoon, everyone, and thanks for joining us for our first earnings call of the year.

We have a number of great things to talk about today starting with CBS's tremendous year and terrific fourth quarter.

For the year and the quarter, we had all-time highs across our key financial metrics including revenue, OIBDA, operating income and EPS.

Quarterly revenue was up 6% to $3.9 billion, OIBDA was up 7% to $927 million and EPS was up 22% to $0.78.

Again all of these were records in the fourth quarter.

For the full year, we performed right along the same lines.

It was our best year ever in every key financial metric.

In fact, for the first time our EPS came in above $3.00.

Remember, just a few short years ago we were just at $0.70.

Clearly, CBS is on a tremendous run.

Year after year, we have told you that this is a golden age for content companies that have the best programming and year after year, quarter after quarter, our shareholders are taking part in the benefits of that.

The good news is that we are just beginning to find a whole new way, set of ways to monetize our programming on new platforms.

There is a lot more to come in this regard.

Through it all, we will continue to focus on our core strength which, of course, is our content.

Our base business is doing phenomenally well and, in addition, our non-advertising revenue streams continue to be a tremendous area of growth for us.

Streaming, domestic and international syndication, retransmission consent and reverse compensation all played a huge role in our success in 2013.

In fact, even with our extremely strong Super Bowl ad sales last year, 42% of our annual revenue was from non-advertising sources, the highest it has ever been.

The trend continues as we speak.

Already here in 2014, we have announced a series of innovative deals that put our programming on a variety of platforms and enable us to grow these recurring and dependable revenue sources.

These include a brand-new deal with Amazon to license Extant, our upcoming summer series with Halle Berry.

With Extant and another deal with Amazon for the second season of Under the Dome, we have created a new model for summer programming.

And we have opened up a whole new time period to launch new content franchises that we can sell around the world.

We also recently extended our library deal with Amazon well into 2016.

We have also cut deals to license Elementary to the WGN cable network and Hulu Plus's subscription service.

Thanks to these two deals, Elementary will generate more syndication revenue per episode than any show ever has.

In addition, we just did a multiplatform deal with WGN, Hulu Plus and ION to license Blue Bloods, also at extremely attractive pricing.

And on Monday we announced a new library deal with Hulu Plus.

CBS content has been performing very well for Hulu Plus in our smaller previous deal.

So we have greatly expanded the partnership and now have another large-scale SVoD library partner along with Netflix and Amazon.

Amazon, Netflix, Hulu Plus, [Stream Picks] WGN, ION, the list goes on and on and it continues to expand across new platforms every single day.

All of these deals are a direct result of the increasing appetite for our content.

The good news is we keep starting the process over and over again with every new hit show we create.

And in addition to CBS, Showtime and the CW we are now launching new owned content franchises on other broadcasts and cable networks as well.

In the last few weeks alone we have received a series order from ABC for a new drama and a pilot order from Fox for a new comedy.

We also just did a series for the USA Network and we are having conversations with many others as well, including original shows for SVoD and other emerging platforms.

Plus, as we head into our development season, we are very excited by the shows we will be producing for the CBS Television Network led by the New Orleans-based NCIS spinoff that we just announced for next season.

So, as you can see we are building the value for CBS across the Company and that's certainly since the great strides we are making with our Outdoor initiative as well.

We are right on track to launch an IPO in the first quarter just as we told you we would.

We look forward to receiving IRS approval to convert our Outdoor business into a REIT which will unlock the value of this business and significantly enhance our ability to return value to CBS Corporation shareholders.

Once the full separation is complete, we will be very close to our goal of a 50/50 split in terms of advertising and non-advertising revenue, and we will be able to be even more focused on growing CBS as a content company first and foremost.

Our Outdoor transaction and the continued strength of our Company are why we are pleased today to announce plans for an accelerated share repurchase of $1.5 billion.

This new ASR means we will use $2 billion in the first quarter to buy back our stock which is nearly as much as we did in all of 2013 and nearly double as much as we did in 2012.

We are doing this because of the visibility and confidence we have in our continued growth prospects.

Going forward, as you know, returning value to shareholders will remain a top priority for CBS.

Now, we will take a brief look at the performance of our businesses starting with entertainment and I will turn it over to Joe to give you some more analysis followed by your questions.

The CBS Television Network is having another outstanding season and yes, as you've heard, many times is the most-watched network in the country once again.

We have the number one program in NCIS, the number one comedy in The Big Bang Theory, and the number one new comedy, The Millers, which is 100% owned by us.

Plus, we have more top 10 and top 20 shows than any other network.

In addition, the value of the biggest live events on television continues to grow.

Last month's broadcast of the Grammys brought in more than 28 million viewers.

This was only eclipsed in the last 21 years by the Grammys that followed the death of Whitney Houston a couple of years ago.

The biggest event of all, though, continues to be NFL programming.

Our AFC championship game averaged more than 51 million viewers, the second highest in 32 years.

And our AFC divisional playoff game drew an average of 41 million viewers which is among the highest we have ever had for that game too.

I also want to congratulate Fox for having the most viewers in the history of television during the Super Bowl last week.

