Paramount Global (PARAA) 2010 Q3 法說會逐字稿

Good day, everyone, and welcome to the CBS Corporation third-quarter 2010 earnings release teleconference.

Today's call is being recorded.

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

Adam Townsend.

Please go ahead, sir.

Thank you.

Good afternoon, everyone, and welcome to our third-quarter 2010 earnings call.

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

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

We will then open the call up to questions.

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

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

In addition, statements 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 the earnings release related to today's presentation can be found on the Investor section of our website at CBSCorporation.com.

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

Thank you, Adam.

Good afternoon, everyone.

I really thank you for being with us today.

Another quarter, another tremendous showing by CBS, all driven by our industry-leading content.

In every area where we compete, CBS is thriving.

From the number one network, to our production and syndication businesses, to our critically acclaimed original programming on cable, to our best-selling printed books, to our diverse websites, the strength of our content is driving our results.

I know I don't need to tell you that I believe that content is king.

And CBS content is at the top of its game.

We have a powerful distribution platform, the right major market local assets to get our leading content to every audience, all the places on this earth that matter most.

Yes, CBS is firing on all cylinders.

And it will continue to do so, not only today, not only tomorrow, but well into the future.

And, of course, I have great confidence in the marvelous management team that is making this all happen, beginning, of course, with my very close friend, CBS's President and CEO, Leslie Moonves.

So I will turn this over to him now.

Les, the ball is in your court.

Thank you, Sumner, and good afternoon, everybody.

Thank you very much for joining us.

As you see from the results we are reporting today we had another terrific quarter, and our momentum continues to build.

Each quarter in 2010 has been better than the one before.

Advertising revenues are growing; profits are higher and margins are expanding.

A great deal of our success comes from how well our content has performed and how well we are monetizing that performance.

The things that we told you would happen over the last several quarters are, in fact, happening.

We are benefiting greatly from a return of advertising to historical levels.

We are diversifying, derisking our business model by growing our secondary revenue streams.

Our major market local assets are experiencing excellent growth.

And once again, most importantly, our content is thriving across the country on a variety -- across the Company -- also across the country -- on a variety of platforms.

At the same time, we are managing our businesses more efficiently, holding down costs, and strengthening our financial position as the markets improve.

We have taken a number of steps to greatly improve our balance sheet by paying down debt.

All of this is coming through in our results, with double-digit growth in profits and EPS, and even better growth in free cash flow.

These healthy levels of free cash have enabled us to announce today a $1.5 billion share repurchase program beginning January 1.

Returning value to shareholders through dividends and share buyback has been one of our highest priorities all along, and we are pleased to deliver on that objective.

All of these factors that I just mentioned have brought about a structural change that will cause our strong performance to continue in 2011 and beyond.

In addition, the two new long-term deals we added with Comcast and the NCAA will only help us that much more.

So between the performance of our content, the improving operating environment, and our very strong balance sheet, you can forgive me for being even a little bit more bullish than usual today.

It is a real good time to be a shareholder of CBS.

I'm going to give some additional comments.

Then I'll turn it over to our CFO, Joe Ianniello.

And then, as always, we will take your questions.

I will begin with our very strong third-quarter financial results.

EPS for the quarter of $0.35 was up 40% versus last year's third quarter.

OIBDA of $667 million was up 17%, as profitability continues to improve significantly.

And OIBDA margins are expanding as well.

We are now approaching prerecession levels.

This is a trend that should continue into next year as our new and better deals kick in, we grow our secondary revenue streams, and we make sure that the costs we cut a couple of years ago will never return.

Total Company advertising revenues were up 10%, and affiliate and subscription fees were up 15%.

So healthy underlying growth continues.

These increases are even more encouraging given that last year's third quarter was when the economy began to pick up.

We also generated $260 million in free cash flow, a significant improvement over last year's quarter, bringing our year-to-date total to $1.4 billion, up 165% over the same time period last year.

Again, it is because of this healthy free cash flow that we were able to announce the $1.5 billion share buyback I mentioned earlier.

Let's take a look at each of our businesses and some third-quarter highlights.

Beginning with our Content Group and its largest segment, Entertainment, where we produced revenue of $1.6 billion and OIBDA of $278 million in the quarter.

Underlying advertising growth in the Entertainment segment was very strong, led by a 7% increase at the CBS Television Network.

As you know, we have had a phenomenal start to the new season, winning the first five weeks of the season in all key measures, viewers 25 to 54 and 18 to 49.

This is the first time any network has done this since 1997.

And it only happened twice since People Meters were introduced in 1987.

Our schedule is incredibly stable, and we expect it to continue to shine for the rest of the season.

