Washington, D.C. 20549
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, ora smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
VIACOMCBS INC.
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PART I
CBS Corporation (together with its consolidated subsidiaries unless the context otherwise requires, the “Company” or “CBS Corp.”OVERVIEW
ViacomCBS Inc. (“ViacomCBS”) is a massleading global media and entertainment company with operations inthat creates content and experiences for audiences worldwide. We operate through the following four segments:
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• | ENTERTAINMENT: TheTV Entertainment. Our TV Entertainment segment is composedcreates and acquires programming for distribution and viewing on multiple media platforms, including our broadcast network, through multichannel video programming distributors (“MVPDs”) and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. TV Entertainment consists of the CBS® Television Network;Network™, CBS Television Studios®; CBS Studios International™ and, CBS Television Distribution™;®, CBS Interactive™;®, CBS FilmsSports Network®;, CBS Television Stations™ and the Company’s digitalCBS-branded streaming services CBS All Access® and CBSN®. and CBSN®, among others.
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• | CABLE NETWORKS: The Cable Networks. Our Cable Networks segment is composedcreates and acquires programming for distribution and viewing on multiple media platforms, including our cable networks, through MVPDs and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. Cable Networks consists of Showtime Networks, which operates the Company’sour premium subscription program services,cable networks Showtime®, The Movie Channel® and Flix®, and Flixa subscription streaming offering of Showtime; our basic cable networks Nickelodeon®, including a digital streaming subscription offering; CBS Sports NetworkMTV®, the Company’s cable network focused on college athletics and other sports;BET®, Comedy Central®, Paramount Network®, Nick Jr. ®, VH1®, TV Land®, CMT®, Pop TV™ and Smithsonian Networks™Channel™, among others, as well as the international extensions of these brands operated by ViacomCBS Networks International™ (“VCNI”); international broadcast networks, Network 10®, Channel 5® and Telefe®; and Pluto TV™, a venture between Showtime Networks and Smithsonian Institution, which operates Smithsonian Channel™, a basic cable program service, and a digitalleading free streaming subscription service.TV platform in the United States (“U.S.”).
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• | PUBLISHING: The PublishingFilmed Entertainment. Our Filmed Entertainment segment is composed ofdevelops, produces, finances, acquires and distributes films, television programming and other entertainment content in various markets and media worldwide primarily through Paramount Pictures®, Paramount Players™, Paramount Animation® and Paramount Television Studios™.
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• | Publishing. Our Publishing segment publishes and distributes Simon & Schuster which publishes and distributes consumer books underdomestically and internationally and includes imprints such as Simon & Schuster®, PocketScribner™, Atria Books®, Scribner and Gallery Books®, Gallery Books®, Touchstone® and Atria Books®. |
LOCAL MEDIA: The Local Media segment is composed of CBS Television Stations, the Company’s 30 owned broadcast television stations; and CBS Local Digital Media™, which operates local Websites including content from the Company’s television stations and news and sports radio stations.
For the year ended December 31, 2016,2019, contributions to the Company’sour consolidated revenues from itsour segments were as follows: TV Entertainment 67% 43%, Cable Networks 16% 45%, Publishing 6%Filmed Entertainment 10% and Local Media 14%Publishing 3%. The Company generated approximately 14%
Owners of its total revenues from international regions in 2016. For the year ended December 31, 2016, approximately 54% and 14% of total international revenues of approximately $1.85 billion were generated in Europe and Canada, respectively.