The Super Bowl and the playoffs followed an extremely strong regular season for the NFL on CBS.

More people watched our coverage than any other network.

All of this is why we are so excited to have won the contract to broadcast Thursday night football this fall.

We submitted a very responsible bid that was greatly helped by our position as the number one network in America and the best possible platform to grow the NFL's Thursday night audience.

We will now have 32 hours of additional NFL programming to strengthen our schedule across the week and the greatest promotional platform in the business to launch our fall seasons.

We are very pleased that the NFL chose us as their partner and we happen to agree with the New York Times, which said, quote, ultimately the victory went to the strongest network in prime time, which it could be argued needed the games the least.

Turning to CBS News, our broadcasts continue to gain ground, thanks to their commitment to quality original programming.

CBS This Morning, CBS Sunday Morning and Face the Nation all delivered their best fourth quarter ratings in two decades.

Season's to date, the CBS Evening News is delivering its largest audience in seven years.

And of course 60 Minutes continues to dominate as the number one news show on television.

With entertainment, sports, and news hitting on all cylinders and the NFLs on Thursdays we are once again very encouraged heading into this year's upfront.

I feel confident saying right now that we will lead the marketplace in pricing and volume, but no, I am not going to make any exact predictions just yet which, of course, will be a major source of relief to our sales department.

But suffice it to say it is going to be a great upfront for CBS.

Meanwhile, we continue to negotiate deals that will give us proper value for the C3 window and beyond.

The world of audience measurement is making great strides right now, including recent announcements we have made with Nielsen, Rentrak and others.

Nielsen is getting better and better at counting all of the eyeballs that are viewing our content and we look forward to the financial upside this will bring.

As I mentioned earlier, our shows are selling extremely well in the syndication marketplace, too.

For example, our innovative deal for The Good Wife is now not only paying off in syndication dollars, it is also helping the show's first run on the broadcast network as well.

During the fourth quarter, The Good Wife was the most watched television series on Amazon Prime.

Lots of this was catch-up viewing which is translating to even more interest for the show's current season and CBS's ratings for the show are now up double-digit.

Of course it also helps that The Good Wife may be the best show on broadcast television right now.

The multiplatform success has led us to sell other shows in new ways as well, including the terrific value I told you about for Elementary and Blue Bloods.

Plus Hawaii Five-0 is also going into syndication later this year which will lead to another whole new source of syndication revenue for us in the quarters and years to come.

Meanwhile, retrans and reverse comps continue to be a very compelling growth story for broadcasters right now and represent another keyway we are monetizing our content and growing our business.

As you have all heard about, there are those who are legally taking our content and seeking to profit from it without paying their fair share.

CBS and others in the industry are challenging this and expect to prevail.

But, no matter what happens, we have a whole host of compelling business alternatives that will build our price financial prospects.

We can adjust and drive, no matter how this situation unfolds.

I do want to point out here that we believe in over the air broadcast television, and it remains our first option.

What's important for investors to know is we have many retrans and reverse comp deals in place right now and when you combine these deals with all of the options we have to sell our network lineup into the future, we are extremely confident in our ability to grow this revenue stream.

In fact, we have been telling you for a while now that our goal is $1 billion in retrans and reverse comps in 2017.

Well, today we are announcing a new goal.

Our new target is $2 billion in 2020.

Clearly that is quite a jump, but we have exceeded our target every time we have given you one.

And we have tremendous confidence in our ability to realize the full value of CBS going forward -- $2 billion in 2020.

Strong new and existing deals for Showtime are also driving our cable network segment which continues to be extremely healthy.

Showtime has added 1 million subscribers each year for six of the last seven years and the number of subs is now at 23 million.

Just like at CBS, it is the strength of our shows that is allowing us to negotiate better and better deals.

During the quarter, Homeland ended its third season with its best ratings ever, up 21% over the second season.

And as you know, season four will be back later this year.

And in their first seasons, Ray Donovan and Masters of Sex both finished with ratings better than Homeland's freshman season, Ray Donovan by 31% and Masters of Sex by 10%.

Obviously, both of these shows will be coming back later this year.

We have a number of other exciting projects coming to Showtime this year as well including the May debut of a tremendously entertaining thriller called Penny Dreadful and a new drama we recently scheduled called The Affair.

We own -- we own 100% of both of these series and they will add to the library of shows in which we have ownership including Dexter, Californication, Nurse Jackie, House of Lies, Episodes, Ray Donovan, and Masters of Sex.

These shows are or will be monetized all the platforms we mentioned earlier in all the ways that have been so successful for CBS.

Simon & Schuster continues to produce great content as well.

During 2013 we had 326 New York Times bestsellers with 37 making it to number one.

Both of these rankings were ahead of last year's number.

And sales of our more profitable digital books continue to grow quickly and now represent 27% of our total revenue.

Meanwhile, at our TV stations, nonpolitical revenue was up 9% helped by the NFL, CBS's strong performance in prime time, including big events like the Grammys.

In fact, local revenue for the Grammys came in 50% higher than it did just three years ago.