Our returning shows remain very strong, and the five new shows we launched are the top five new shows of the fall, led by the number one new show, Hawaii Five-O.

All five of our new shows have been picked up for the entire season.

We not only outperformed the field in this year's upfront marketplace, but we are now reaping the greatest benefits of the increase in scatter pricing as well.

Because of the strength of our primetime schedule, scatter is up more than 35% over the upfront, which bodes very well for the fourth quarter, and the first quarter of 2011 as well.

In addition, NFL ratings are up 12% year-over-year this season.

We have extremely high demand for our AFC package, and our sales are phenomenally strong.

We expect this to continue right through the AFC championship game in January.

As you know, advertising is just one way we capitalize on our content.

Very positive trends in nonadvertising-dependent revenues, including global syndication, retransmission consent, and license fees from emerging platforms continue to strengthen the evolving broadcast model.

Including the three new CBS-produced dramas on our schedule this season, our studio now owns 27 shows that are currently in production, meaning that ratings success represents just the first link in our increasingly valuable monetary content chain.

Let me point out just a few of the incremental ways we are getting paid for our content now.

First, syndication.

Domestically we are selling our new hits show earlier and at record prices.

And international syndication is becoming a bigger piece of the pie as well, representing an important long-term growth opportunity for us.

This season we sold all three of our new dramas internationally for north of $2 million an episode each.

Meaning that all three were profitable before a single episode aired.

Within weeks of enhancing Hawaii Five-0 was on our schedule, we sold it in more than 100 markets.

And now it is in nearly all 200 of our overseas markets.

And, of course, on this show domestic syndication is still to come.

We are also expanding internationally by gaining equity in new overseas channels.

As you know, last year we partnered with Liberty to rebrand six local UK channels as CBS channels and expand our programming there.

During the quarter we entered into two new similar joint ventures, one with Reliance in India for three channels in India.

And another with Network Ten in Australia, the people who own the Ten Network, for a partnership to provide content to the new cable channel 11.

Next, in addition to syndication, retrans is now a very significant and continuing part of our content value chain as well.

Our retransmission consent revenue is up more than 40% year-to-date versus the same time period last year, and will easily meet our full-year target of $100 million.

This important revenue stream will keep growing for us.

And the economics of our groundbreaking new ten-year deal with Comcast will benefit our bottom line for a long, long time.

We are pleased that without a fuss the largest cable operator recognized the value of our content in a way that benefited both sides of the negotiation.

Retrans, as well as broadcast affiliate compensation, to us will continue to grow every single year.

Finally, it is becoming increasingly clear that every new online distribution platform needs premium content to successfully launch their service.

We continue to talk to all of these companies, companies you all know very well, about ways we can get the proper value for our programming.

We have and will continue to pick and choose the best deal for our shareholder as we grow this additional revenue stream.

Meanwhile, our in-house websites led CBS Interactive to a very strong third-quarter with display advertising revenue up 17% year-over-year.

Our ad sales, site traffic and audience engagement all continue to grow and to outpace the industry.

Clearly, when you have the most successful shows on air it crosses over to online as well.

And not just CBS.com and TV.com, but also social communities like Facebook, where we have nearly 50 million fans for our primetime shows.

The cross-platform presence is appealing to our advertisers who are increasingly making both on air and digital buys with us.

Our Cable Networks segment also had a terrific quarter.

Revenue was up 12%, and OIBDA was up 33% from the same period last year.

Year-over-year we have added more than 4 million subscriptions at Showtime Networks, and nearly 5 million at CBS College Sports.

And rates have increased as well.

We are confident that all of our Cable Networks will continue to add more subscribers and value to our portfolio going forward.

Cable is another business where the strength of our content is driving our performance.

During the quarter we debuted yet another critically acclaimed Showtime original series, The Big C.

The show's launch drew our highest ratings for an original series premier in eight years, and it is staying strong.

Our returning series, Weeds and Dexter, also premiered new seasons during the quarter.

Both shows had their highest premieres ever come.

And Dexter's was Showtime's best overall original series season premiere in 15 years.

At Publishing revenue was $218 million in the third quarter, and OIBDA was $31 million, up 10% as our expense rationalization efforts keep paying off.

Just as with our TV programming where digital continues to be a growing part of the business, digital competition between Apple, Barnes & Noble, Google, Amazon and the rest has us well-positioned in the e-book space, given our leading content.

We had more New York Times bestsellers in this year's third quarter than we did last year.

And our newest releases by authors Vince Flynn and Bob Woodward are outperforming their previous titles.

Turning to Local Broadcasting, we had another outstanding performance, as the local ad market recovery continued into the third quarter.

Revenue was up 15%, with TV station advertising revenue up 25%, and radio ad revenue up 9%.