The Company operates businesses which span the media and entertainment industries, including the CBS Television Network, cable networks, content production and distribution, television stations, internet-based businesses, and consumer publishing. The Company’s principal strategy isour Class A Common Stock are entitled to create and acquire premium content that is widely accepted by audiences, and to generate both advertising and non‑advertising revenues from the distribution of this content on multiple media platforms and to various geographic locations. The Company continues to increase its investment in both Company-owned and acquired premium content to enhance its opportunities for revenue growth, which include exhibiting its content on multiple digital platforms, including the Company’s owned digital streaming services, as well as third-party live television streaming offerings; expanding the distribution of its content internationally; and securing compensation from multichannel video programming distributors (“MVPDs”), including cable, direct broadcast satellite (“DBS”), telephone company, and other distributors, for authorizing the MVPDs’ carriage of the Company’s owned television stations (also known as “retransmission fees”) and cable networks, and securing compensation from television stations affiliated with the CBS Television Network (“station affiliation fees” also known as “reverse compensation”). The Company also seeks to grow its advertising revenues by monetizing all content viewership as industry measurements evolve to reflect viewers’ changing habits.
On February 2, 2017, the Company entered into an agreement with Entercom Communications Corp. to combine the Company’s radio business, CBS Radio, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, the Company intends to split-off CBS Radio through an exchange offer, in which the Company’s stockholders may elect to exchange shares of the Company’sone vote per share. Our Class B Common Stock for shares of CBS Radio, which will then bedoes not have voting rights. ViacomCBS Class A and Class B Common Stock are listed on The Nasdaq Stock Market LLC.
immediatelyconverted into shares of Entercom common stock at the time of the merger. The merger and related transactions are collectively referred to as the “Radio Transaction”. The Radio Transaction is subject to customary approvals and closing conditions. The Company expects to complete the Radio Transaction during the second half of 2017. CBS Radio, which was previously presented in the Company’s former Radio business segment, has been presented as a discontinued operation in the Company’s consolidated financial statements for all periods presented.
On July 16, 2014, the Company completed the disposition of CBS Outdoor Americas Inc. (“Outdoor Americas”), which was previously a subsidiary of the Company and has been renamed OUTFRONT Media Inc. Outdoor Americas has been presented as a discontinued operation in the Company’s consolidated financial statements for all periods presented.
The Company competes with many different entities and media in various markets worldwide. In addition to competition in each of its businesses, the Company competes for opportunities in the entertainment business with other diversified entertainment companies such as The Walt Disney Company, NBCUniversal Media, LLC, Twenty-First Century Fox, Inc. and Time Warner Inc., and with respect to CBS Radio, Cumulus Media Inc. and iHeartMedia, Inc.
As of December 31, 2016,2019, National Amusements, Inc. (“NAI”), a closely held corporation that owns and operates approximately 925 movie screens in the U.S., the United Kingdom (“U.K.”UK”) and South America and manages 3additional movie screens in South America, directly or indirectly owned approximately 79.5%79.4% of the Company’sour voting Class A Common Stock, and approximately 9.5%10.2% of the Company’sour Class A Common Stock and Class B Common Stock on a combined basis. Owners of the Company’s Class A Common Stock are entitled to one vote per share. The Company’s Class B Common Stock does not have voting rights. NAI is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended.
The Company wasWe were organized inas a Delaware corporation in 1986. The Company’sOur principal offices are located at 51 W. 52nd Street,1515 Broadway, New York, New York 10019. Its10036. Our telephone number is (212) 975-4321258-6000 and our website is www.viacbs.com. Information included on or accessible through our website is not intended to be incorporated into this Annual Report on Form 10‑K. On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”), pursuant to an Agreement and Plan of Merger dated as of August 13, 2019, as amended on October 16, 2019 (the “Merger Agreement”). At the effective time of the Merger, we changed our
name to “ViacomCBS Inc.” Unless the context requires otherwise, references in this document to “ViacomCBS,” “Company,” “we,” “us” and “our” mean ViacomCBS Inc. and our consolidated subsidiaries, to “CBS” mean CBS Corporation and its Website address is www.cbscorporation.com.consolidated subsidiaries prior to the Merger and to “Viacom” mean Viacom Inc. and its consolidated subsidiaries prior to the Merger.