In radio, we continue to put an emphasis on great local programming which is leading to bigger audiences.

During the most recent ratings period, we had double-digit ranking gains in the highly coveted 25- to 54-year-old demo in many of our major markets.

And nontraditional revenues from special events was up double digits over a year ago.

Our strategy to combine the Company's local TV and radio website into a single online presence in every market also continues to pay off.

In 2013, revenue was up 21% over the year before.

And the momentum is continuing here in 2014 including a new record of nearly 57 million unique users in January.

I am also very pleased with the success of our CBS Interactive business.

Revenue was up 14% during the quarter and we continue to see very rapid growth in mobile ad revenue which was up 118% and it helped to increase profits substantially.

So, as you can see we continue to drive our base business forward while strategically capitalizing on new opportunities.

These opportunities are all around us.

We are selling our hit shows into domestic syndication at record rates while also partnering with the biggest players in the SVoD to maximize the value of our programming.

We are continuing to forge new deals with cable and satellite operators at fair value, while also resetting a large number of reverse comp deals that are coming up for negotiation.

Every single day we are leveraging the power of the CBS Television Network, Showtime, and our major market local assets to tap into new innovative revenue streams.

And it is all borne out of same idea that creating, owning, and broadcasting the best content lends itself to infinite possibilities.

So given our track record of success in that regard, and our drive to keep doing what we do best, it stands to reason that we think our future as a content company is very, very bright.

I will close by reminding you of two $2 billion numbers.

First, our $2 billion of share repurchases here in just the first quarter.

And second, $2 billion of retrans and reverse comp in 2020.

So there is a lot to be excited about here at the CBS Corporation.

Thank you.

And with that I will turn it over to Joe.

Thanks, Les, and good afternoon, everyone.

Today I will start with giving you -- by giving you some more details about our fourth quarter and full year results.

Then I will update you on our Outdoor transaction and discuss what lies ahead in 2014.

After that, we'll be happy to take your questions.

As you know by now, we delivered our best ever results in 2013, driven by the healthy performance of our base business and the growing strength of our non-advertising revenue streams.

These results are indicative of the ever-increasing number of opportunities we have to monetize our content, and it is a trend we see continuing for many years to come.

During the fourth quarter, revenue of $3.9 billion was up 6% with strength in every one of our key revenue types.

Content licensing and distribution was up 28% driven by growth in both traditional syndication as well as SVoD.

CBS, Showtime, and CW content all contributed to the strong performance and international content sales grew 20%.

Affiliate and subscription fees were up 7% thanks to the continued increases in retrans and the reverse compensation as well as higher cable affiliate fees.

And in advertising, a 4% increase at the CBS Network during the quarter offset local political spending in 2012.

As Les said, our profit measures in the fourth quarter were up across the board, operating income of $813 million was up 9% and EPS of $0.78 was up 22%.

It was our highest quarterly EPS we have ever reported.

For the full year, our results were very consistent with the quarter.

Revenue of $15.3 billion grew 8% with solid gains in all three of our major revenue sources.

Advertising was up 4%, content licensing and distribution was up 15%, and affiliate and subscription fees grew 16%.

We also delivered strong annual gains in profits trending right in line with our quarterly results.

Full year OIBDA of $3.74 billion was up 7%.

Full year operating income of $3.28 billion(sic-see press release "$3.26 billion") was up 9% and full year EPS of $3.02 was up 18%.

Now, let's turn to our operating segment performance for the quarter.

Entertainment revenue in the fourth quarter grew 11% to $2.2 billion.

The segment benefited from our fast-growing streaming and syndication revenue both in the US and abroad as well as 4% growth in network ad sales led by our NFL programming.

Revenue at our CBS Interactive unit was also up 14% for the quarter.

Entertainment OIBDA of $418 million was up 27%.

Network advertising, retrans and reverse comp as well as content licensing fees drove a margin expansion of 240 basis points to 19%, all while continuing to invest in content.

At cable networks, fourth quarter revenue of $477 million was up 9% fueled by growing subscriber accounts as well as higher rates per sub.

It was also driven by the international licensing of Showtime Original Series, which is becoming a meaningful new revenue generator for us and one that will continue to grow as we own more and more of our shows.

Cable OIBDA of $199 million was up 8% and our cable OIBDA margin held steady at a healthy 42%.

Turning to publishing, fourth quarter revenue of $225 million was up 5% due to the strength of our titles across both print and digital platforms.

E-books represented 23% of total publishing revenue for the quarter.

Publishing OIBDA of $37 million was up 19% and publishing OIBDA margin grew 2 percentage points to 16%.

In local broadcasting, nonpolitical revenue was up 4% for the quarter with TV stations up 9% and radio even with last year.

Reported results were obviously affected by last year's political spending.

In terms of top categories, healthcare and auto grew solidly in both TV and radio.

Because of the lack of political ad dollars local broadcasting OIBDA came in at $263 million and still delivered a solid margin of 37% for the quarter.

And Outdoor Americas reported revenue in the fourth quarter of $347 million was up 2% and in constant dollars, revenue grew 3%.

The US led the way with a 5% increase with growth in both billboards and transits.