At the same time Local Broadcasting OIBDA increased 49% year-over-year.

And our OIBDA margin was 29%.

Strong pacing is continuing into the fourth quarter.

Radio is pacing up double digits and our TV Station Group is trending to be up more than 20% over last year.

Political advertising will contribute significantly to our fourth-quarter results.

We saw very strong political spending right up through the midterm elections this week.

And the demand for political time pushed nonpolitical dollars past the election into the rest of the fourth quarter.

The momentum in local TV advertising continues well beyond the fourth quarter.

Momentum also continues at Outdoor as well.

Third quarter revenue was up 10% in constant dollars as the advertising marketplace continued to improve.

OIBDA more than doubled year-over-year in the quarter as a result of both the topline growth and this business' new streamlined cost structure.

We continue to renegotiate and enter into new contract at better terms, which will be reflected in our results going forward as well.

One final note on our Local Group.

I mentioned to you last quarter that we were launching a single website in New York called CBSNewYork.com.

This site combines the resources of WCBS Channel 2, 1010 WINS, WCBS 880, and WFAN - The FAN, to become the premier local information destination in the market.

We have since launched six more similar local sites in major markets where we own TV and radio stations, including Los Angeles, Chicago, Philadelphia, San Francisco, Dallas and Boston.

We are very encouraged by the early results, and going forward we expect to be generating hundreds of millions of dollars from our local websites within the next few years.

Across-the-board, during the quarter we were able to once again deliver on our promises and produce results that speak to our ongoing growth and success.

Beyond the strong finish we expect this year, there are a number of developments that will drive our continued momentum into 2011 and 2012.

These include the best start any television network has had in 13 years, with successful new shows that are already profitable and will generate revenue for years to come.

The increasing value of our content in a dual revenue stream universe, including retrans, affiliate compensation, and emerging online services, dramatically improved contracts like the new Comcast and NCAA deals, which truly kick in beginning next year.

The broad-based recovery of the local ad market, where there is still lots of room for more growth.

Our lower cost structure, which allows more revenue to translate into profits.

Interest expense alone will be down $90 million annually, following all of our debt actions this year.

As you saw with our announcement today, a share repurchase program that returns additional value to shareholders, as our businesses continue to throw off lots of cash.

So, yes, we had a terrific quarter.

But as you see, the best is yet to come.

Thank you.

And with that I will turn it over to Joe.

Thanks, Les.

And good afternoon, everyone.

Today I will provide some more detail on our results for the quarter, highlight our recent financing activities and new share buyback program, and update you on what we are seeing in Q4, and the things we know about 2011.

Starting with our total Company results for the quarter.

Total revenue of $3.3 billion compares to $3.35 billion for the same quarter last year when we benefited from the sale of five major television series that went into first cycle syndication.

To give you a sense of the size of these titles, we are talking about over $300 million in revenue at about a 35% OIBDA margin, which is not included in this year's third quarter.

Meanwhile, as Les said, total advertising revenue was up 10%, and affiliate and subscription revenues were up 15%, illustrating the ongoing strength in our underlying businesses.

The 10% advertising growth accelerated from Q2's 9% despite tougher comps this quarter.

Reported OIBDA was up 33% for the quarter to $750 million.

Reported operating income increased 46%, and reported diluted EPS increased 53% to $0.46.

We are adjusting our reported results for four items in 2010, a favorable legal recovery of $90 million, a gain on sale of a TV station of approximately $8 million, an $18 million tax benefit from the settlements of income tax audits, and restructuring charges of $7 million.

In 2009 we are adjusting for three items, another favorable legal recovery of $28 million, $42 million of tax benefits from additional audit settlements, and impairment charges of $32 million.

Adjusting for these items in the quarter, total Company OIBDA came in at $667 million, a 17% increase.

Operating income was up 25%, and diluted EPS of $0.35 was up 40%.

Margin expansion continues to be a key area of focus for us, so let's look at that trend.

Total Company's OIBDA margin in Q1 2010 was 10%, and in Q2 it expanded to 17%.

And now in Q3 it has reached 20%, which is near 2007 levels.

Our Q3 OIBDA margin is a 300 basis point improvement to last year's third quarter, even without the benefit of the five syndication titles.

And these are not only percentage increases we are talking about, they are higher dollars as well.

Let's quickly look at our year-to-date results, total Company revenue up 7%, OIBDA up 31%, operating income up 50%, and net earnings up 133%.

This flow-through demonstrates the strength of our operating leverage.

Looking at our segments for the quarter, Entertainment revenue of $1.6 billion was down 12% due to the five shows that went into syndication last year.

Our 7% increase in network advertising revenue accelerated from 5% in Q2.