CBS CORP. BUSINESS SEGMENTSTV ENTERTAINMENT
Entertainment (67%, 67% and 66% of the Company’s consolidated revenues in 2016, 2015 and 2014, respectively, and 53%, 51% and 50% of the Company’s total segment operating income in 2016, 2015 and 2014, respectively)Overview
TheOur TV Entertainment segment consists of the CBS Television Network;Network, our domestic broadcast network; CBS Television Studios CBS Studios International and CBS Television Distribution, the Company’sour television production and syndication operations; CBS Interactive, the Company’sour online content networksservices for information and entertainment; CBS Films, the Company’s producer and distributor of theatrical motion pictures; and the Company’s digitalour CBS-branded streaming services CBS All Access, CBSN, CBS Sports HQ®and CBSN.ET Live®; CBS Sports Network, our cable network focused on college athletics and other sports; and CBS Television Stations, our 29 owned broadcast television stations.
Television Network.Our TV Entertainment segment’s revenues are generated primarily from advertising sales, the licensing and distribution of its content and affiliate revenues comprised of station affiliation fees, retransmission fees and subscription fees, as further described below. In 2019, our TV Entertainment segment advertising revenues, content licensing revenues and affiliate revenues were approximately 50%, 26% and 21%, respectively, of total revenues for this segment. Our TV Entertainment segment generated 43%, 41% and 39% of our consolidated revenues in 2019, 2018 and 2017, respectively.
The CBS Television Network, through CBS Entertainment™Entertainment™, CBS News® and CBS Sports®, distributes a comprehensive schedule of news and public affairs broadcasts, sports and entertainment programming to more than 200 domestic television station affiliates reaching throughout the U.S., including 1615 of the Company’sour owned and operated television stations, and to affiliated stations in certain U.S. territories.
The CBS Television Network primarily derives revenuesrevenue from the sale of advertising time for its network broadcasts. A significant portion of the sale of advertising spots for the network’s non-sports programming occurs annually generally during May through July in the industry’s upfront advertising market for the upcomingbroadcasts and affiliation fees from television broadcast season, which runs for one year generally commencing in mid-September. Advertisers purchase the remaining advertising spots closer to the broadcast of the related programming in the scatter advertising market. Overall advertising revenue for the network is also impacted by audience ratings for its programming. The Company offers dynamic advertising insertions forstations affiliated with the CBS Television Network’s on-demand programming which allow theNetwork.
Company to change advertisements at any time within such programming and offer advertisers greater audience reach. In addition, the CBS Television Network’s revenues include station affiliation fees.
CBS Entertainment is responsible for acquiring or developing and scheduling the entertainment programming presented on the CBS Television Network, which includes primetime comedy and drama series, reality‑based programming, specials, children’s programs, daytime dramas, game shows and late-night programs such as The Late Show with Stephen Colbert. During 2019, the CBS Television Network broadcast the Tony Awards®, the Kennedy Center Honors and the GrammyAwards®. CBS won 21 awards at the 46th Annual Daytime Emmy® Awards in May 2019.
CBS News operates a worldwide news organization, providing the CBS Television Network and CBS News Radio News™® with regularly scheduled news and public affairs broadcasts, including 60 Minutes, 48 Hours Mystery,, CBS Evening News with Scott Pelley, CBS This Morning, CBS Sunday Morning and Face the Nation as well as special reports. CBS News also provides CBS Newspath®, a television news syndication service that offers daily news coverage, sports highlights and news features to the CBS Television Network affiliates and other subscribers worldwide.