Outdoor OIBDA of $120 million was up 28%, driven by revenue growth and a gain from the disposition of some bus shelters.

Turning to cash flow on the balance sheet.

Free cash flow came in at $382 million for the quarter compared with $199 million in Q4 of 2012 when we made a $200 million discretionary pension contribution.

For the year, free cash flow was up 13% to nearly $1.8 billion.

And we do not anticipate making any significant pension contribution in the near term.

Also during the quarter, we used $364 million to retire more than 6 million shares of our stock.

At the end of 2013, we had $5.4 billion remaining under our current buyback program.

As Les said, we plan to use $2 billion to repurchase our stock during the first quarter through a combination of the $1.5 billion ASR we announced today and an acceleration to the quarterly pace of our ongoing repurchase plan.

This announcement once again demonstrates that we are committed to returning capital to our shareholders and that we have continued confidence in our future cash flow.

Also at the end of the fourth quarter, we had $397 million of cash on hand.

Next, let me give you an update on our Outdoor transaction.

We have come a long way since we first announced our Outdoor initiative about a year ago.

We filed our private letter ruling request with the IRS, submitted multiple filings to the SEC, hired a new public company management team, and recently completed a $1.6 billion debt offering at a weighted average cost of debt of 4.2%.

We feel very optimistic that we will receive a favorable ruling from the IRS to convert our Outdoor business into a REIT.

And we remain on track to launch our IPO later this quarter.

Now, let me give you a few observations about what we see ahead in Q1.

Network scatter pricing remains strong, up double digits from upfront pricing.

Local broadcasting is showing stability.

Our underlying TV stations are pacing to be up high single digits which excludes the impact of non-comparable sporting events, and radio is pacing to be flat to up low single digits compared to last year.

Meanwhile, Outdoor is pacing to be up low to mid single digits.

So, in summary, we are managing our business for the long term and diversifying our revenue mix by growing our high-margin, non-advertising revenue stream.

In content licensing and distribution, our first cycle syndication deal for Blue Bloods and Elementary demonstrate the strength of our programming and the way our multiplatform approach is increasing our content value.

We continue to find a huge appetite for CBS content both domestically and internationally as well as on traditional and newer platforms.

And looking ahead, we have set up a strong syndication pipeline with contributions from CBS, Showtime, and the CW.

And affiliate and subscription fees will continue to do more retrans and reverse comp deals to realize the fair value of our content.

In 2014, we will reap the full benefit of the deals we signed last year as well as from escalators and existing deals.

As we mentioned, we see a path to $2 billion in total retrans and reverse compensation revenue in 2020.

And for advertising revenue, we'll benefit in the back half of 2014 from a strong upfront marketplace, our new NFL Thursday night package and political spending.

Add all of that to the completion of our Outdoor transaction and CBS is well on its way to becoming a content-centric company, one that is fueled by more predictable, fast-growing revenue streams.

With so many exciting opportunities before us, 2014 will make for another terrific year for CBS.

With that, we can open the line for questions.

(Operator Instructions).

Ben Swinburne, Morgan Stanley.

As we get our arms around that $2 billion number, can you spend a minute talking about your outlook on the reverse comp front?

I ask because that is maybe where there is more debate or controversy.

And in particular how do you think, Les, those smaller CBS station groups can go out and get their own retrans which you need them to get to pay you and then there has been sort of this focus on a 50-50 split historically.

I am guessing that that is not something you'd necessarily subscribe to, but maybe you could comment on that as well.

Yes, look, one size doesn't fit all and once again we wish our affiliates well in their retrans conversations, but that really doesn't affect us greatly.

As you can tell, there are a lot of very large station groups out there that are gobbling up a lot of these smaller markets.

So they can do fairly well in their retrans site.

The reason we get to that number is as we look at the contracts that are expiring at the end of this year and many more in 2015 and 2016, and so on, looking down the road, we don't think it is a tough [puck] to get to that $2 billion.

We want our affiliates to be strong.

We believe in them.

But we also know with the product that we are providing with them, they are able to get revenue from the MPDs as well.

Got it.

And, Joe, taking this retrans conversation further, the balance sheet, I noticed you guys are levered, I think like 1.6 times here on trailing basis.

How do you think about leverage after this Outdoor transaction?

I know I can't pin you down on a number, but at least directionally and can you help us or remind us about the off-balance-sheet liabilities that rating agencies look at and how that may be exiting with the spinoff, how that could help your leverage picture?

Sure.

The bottom line, as we are increasing our cash flow and the mix and the quality of that cash flow, clearly we are creating lots of financial capacity.

As far as the off-balance-sheet thing, obviously leases is a big part of that and I think, again, the rating agencies -- that will mostly go with the Outdoor deal.

And our pension as we sit here today is 95% funded.

So, there's not a whole lot of off balance sheet adjustments that the rating agencies, I think, will make.

There are some, but again, as we execute on this Outdoor deal, we will continue to refine our thinking on what's the appropriate leverage ratio for CBS, but clearly we are creating significant capacity.

Terrific.

Thanks.