OIBDA for the Entertainment segment finished at $278 million, down $47 million as the syndication benefit from last year more than offset the growth from ad revenues from the Network and Interactive and higher retrans revenues.

At Cable Networks revenue was up 12% and OIBDA was up 33%.

Telcos and satellite operators drove this subscriber growth.

On a year-to-date basis our Cable OIBDA margin is at 36%, up 500 basis points from the same period a year ago.

We expect the fourth-quarter margin to be 40% plus for Cable.

Publishing revenue of $218 million for the quarter was down 6%.

However, publishing OIBDA for the quarter was up 10% to $31 million, as we continue our cost containment actions.

E-books now comprise approximately 7% of total revenue, and will continue to be a growing part of the revenue base.

At Local Broadcasting the strong revenue and profit increases already discussed have improved our OIBDA margin 7 percentage points from last year to 29%.

We expect Local Broadcasting's fourth-quarter margin to be up in the mid-30%s.

And at Outdoor revenue for the quarter was 8% to $460 million on a reported basis.

Excluding the impact of foreign exchange fluctuations, Outdoor revenue increased 10%.

The Americas led the way with a 15% increase, driven by higher occupancy.

Outdoor OIBDA of $77 million increased 136% from last year's third quarter, as we are benefiting from higher revenue, cost saving initiatives and more favorable contracts.

Turning to our balance sheet.

Free cash flow came in at $260 million for the quarter, compared to a $24 million use of cash last year.

It bears repeating that on a year-to-date basis, free cash flow is $1.4 billion, up 165% from prior year.

We have used this cash primarily to strengthen our balance sheet.

Our cash on hand at the end of the quarter was $1.1 billion.

So far this quarter we have issued $600 million of new debt at very attractive rates.

The 4.3% coupon for our 10-year note is the lowest rate in our history.

In fact, it is the lowest rate ever for all of media.

This week we also called the $544 million that was due in May 2011, so total gross debt on the balance sheet as of September 30 will decrease by $500 million-plus before year-end.

The net result from all our financing activities this year leaves only $490 million of debt coming due over the next three years, and saves us approximately $90 million per year in interest costs.

So our balance sheet has never been stronger, which brings me to our next topic of returning capital to shareholders.

The $1.5 billion share buyback program we announced today is expected to be executed over approximately 18 months starting in January, which will come to about $500 million every six months.

At our current share price this program constitutes about 13% of our shares outstanding.

The combination of this buyback, along with our dividend, provides our shareholders a very attractive total return yield.

It also represents a significant payout ratio, and gives you a clear indication of what we are doing with our cash flow.

Looking ahead, here is what we are seeing in Q4 for our advertising businesses.

As stated earlier, network scatter market remains robust.

It is up over 35% above the upfront and broad-based among categories.

Online display advertising is pacing up mid teens.

TV station revenue is pacing to be up over 20% against tougher comps.

Radio stations are pacing to be up double digits, which is an acceleration from the third quarter.

We are having a record political year at our Local Broadcasting segment, and we expect to exceed our full-year $200 million target.

Our Outdoor Group is currently pacing up high single digits on a constant dollar basis.

In addition, we expect our fourth-quarter total Company results to be our highest of the year in terms of revenue and OIBDA.

CapEx for the full year 2010 should be in the range of $250 million to $300 million.

We estimate cash taxes to be in the range of $200 million to $250 million for the full year.

Also, as a reminder, our fourth-quarter financing activities will result in an early extinguishment of debt charge of about $45 million.

Looking further out to 2011, we expect to have another strong year.

Here is what we know.

We know this year's upfront was up high single digits, which runs through Q3 of 2011, and scatter is tracking well above upfront.

Given the strength of our schedule, we expect this trend to continue.

We know the cost of the current primetime schedule is less than last year's.

And with our revised NCAA agreement, sports costs will be down next year as well.

We know we have new retrans agreements that provide meaningful upside in 2011.

We know we have more favorable Outdoor contracts.

We know we will get cost savings from our 2010 restructuring activities.

We know interest expense is going to be lower, and we will generate significant free cash flow.

And we know we will be returning a significant portion of that free cash flow to our shareholders via our stock buyback and dividend.

So we will conclude by saying that our momentum is set to continue into next year and beyond.

The overall ad market still has plenty of room to recover.

Plus we have positioned the Company to continue to be a big beneficiary in the years to come by taking a number of strategic steps to capitalize on the changing business model.

We feel very good about where we are, but even better about where we are headed.

With that, Ruthie, we can open the line up for questions.

(Operator Instructions).

Ben Swinburne, Morgan Stanley.

Joe, thanks for the color on the buyback.