CBS Sports broadcasts on the television network include The NFL Today; certain PGA Tour Golf Tournaments,golf tournaments, the Masters and the PGA Championship; certain games from the NCAA Division I Men’s Basketball Tournament the rights to which have been extended through 2032 under a March 2016 agreement with the NCAA and Turner Broadcasting System, Inc.;certain regular-season men’s college basketball games;games, including games from the Big Ten Conference; regular-season college football games, including games from the Southeastern ConferenceConference; and the NFL’s American Football Conference (AFC)(“AFC”) regular-season, post-season wild card playoff, divisional playoff and championship games. In 2016,2019, the CBS Television Network broadcast Super Bowl 50, for which CBS Sports won three Sports Emmy®Awards, and certain AFC games in the 2016 season under its February 2014our agreement with the NFL to broadcast the AFC package from the 2014 through the 2022 seasons,season, which also includes certain National Football Conference regular season games and the Super BowlsBowl, which is broadcast on the CBS Television Network on a rotating basis with other networks. Our most recent Super Bowl broadcast was in 2016,February 2019 and 2022. The Company produced andour next Super Bowl broadcast certain NFL Thursday Night Football games for the 2016 season and will also do so for the 2017 season under its January 2016 agreement with the NFL.be in February 2021.
CBS Television Network content also is exhibited via the internet,Internet, including through CBS.com™, CBSSports.com® and related software applications (“apps”); CBSN,the Company’slive digital streaming advertiser-supported news network available 24 hours a day, seven days a week; and CBS All Access, the Company’s digital streaming subscription service which includes a commercial-free option for on-demand content announced in August 2016. CBS All Accessoffersbothcurrent and library programming as well as original series, such as the upcoming The Good Wife spin-off The Good Fight and Star Trek: Discovery.In December 2016, the Company commenced a multi-year deal with the NFL for the live, local NFL games broadcast by the CBS Television Network to be streamed on certain CBS All Access platforms. Digitalour streaming services, such as CBSN and CBS All Access, which are further described below; and CBSN are also knownvirtual MVPDs, such as “over-the-top” or “OTT” services which provide video content via the internet to users without payment to a traditional MVPD. CBS All AccessAT&T TV Now, Hulu with Live TV and CBSN are available at CBS.com and CBSNews.com™, respectively, and through CBS software applications (“apps”) on multiple digital platforms, including Android, iOS, Amazon Fire and Windows 8 mobile platforms, and Amazon Fire TV, Android TV, Apple TV, Chromecast, PlayStation, Roku and Xbox connected device platforms, among others. In January 2017, the Company entered into an agreement for the digital streaming of the CBS Television Network’s programming on Hulu’s upcoming live television streaming service. During 2016, the CBS Television Network broadcast the 70th Annual Tony Awards®, the Kennedy Center Honors and the GrammyAwards®. In June 2016, the Company extended an agreement with The Recording Academy® to broadcast the Grammy Awards on the CBS Television Network through 2026. Furthering the Company’s analytic tools regarding television advertising and ratings, in 2016, the Company announced the “NYU Stern / CBS Media Analytics Initiative” to focus on the interactions between television and other media platforms and their influence on consumer exposure and behavior and “Purchase-Driven Planning” with Nielsen Catalina Solutions used to maximize return on investment across television and digital advertising campaigns, all of which supplement the Company’s “Campaign Performance Audit™,” a data-driven approach for analyzing and buying advertising time on broadcast television which helps advertising customers enhance consumer targeting and measure the effectiveness of their advertising.YouTube TV.
The CW, a broadcast network and the Company’sour 50/50 joint venture with Warner Bros. Entertainment, airs programming, including Jane the Virgin, Crazy Ex-Girlfriend, Supergirl Charmedand The Flash.Flash. Eight of the Company’sour owned television stations are affiliates of The CW. Certain of The CW’s series are streamed on Netflix, a subscription video-on-demand service including pursuant to output license agreements entered into with Netflix, Inc. in July 2016.(“SVOD”), and are also available via The CW app on multiple digital platforms.