Jessica Reif Cohen, Bank of America Merrill Lynch.

I have a couple of questions.

First, you have done a ton of deals in the last few weeks and the last year or so on content deals.

As you look at your pipeline, could you talk about other stuff that could be coming off the network and going to the pipeline like, maybe, CSI:Las Vegas and what that could mean?

Second, it is amazing that the TV advertising came down as much as -- given the political comps came down and yet you were able to basically maintain margins.

Just wondering how you did that.

And then I have one follow-up.

I will do the first part and Joe can talk about the margins.

Once again, remember, most of the deals with very few exceptions include any current shows on the air or past seasons of current shows.

So there is a huge capacity for that, which we are very excited about.

In addition, owning The Millers, you know, the number one new comedy on television is something we own 100%.

We haven't had a hit comedy since Everybody Loves Raymond that we were a participant in, in a major way.

So the fact that The Millers is going to be around a while, and clearly is doing very well, leads to a fairly big number.

In addition, once again, we are only talking about some first cycle stuff.

The pipeline will continue.

There are more and more players.

I remember when we started with Netflix everybody said, oh, is there anybody else going to be there and then Amazon came along.

Then Hulu expanded to Hulu Plus.

You see Streampix coming along.

So with the amount of library and current show contracts that we own both on CBS and Showtime, we are very encouraged that the pipeline at this level is going to continue for many, many years.

And the only thing I will add to that is we still have a lot of shows that we have not sold that we have held back such as the CSI that you referenced, Criminal Minds, NCIS.

So we still have a whole lot of our content that we have not yet monetized as well.

For locals, Jessica, the 37% margin is actually down.

Obviously we pride ourselves on managing our cost infrastructure nicely, so it is still a very healthy margin, but that also ties back to what Ben's question was is, why do we feel confident in the reverse compensation number is -- we own TV stations too.

So we see them having 37 plus percent margins.

So this isn't about an ability to pay.

They certainly have the ability to pay and the value we see we provide to CBS-affiliated stations that we own when we compared them to independents or CW is quite significant.

So I think we look at that holistic.

And then the follow-up is Les alluded to the coming Supreme Court decision.

I was just wondering what -- can you give us any color on options like medium or longer-term if the Supreme Court rules in favor of Aereo?

We have already mentioned that number was on -- number one most of our current deals with MVPDs, would not allow them to accept an Aereo-like service.

So, people are forgetting that.

Even if Aereo was available.

Look, we obviously are coming before the Supreme Court.

We feel fairly confident that we are going to become victorious.

You never know what is going to happen, but if something goes the other way, there are so many other alternatives we can form our own Aereo with the other networks.

We could go over the top ourselves.

We can go directly with cable.

There are a number of ways that we could do things.

We prefer the current system.

We prefer a system where local television can get into their marketplaces there.

But if that doesn't happen, we are not going to be financially handicapped at all.

Thank you.

David Bank, RBC Capital Markets.

Kind of a follow-up to the last question that's a little more modeling-oriented.

In what is kind of a high-class problem, the sheer magnitude of deals with respect to both the online stuff, the broadcast stuff, the cable stuff that you have announced, it is so big it is getting hard for us to follow, right.

And generally I think it is getting to the point where we really can't follow specific deals anymore.

So -- and shows, sort of -- make it easier, is there a way to give us a run rate at this point for digital over the next few years in aggregate, you know Hulu, Netflix, Amazon, and then kind of a ballpark from monetization on first run traditional syndication for 2014, 2015, 2016?

And if you can't, just a sense that there really is no hole.

That this is kind of a steady, revenue stream that like -- or if it is not can you clarify, are there big lumps?

(multiple speakers)

David, you are making the question more complicated than our deals.

Look, the key to all this, and I will let Joe finish the end of it talking about some of the modeling and financials, is each deal that we do is very different than the last one.

So we did a deal for The Good Wife, which got a lot more money than anybody ever imagined we would get for a softer, female-oriented show.

And we did that by putting together SVoD and cable and station groups and we just did the same thing with two different shows.

Elementary, for Elementary, I think it surprised a lot of people the amount of money we got, but suddenly here was Hulu Plus as the new SVoD player.

Here was WGN, which had not been a major player in the cable syndication marketplace before, as well as ION.

So, once again we found a new way to do it.

And as you look down the road, once again domestically we haven't even made these sorts of deals with CSI which has over 300 episodes.

And NCIS, which has over 200 episodes.

And the sky is the limit, which is why we feel very comfortable that the pipeline is still going to continue in a way that is going to make sense.

And these deals may look -- there may be a new guy involved in this, that pays us a lot more money than we have received already.

So --.

Yes, and David, so, obviously you know we don't give guidance.

So but what I would point you to is instead of looking at individual deals, if you look to the content licensing and distribution revenue that's where these syndication deals fall and the affiliate subscription really where the retrans and reverse comp deals are falling, just look at that growth rate in total.

So, for 2013 content licensing grew 15%.

It is now a $4 billion number.

An affiliate subscription fees grew 16%.

It is now a $2.2 billion number.

So you are talking about $6.6 billion of non-advertising revenue.