I guess the only thing I would add is you have given us 2.5 times, I think, gross leverage target range.

Any comment on how much cash CBS needs to keep on its balance sheet any given time just from a flexibility perspective?

Then, also, your revenue break out, at least the strength versus where we were came in on the affiliate and subscription fees, which the growth was 15% this quarter, an acceleration from the first half.

Is that retrans from Comcast kicking it already or CBS Sports Network or Showtime or all of the above?

I just want to get a little bit of understanding of what drove that acceleration.

Then one last one for Les.

NBC is making a big move all of a sudden -- maybe not all of a sudden, but about looking at alpha boomers and the older demo.

And you guys always get knocked for being the older network.

What is going on here?

Is this something you think is a significant shift in the broadcast industry in terms of advertising?

Ok, Ben, I will start -- it is Joe.

I will start first.

I will answer your first two.

As far as how much cash do we have, we don't need a lot of cash on hand to run the Company.

The working capital, as you see, we manage very, very well.

So cash on hand at the end of the quarter just under $1.1 billion.

Obviously, we will use some of that cash to call the debt, I said, in from May of 2011.

So we don't really need a lot of cash.

As you know, the first six months of the year is our stronger cash flow part of the year.

So, again, we are going to buy the stock right into our strength in generating more cash flow.

As far as the affiliate and subscription, a little bit does have to do with timing.

It is when agreements kick in and stuff, so there is a little bit of timing.

But if you look at it on a year-to-date basis those fluctuations tend to even out.

Ben, we find it a little bit ironic that NBC is now talking about older demos.

It is something we have obviously been talking about for a while.

We have been quoted -- I have been quoted about 1,000 times saying, for my money a 50-year-old is more valuable than a 19-year-old in terms of purchasing power.

I was sort of boo'ed down by the other networks when they were doing a bit better -- that 18 to 49 is the only thing that mattered.

Now that we are winning the 18 to 49, suddenly there is a shift.

Now, by the way, we still agree with the fact that a 50-year-old is more valuable than a 19-year-old, and we have always welcomed them into the tent.

And to us a viewer is a viewer is a viewer.

We like winning them all.

We like 18-year-olds, and we like 80-year-old.

And the good thing is they are watching CBS.

Can't say more than that.

Thank you.

Anthony DiClemente, Barclays Capital.

Thanks for taking the questions.

I have two; one for Joe and one for Les.

Joe, if you could just get back to the fourth-quarter network math, you mentioned some points.

It seems like the network ad revenue being up 7% in the quarter, up sequentially, that should really accelerate into 4Q, because you've got the upfront CPM increases in the high single digits.

It seems like scatter should be way up.

And then it seems like you have seen a ratings reversal from 3Q to 4Q.

So should that network ad revenue growth double or more than double in the fourth quarter?

Anthony, I don't think we said what fourth-quarter network ad revenue, I think we gave you the scatter market.

The scatter market, as you know, is pacing -- but as we said, 35% plus over this year's upfront.

So, yes, I think again any way you look at it it is going to be a strong fourth quarter on the advertising -- the national advertising front.

It will be.

The only caution I want to give you is, Anthony, is this year we sold a lot more at the upfront than we did a year ago.

So there is a little bit less inventory.

However, this scatter demand keeps going up and up and up, and being as we are stronger that should -- there should be enough inventory to take care of that.

But you sold at higher prices, can you confirm, did you sell it at, say, up 8%, up 9%?

Is that in the ballpark?

I think we've said high single digits.

This year's upfront, we said high single digits.

You're right there.

And then one for Les.

And this is, I guess, a bigger question about digital distribution.

You have moved forward with this hyper syndication model and made a lot of your content available for free online with all your partners.

It seems to have bucked the authentication strategy of putting the content behind a pay wall.

It doesn't seem to be hurting your ratings.

I guess the question is, what gives you the confidence that that more liberal and open strategy with your content continues to be the right one going forward?

Well, actually, Anthony, we have been slightly more conservative about putting our content online than some of our peers, because as you know, we are not a member of Hulu.

And as a result of that -- we do have CBS.com, but once again we have been rather cautious about where to put it, when to put it, because the mother lode is still on network advertising, and ratings on network and in syndication still bring in far more dollars than they do on digital.

Having said that, we are obviously exploring all these various platforms and making a variety of deals when it makes sense.

And when it makes sense to us is getting paid appropriately for our content.

But TV Everywhere, we are certainly a believer in it.

When Comcast or Time Warner gives us decent retrans dollars, which they have done, and treated us very fairly, which they have done, they deserve to have the content as part of their retrans fees.

So we are very much in favor of TV Everywhere.

Okay, thanks a lot.

Michael Nathanson, Nomura.

Thanks.

I have a couple.

The first one would be, why are we waiting for January to start buying back stock?

Is there any timing related issue on the buyback?

No, I think we are just going to go through it, nothing more.

It is 60 days.

We are going to obviously use the cash on hand to pay down the -- call the notes and stuff like that, so it is just getting everything in order.

Okay, then I will follow-up on stations and radio.

I know people are going to say, look, October is great because of political being so strong.

So can you share a little bit about November pacings, what are you seeing now that political is out of the way?

You talked about a backlog, and how is that coming through in November for you in TV and radio?

Well, it obviously impacts TV more, so let's just focus on TV.

Our current pacing is holding at up 20% after the election.

Obviously, advertisers are booking early.

And we are just making sure our sales guys are pricing it right, because the demand -- the pricing is so strong.

So that demand that people got pushed from October into November and December, that pricing is clearly holding.

So the way we see it, Mike, is 2010 is going to be a very strong year for local television, with or without political.

Right.

Michael, one of the misnomers out there is the ex-political dollars.

Because, yes, we took in a lot of political revenue.

We are really pleased -- it went across TV stations and radio stations.

And we all know how much money was spent in places like California and New York, hundreds and hundreds of millions of dollars.

And we benefited by that.

But all we did was in an already in demand categories, we just pushed it further out.

So it is remaining in demand, and what people don't realize, we would have sold those spots for very high prices.

In some cases, we sold the political spots for less than we would have gotten had we just had it in the normal marketplace.

So, as we said, we pushed money into the rest of the fourth-quarter.

And per Joe's comment, the demand remains very strong.

Okay, thanks.

Can I just ask you one, Les, about -- you are early on the retrans argument, and now the next wave is the reverse retrans of getting paid by your affiliates.

If you talk a bit about what kind of deals you're getting done, and how big it will be in the next couple of years, a little bit of update on that strategy too.

Yes, obviously, we have had a number of discussions with our affiliates.

And when their deals come up with CBS, we know that they are getting retrans money, and we wish to share in them.

A ton of those deals have not come up yet.

There have been a number of them that have.

We are getting paid.

It is hard to quantify where we are going to be, since the bulk of our deals aren't up until 2013 and 2014.

But the affiliates are aware that they're getting paid retrans.

And a lot of the reason that they're getting paid that retrans money is because of what the network is giving them.

And our affiliates certainly appreciate what CBS primetime is doing for them.

When you look at 10 o'clock, we are winning five nights a week, which means their 11 o'clock local news is doing extremely well.

And as I referred to, the NFL is doing extremely well for them.

So we are making those deals.

They're not very noisy, but we are getting paid by them.

And it should, over the next number of years, also amount to hundreds of millions of dollars down the road.

Okay, thanks.

Michael Morris, Davenport & Company.

Two questions for you.

One, on local advertising, in particular, with respect to autos, it seems like autos have come back strong, kind of consistent with the return of purchases of autos.

At this point has the return of auto actually been consistent with that level?

Is that what you are seeing?

And have you seen any permanent differences, say, with a reduction of auto dealerships or a reduced amount of spending at the manufacturer level that has impacted you?

That is the first question.

Then the second, on the repurchase decision, this certainly isn't a criticism.

I think $1 billion annual repurchase pace is very strong, but can you talk a bit about the decision to do a repurchase instead of, say, returning to a dividend?

And what your appetite is in the future once you work through this plan to address the dividend or is a repurchase -- like an ongoing repurchase where you want to be?

Thanks.

Mike, it is Joe.

On the local auto front, again, the category -- and, again, broadly other categories are following suit, but clearly auto is up.

I think clearly obviously selling more cars helps.

We are seeing auto companies obviously much better capitalized companies.

The dealerships, maybe less dealerships, but again, better capitalized so the dollars are following.

What I will tell you there is still much room to grow there.

So we are not clearly back to 2007 levels, but again, they're focused on it.

And clearly they know they have to market to move product, and we have local assets well-positioned to capitalize on that.

And, Michael, on the repurchase, obviously there was a lot of discussion.

What is the proper way of returning money to our shareholders.

We already have a dividend in place.

We felt that to reduce our shares was the right way to go with this amount of cash.

This does not preclude us, as we look forward, to do something further with a dividend.

And something that we talk about every week and we discuss it with our Board, and we came to the conclusion that the share repurchase was the right thing to do, being that our cash position was so strong.

But, once again, we will continue to look at it, and we will continue to see what is the best way to use our capital.

But an increase in the dividend is certainly not out of the question.

That's great.

Thanks.