So when Les and I talk about 50-50 mix, we anticipate growing advertising, but growing these non-advertising revenues at a faster clip.

So I would guide you to look at them when we report revenue by type.

Okay.

Thank you very much.

Michael Morris, Guggenheim Securities.

I apologize, I am losing my voice.

Two quick ones.

One, the goal for 2020 can you talk about the trajectory between now and then?

Is it lumpy, is it back [half weighted], is it a relatively straight line?

That would be helpful.

And then also with Netflix entering more and more European markets, can you talk about what of your content is already sort of spoken for in markets outside the US and where there could be additional opportunity from here?

Thanks.

I will start with the $2 billion number.

It is lumpy, unfortunately.

It is really predicated on the timing of when deals expire.

So it is not linear, so there will have some lumpiness.

Obviously, last year we renewed about 17.5% of our footprint.

This year, we have less than that to renew, but remember we have a huge amount on the reverse comp side coming in 2015 and 2016.

So you are going to see a nice leg up there, but, again, that is going to be somewhat lumpy.

In terms of Netflix, obviously every territory they have opened in, we have been a major player there.

And as they expand, we are very happy doing that.

Once again, handled by our international people as a Netflix being part of the international syndication sales and in certain territories replacing these main syndication partner.

But it is sort of impossible to give you numbers, but all I can say is every time they expand, we are very happy about it and it does well for us.

Thanks.

Anthony DiClemente, Nomura.

I have one for Joe and then one for Les.

Joe, on the last quarterly call you talked about split-off transaction in the third quarter.

Are the plans for that exchange offer intact?

I wonder if there is a way for you to quantify for investors the potential reduction in shares from that?

And then, Les, on the NFL deal, congratulations on getting that deal done.

I wonder do you expect that deal to be profitable out of the gate or was it more of a strategic -- is there more of a strategic rationale there as it pertains to either the programming schedule or longer term making you guys the incumbent on Thursday night.

I think investors would want to know if you expect to be profitable out of the gate on that.

Let me do the first part.

The split up.

Yes, so, the IPO we are planning for later this quarter as we said and then that stock will trade and we think, again, roughly five to six months so it brings us into the third quarter and then we would anticipate doing an exchange offer.

And obviously what that means is the holders of CBS will exchange their CBS for shares of Outdoor company at a ratio.

And that is a transaction that has to take 20 business days.

So that is a month.

So we are on track for that, but -- so it is dependent upon the value, the equity value of the Outdoor business which we are quite bullish on.

So I can't give you a sense of exactly how many shares we would retire, but clearly, it is going to be a significant reduction in shares.

On the NFL deal, we are thrilled to have it.

As you know the competition was pretty fierce.

At the end of the day, it really wasn't about money.

The NFL was more interested in establishing their Thursday night and being in partnership with a brand, a company, a network that would do a better job of establishing that into the future.

Now, obviously, we ascertained what our network sales are going to be.

In addition our local affiliates are contributing.

Our station sales, remember we have an awful lot of [L&Os] that are in the NFL market.

Should be extremely high, plus it's impossible to speak more highly of how it promotes everything else in our fall schedule.

Is it strategic?

Absolutely.

Do I hope we get it longer?

Sure, but so does everybody else.

We hope to have it, we hope to extend it for a longer period of time, but as it is I am extremely pleased to have this.

It means so much to us.

Look at what our schedule looked like at the beginning of this year without the NFL.

Then you add that Thursday night to tighten up an already existing schedule and it is a pretty sensational thing.

So it is a good short-term value and a good long-term value.

Okay, thanks.

John Janedis, UBS.

Les, there has been some concern over the past couple of years that there would be some pressure on pricing and syndication, but based on the Blue Bloods and Elementary deals, that doesn't seem to be the case.

Are these one-offs or do you think the bar has been reset and how does international look?

Number one, as you get more and more players in the marketplace and more and more ways of selling it, the sky is the limit.

You are right.

Everybody said once upon a time people gave zero value to domestic on dramas, on ours.

Now when you look at the fierce competitiveness and the different ways of selling these things, both exclusively and nonexclusively, these aren't one offs.

As I go back to the last four or five deals we have done between NCIS:LA and Hawaii Five-0 and Blue Bloods and Elementary, you look at them and every single deal was vastly different with different partners.

And the sky is the limit.

And with all of these players demanding our programming, the more good stuff we have, the more good deals we are going to make and the marketplace is exploding.

It really is.

And internationally, once again from a few years ago, where we were making $400 million last year our international folks brought in over $1.2 billion in revenue from our products.

So that marketplace also is exploding.

Remember per an earlier question the Netflixes of the world are also going international and they are also bidding up the competition, plus internationally there are more markets that are getting more aggressive for our content.

Asia is opening up.

South America is opening up and Eastern Europe is opening up.

So, once again that marketplace is growing as well.

Thanks.

And, Joe, one quick one for you.

Going back to the buyback, I'm sorry if I missed this, but should the increased pace in the first quarter now be viewed as a new run rate for the year?

No.

I think, look, John, we are going to take it -- as you said we are going to go into the Outdoor transaction.