And just to be clear, on auto side then, your sense is that there hasn't been, say, a permanent structural change, or the changes that have taken place had been mitigated by stronger capitalization and you feel like prior levels are achievable?

That's correct.

Okay, great.

Thanks, guys.

Laura Martin, Needham & Company.

Just two questions; one on sports.

We are hearing from some of your competitors that sports ratings are strong.

I'm interested in whether CBS is also getting a higher sports rating.

But more importantly, do you get the economics flow through of that or does it go back to the league?

(technical difficulty) radio it sounds like, Joe, you were pretty optimistic about the trendline in radio going into 4Q.

We have been hearing that national is up double digits, but local remains anemic at low single digits.

I'm just wondering if you think that is a secular kind of rebuttal of the local merchants against the radio business, or whether you see those two lines converging in this fourth-quarter we are in now?

I will deal with the first question, the sports.

Sports has been extremely strong.

Before the season even began there was a great demand for NFL football.

And I think it followed the strong upfront that sports became -- the NFL became even stronger than that.

Add to that what we referenced as ratings that are up in the low teens, and the demand for the NFL is extremely good.

I know the NBC game is doing well.

I know Fox is doing well.

Football is extraordinarily strong, and the dollars are flowing in greatly for it.

The economics of the rest of our sports, as mentioned, the NCAA deal changes our full profile in that event, and that becomes a profitable event, as does golf, and even the U.S.

Open Tennis Tournament, if it wouldn't rain so much.

So we are very pleased with our sports portfolio, but the NFL has gone through the roof.

Joe --- (inaudible).

On your radio question, Laura, the fourth-quarter, yes, it is accelerating.

That is impressive because obviously sequentially Q3 2009 to Q4 2009 grew a lot.

So, again, very impressive.

Yes, national is up higher than local.

And local -- but local is still growing.

And what I just think is right now the local advertisers are not flocking to television, because they like where the price is there.

So as we continue to increase pricing on the local TV side, I think local radio, as well as Outdoor, will continue to benefit.

So you think the gap closes between national and local a little bit?

Yes, I think it will converge, again, but all on strong demand.

Great, thanks very much.

Very helpful.

Brian Shipman, Jefferies.

Can we talk about Showtime for a second?

Showtime showed some nice subscriber growth.

Is any of that growth promotional in any way?

Are you getting paid for all of it?

And then what rights does Showtime have for digital distribution of its content?

The Showtime growth, you know what, it is hard to distinguish.

Yes, we have some promotional things, and I know HBO addressed their loss of subs by some of the lack of promotional stuff.

That hasn't really affected the growth in Showtime.

I think the thing that has affected the growth in Showtime is just Showtime's programming has gotten infinitely better over the last two or three years, and we are seeing a constant increase in the subscribers.

And in terms of the digitalization of the content, it depends on the content.

By and large Showtime owns most of what they do.

There are a couple of shows that they don't, but they have most of the rights for the content that is on Showtime.

And, once again, they are being exploited and will continue to be.

Great, thank you.

Michael Meltz, JPMorgan.

You have said a few times how strong the sports programming ratings have been, especially NFL.

Is there -- or what is the contingency plan if NFL season doesn't happen in second half of 2011?

Well, Joe and I are going to get out on the field and start tossing the ball around.

I would pay to see that.

You have never seen Joe with shoulder pads on.

Look, obviously it is something that would not be a good thing to have happen if there was a lockout.

The reports I am hearing are guardedly optimistic that there seems to be some progress being made.

So we are obviously hoping that there isn't a lockout.

It is not something we would want, and it is not programming you replace.

It is not like, okay, if I take off a show from primetime I will have another show ready.

The NFL is the NFL, and it is very valuable, but we are hoping that nothing bad happens here.

Joe, on Cable, is 40% now a good run rate for margins?

Yes, I think, again, you've got to look at that on an annualized basis, Michael.

I think that is fair.

Each quarter on whether there is some ad and promo for premieres expenses kind of fluctuate, but on a normalized run rate 40% plus I think is a good indication.

Great, thanks for your time.

David Miller, Caris & Company.

Hi, congratulations on the stellar print.

A couple of questions.

One, first related to the NFL, Joe, my understanding is that if there is a lockout, and it doesn't sound like there is going to be, but if there is, you do not have to pay the roughly -- I think it is $655 million in rights fees back to the NFL.

And if you could confirm that number for me, that would be great.

Then, Les, on the network piece, my understanding is that the ratings guarantees dated back to the upfront in June were actually even more conservative for certain series than the previous year, which really makes the chances of a make-good situation basically nil.

And if you could confirm that for me, that would be great.

Thanks very much.

So let me answer both of them.

You know what, if there is a lockout there, we have a certain arrangements with the NFL that I don't want to get into, where they would get some [renumeration], not total.

Nothing that affects us greatly, but it is a private contract.

And it wouldn't affect our bottom line, let me put it that way.

Right.

Regarding the ratings guarantee, we are in very good shape.

The word, make out good, the good news is it hasn't come up all year at CBS, nor do I expect it.

So every dollar we are taking in in scatter is new money.

The prices are going up considerably.

We have renewed our entire schedule.

It is a great luxury to have that.

We actually have three midseason shows, and our problem is, where do we put them?

So I have never seen anything like this, but we are beating our guarantees and we are in very good shape, and it is a good position to be in.

Thank you.

Doug Mitchelson, Deutsche Bank.

Thanks so much.

A couple of questions.

Joe, I guess I missed it, can you give us a break out between radio and TV for political ad revenue this year, percentages or dollars or something?

We don't break it out.

Again, most of the dollars in the third quarter, it is about $37 million -- again, most of that is falling to TV stations.

I think that will give you a general sense.

Okay, and then I guess either for both Joe and Les, have you thought about or have you been making all of your TV affiliate deals coterminous?

It would be a lot easier to convert to a cable network at some point in the future if you so choose, not to mention can you imagine the improved bargaining position from your TV affiliates just knowing that you could have that option if you so chose?

The range of these deals, Doug, are so diverse, it is very hard to make them coterminous.

And by and large, we have not done that.

Yes, I am sure it would give us leverage five years from now, and potentially give us more leverage, but it is virtually impossible to imagine a world where that would happen.

And we own, in the top major markets, the television stations.

We own 40%.

And once again, it is not our intention now or in the future to turn CBS into a cable network.

No, fair enough.

I guess just the thought is, as we see continued retrans fights if at some point, even though it seems like the FCC is not interested in getting involved, if at some point the regulators did get involved, obviously that is an option you could always pursue, does to sidestep the entire issue, just become a cable network.

So I'm just more sort of curious about (multiple speakers).

Well, one thing that should be pointed out, we all hear about the battles, we all hear about the signals being pulled.

We have made hundreds of deals.

There have been hundreds of deals that haven't made any noise whatsoever.

So number one, we obviously really urge the government to stay out of this.

This is a company to company issue.

And by and large if we were able to conclude a ten-year deal with Comcast, a long-term deal with Time Warner, successful deals with 25 smaller cable companies, this dispute is the exception, not the rule.

Then let me just ask one follow-up on the reverse retrans from your affiliates.

I think there is a general perception by some of the other networks that the value you are delivering is worth somewhere in the 70% to 80% of the total retrans fee range.

Even though it seems to be selling out at 50-50 initially.

Where do you come out in terms of, if you had to divvy up the pie between the value of the local TV station generates versus the value that network programming generates, how much of it do you think you deserve in a theoretical world, even if it is not practical today?

Doug, there is only the one network that says they deserve 75% or 80%.

And we know where that is coming from.

We take them each -- not all affiliates are created equal.

Some are in stronger financial positions than others.

Some are getting more retrans than others.

So we take each group separately.

But as I said, we have concluded a number of deals where we feel we are being compensated appropriately.

And we want our affiliates to be strong.

As Joe said, we control -- we own 40% of the country with our own stations, and that is the major part of our business.

All right, thank you very much, Les.

Ruthie, we have time for one more question, please.

Marci Ryvicker, Wells Fargo.

Just a question on Outdoor.

Growth was phenomenal in the Americas.

What was US alone?

And you've mentioned that occupancy was a driver of most of this growth.

How was price?

Marci, go back to bed.

Take care of your flu, please.

Joe, go ahead.

By the way, Marci, the Americas is really primarily the United States.

We do have something -- Canada, Mexico and South America, but mostly, again, the 15% is coming from the US.

So that is a good proxy in the mid-to high teens.

What I would just tell you is occupancy we increased from the 75 percentage range on average to over 80%, so the rest is pricing.

Okay, and then in terms of Europe, Europe was kind of weak.

So what is happening there?

I think, again, if you go country by country, I think that is certainly trailing the recovery we are seeing here.

The good news is the UK, it looks like it is turning around and coming back, which is our largest market.

So I think, again, the other countries will follow.

But you are right in terms of it is trailing the US.

What is the national/local split in Outdoor?

The national/local split in terms of what, revenue mix?

Yes.

Dollars or growth rates?

Percent of revenue.

Percent of revenue, I would say national is probably about 60%, if I was just guessing.

Great, thank you so much.

Great.

Thank you, Marci.

And thank you everyone for joining us tonight, and have a great evening.

Ladies and gentlemen, this does conclude our conference.

We appreciate your participation.