We are going to be raising obviously IPO proceeds, so I think, again, it is going to be part of an overall strategy as we fine-tune it.

Right now, we just want to get this $2 billion executed in Q1.

Thanks a lot.

Alexia Quadrani, JPMorgan.

My questions on the [SVoD] revenues.

You gave a lot of detail and talked about the pipeline and a lot of recent deals you have been signing.

A couple of questions on it.

Do you think the SVoD revenues will actually be up year over year in 2014 versus 2013?

And then also a lot of the announcements you have seen more recently and you touched on Amazon and Hulu, Hulu Plus, are you seeing -- I guess more so at Hulu because Amazon is a big player in the market for a while.

Hulu becoming a much more competitive bidder and I guess have deeper pockets now.

Well, once again, we distinguish between Hulu and Hulu Plus.

Hulu Plus is an S spot.

And obviously we are not part of Hulu and there is a big distinction there.

But clearly by this last deal, they were a competitor to Netflix and Amazon.

They are now over 5 million subs.

So very, big, big player and, yes, SVoD will be up substantially in 2014 over 2013.

Then just a follow-up, if I can, on the NFL Thursday night football which looks like a great win for you guys, do you think there is -- I mean is there a possibility that could turn into a multiyear deal?

I know it was initially for just one year.

Is that part of your thinking?

Look, the deal is for one year and we are hopeful that we show them how great we are.

And as I said, we are very flattered they chose us, because at the end of the day it wasn't about the money.

It was about who would be a great partner.

So our goal is at the end of next season they say, my God, CBS did a sensational job.

We want to continue with them.

But, there is no guarantee of that.

All right.

Thanks very much.

Doug Mitchelson, Deutsche Bank.

Couple of questions.

First, Joe, what's the margins we should expect on these incremental retrans revenues?

Now that they are giving seven-year guidance for retrans revenue, we figured we would try for seven-year guidance on some other metrics.

What is the flow-through on the incremental retrans growth these days?

When we look at retrans, it is 100% flow-through.

Our thought is we are spending this programming as part of our overall strategy.

So, when we went after the NFL Thursday night package, it wasn't we are not setting predicating incremental retrans.

Obviously, we think we can get it, but when we look at the retrans dollars, all we are trying to get on retrans out, it's fair value for the content we are providing today.

And I think the statistics and the viewership and the audience justifies that.

So we look at those as 100 cent dollars, Doug.

On the ASR is that already partly executed, fully executed?

Does that just get started now?

How does that work?

It is just getting started now so we announced today.

Tomorrow is a cooling-off period, and we will put it in effect on Friday.

Les, health in the scatter market.

I know you guys talked in your prepared remarks about scatter prices double-digit over the upfront.

There was a volume issue in the fourth quarter that seems better in the first quarter.

Is there anything when you look at the spreads of categories, you know, which ones are growing versus shrinking, [sellout] at this point in terms of volume versus this point last year for the first quarter?

Is there any depth you can give us to how you feel the health of the scatter market is today?

All I can tell you is it's very healthy, it is not something -- I speak to our sales guys a couple of times a week and there is a lot of activity going on.

The Grammys sold through the roof.

Obviously the NCAA Tournament is going extremely well.

We are very pleased with the pricing there.

And as we head into the rest of the season, post-Olympics, everything for us is looking great.

In the Olympics we are just doing the holding pattern and then we explode again.

Great.

Thank you, gentlemen.

Laura Martin, Needham & Company.

A couple.

One is, you guys are saying after you spin off Outdoor the mix of revenue will be 50-50 advertising, non-advertising.

What do you think the normalized rate is longer term because we are getting really fast growth in non-ad revenues?

I'm interested in your normalized.

And then building on Anthony's question, now that we have the NFL on Thursday nights which is predominantly male and historically you guys were the strongest ratings on Thursday nights, predominately female.

Does this, a, change when you introduce your new fall schedule and do you go to more of a year round introductions or do you go to shorter seasons?

And what does it do to your upfront numbers?

Doesn't it add a bunch of men to your guarantee, which typically sell at higher CPMs so do you end up with a lot higher upfront number, but don't get in trouble with your sales force, Les?

I will answer the second first and then, Joe, you can answer the first.

Regarding the NFL, yes.

It is a large percentage males, but there's still a lot of women that do watch it.

This just tightens our schedule.

What happens is our Thursday night schedule will come on at the end of October, early November.

So, we will have very high rates and, yes, there will be more men watching on Thursday, still a lot of women watch football.

What we will do with our Thursday night is we have some big shows such as The Big Bang Theory, which leads off Thursday night.

And we are not going to wait until November to launch that.

That is going to be on the air on some other night, which will grow the ratings and the rates on some other night for The Big Bang Theory and we have that possibility with Elementary on the other end of the schedule.

So what it will mean is we will have more original programming on throughout the year.

A few less repeats.

And I think the upfront sales as you know the NFL sells better than anything else.

The volume will be extremely high and the male-female balance is not something that we are even slightly concerned about.

And on your questions, mathematically just to be sure you are clear, it does not get us to the 50-50 with just taking out Outdoor.

If you looked at it kind of for 2013, so when Les referred to that was our target, that's our goal, so we will be still slightly higher.

But with the non-advertising revenues growing faster that is our goal to get to 50-50 organically.

All right.

That is helpful.

Thank you.

David Miller, Topeka Capital Markets.

Two questions for Joe.

Joe, on the $1.5 billion ASR, the way I have been thinking about your buyback program this year is you have got the $6 billion organic buyback, then you have got the future extraction of cash from the CBS Outdoor transaction and, then, you have got the share exchange which you talked about just a few minutes ago.

Should I assume or should we assume that the $1.5 billion ASR effectively sort of de facto represents the extraction of cash there before you have even extracted cash?

Or is that something else and then I have a follow-up.

Thank you.

Cash is fungible the way we look at it, which 1.5 is it.

We obviously -- $1.6 billion of debt on the Outdoor transaction, so we are sitting obviously flush with a lot of cash here in February.

So, again, it is part and parcel of the underlying $6 billion program as well as the one-time Outdoor transaction.

So the Outdoor transaction raised debt, they are going to raise IPO proceeds, that gives us cash plus our free cash flow, but it is all part of the program that we look at, David.

So we just would focus on the share count if we're really smart, about how we are buying back our stock, but, again, it is our top priority.

Okay, great.

Perfect.

Then maybe, Les, you can chime in on this one if you like, you guys are a large organization.

You know a lot of people in Washington.

You have your ears to the ground with a lot of regulatory bodies.

You obviously have a lot of well-paid attorneys.

I mean what are all of these bodies telling you about the process within the IRS?

What is the IRS thinking?

What are your attorneys telling you with regard to just level of confidence in terms of PLR approval and timing thereof?

Anything you could tell us would be great.

Thanks a lot.

You're right.

We are paying a lot of attorneys a lot of money.

(laughter) way too much.

Go ahead, Joe.

Yes.

Look, David, I think we have remained consistent on this point throughout from the time we announced this.

We feel our position is right squarely within the rules of the IRS.

For this we think there's some precedent for this.

Obviously we also have another peer of ours taking the same position.

So, the timing is really up to them and we will continue to respond to any questions they have.

But we are feeling very good about our position.

Wonderful.

Thank you.

Alan Gould, Evercore.

Les, you said this year, or Joe said this year would be a record -- a significant increase in SVoD revenues in 2014.

Were you off mark with 20% and can you give us some idea if you closed the $450 million already in SVoD?

Say the question again, Alan.

I missed the -- who said the 450?

Sure.

How much was your SVoD revenue in 2014 and what percent increase was that roughly?

We don't give guidance for 2014.

Obviously --.

I meant 2013.

I'm sorry.

Directionally -- okay, directionally it is hundreds of millions of dollars.

Again, there's new deals we are doing all the time that grow that.

So really it is just a function of the content we make available.

So we have a lot of flexibility and choice on what series.

For instance, as an example, we have 250 episodes of CSI.

300.

300, see?

300 episodes of CSI.

So, we have lots of flexibility as to how and when we do that.

So we don't want to get boxed into a growth rate percentage SVoD over SVoD.

I think an earlier question said if you just look at the content licensing and you look at that number growing, I think that will be the best guidance we can guide you to.

Can you give us a base number what that -- I guess you did the licensing revenue.

Thank you.

We have time for one more question, please.

Marci Ryvicker, Wells Fargo.

I have a couple.

The first we have heard from a lot of broadcasters that the pace of business in the first quarter has been pretty significantly impacted by the weather.

So just wanted to know if you are seeing the same thing across your local TV, radio, outdoor, and networks.

In essence your core might actually be stronger than your pacings would suggest.

We are not seeing that.

Actually we like the bad weather because more people are at home turning on their television set.

So, that is why our ratings are so good and we see it when there's snow or rain.

Sincerely, we have not seen -- I think the advertising -- we sell advertising by the telephone or online right now and so we have not seen that.

We saw the reports by some of our competitors, but we haven't felt the same thing.

We don't feel like that has been a factor.

Okay.

And I just want to confirm the accounting for syndication in SVoD.

It is my understanding that you recognize revenue when these shows become available.

Can you confirm that with all of the new deals it is actually you, CBS, that determines the timing of the availability of these shows?

Yes.

It is in the contract.

So for instance the first cycle stuff is when we make that available.

So Hawaii Five-0 and Blue Bloods are later this year.

Elementary is going to be 2016 or 2015.

Library deals is when, again as you said, the shows are made available and we will work with our partners to see how they want to stagger availability.

So it is really contract by contract, but again, the trigger for revenue recognition is when they are made available, but the cash flow which is equally important come in over time.

And I have one last quick one for Les.

If Aereo does win the Supreme Court case, is there any risk to your $2 billion retrans reverse comp target for 2020?

No.

We will hit that number regardless of what happens with Aereo.

Thank you very much.

And this concludes today's call.

Thank you, everyone, for joining us.

Have a great evening.

Thank you, everyone.

That does conclude today's conference.

We thank you for your participation.