Television Production and Syndication.CBS Television Studios CBS Studios International and CBS Television Distribution produce, acquire and/or distribute programming, worldwide, including series, specials, news and public affairs, and generate revenue principally from the licensing and distribution of such programming. The programming is produced primarily for broadcast on network television, exhibition on basic cable and premium subscription services, streaming services or distribution via first‑runfirst-run syndication. First-run syndication is programming exhibited on television stations without prior exhibition on a network or cable service. The CompanyWe subsequently distributesdistribute programming after its initial exhibition on a network, basic cable network or premium subscription service for domestic exhibition on television stations, cable networks or video-on-demandstreaming services (known as “off-network syndicated programming”). Off-network syndicated programming and first‑run syndicated programming distributed domestically, as well as programming distributed internationally, can sometimes be sold in successive cycles of sales known as “first cycle,”cycle” sales, “second cycle” sales, and so on, which may occur on exclusive or non-exclusive bases. Generally, license fees may decrease with successive sales cycles due to increased program exhibitions.
Programming that wasour production group produced or co-produced by the Company’s production group and is broadcast on network television includes, among others, NCISFBI (CBS), Bull (CBS), Kevin Can Wait (CBS), Madam Secretary (CBS), Scorpion (CBS), Criminal Minds Evil (CBS) and Jane the VirginNancy Drew (The CW). Generally, a network will license a specified number of episodes for broadcast on the network in the U.S. during a license period. Remaining distribution rights, including international and/or off‑network syndication rights, are typically retained by the Company or, in the case of co-productions, distribution rights are shared with the co-producer for U.S. or international markets. The network license fee for a series episode is normally lower than the costs of producing the episode; however, the Company’s objective is to recoup its costs and earn a profit through various forms of distribution, including international licensing, domestic syndication and digital streaming of episodes. Generally, international sales of network series are made within one year of the U.S. network run and series must have a network run of at least three or four years to be successfully sold in domestic off-network syndication; however, increasingly, these time frames are being shortened, particularly for sales to digital streaming services. In off-network syndication, the Company distributeswe distribute series, such as Hawaii Five-O, Criminal Minds, Blue Bloods The Good Wife, Elementary, NCIS and NCIS: Los Angeles,New Orleans as well as a library of older television programs. The CompanyWe also producesproduce and/or distributesdistribute first-run syndicated series such asWheel of Fortune, Jeopardy!, Entertainment Tonight, Inside Edition The Insider,, Dr. Phil, The Doctors, Rachael Ray, Hot Bench and Judge Judy and produces the upcomingproduce several series The Good Wife spin-off for streaming on CBS All Access, includingThe Good Fight, and Star Trek: Discovery,for streaming on CBS All Access Why Women Kill and Star Trek: Picard. The CompanyWe also distributesdistribute syndicated and other programming internationally.
The Company continues to monetize its content through digital media. It enters into and renews numerous multi-year licensing agreements for distribution of certain of its programming to various services, including the digital streaming on subscription video-on-demand services owned by Netflix (in the U.S, Canada and countries in Africa, Asia, Europe and Latin America), Amazon (in the U.S., India, Germany and U.K.), Hulu, Hulu Plus (each, in the U.S.), Bell Media (in Canada), Canal Play (in France), DLA (in countries in Latin America and the Caribbean), Foxtel, Stan Entertainment (each, in Australia), iFlix (in Malaysia, Thailand and Philippines), Nippon TV (in Japan), PlayCo (in the Middle East), MultiChoice Africa (in sub-Saharan Africa), Sky TV NZ, Telecom NZ (each, in New Zealand), Telefonica (in Spain), Watchever (in Germany), among others; digital streaming on advertising supported video-on-demand services, such as PPTV (in China); Sony’s broadband pay television service, PlayStation Vue (in the U.S.); and the digital downloading on various electronic-sell-through services owned by Amazon (in the U.S., Germany and the U.K.), Apple (in the U.S., Canada, Australia and countries in Europe), Google (in the U.S. and U.K.) and Microsoft (in the U.S.), among others. In July 2016, the Company announced that its upcoming Star Trek: Discovery series as well as the existing Star Trek series library were licensed to Netflix in 188 countries (excluding the U.S. and Canada) and to Bell Media in Canada.
Fees for television programming licensed for syndication and digital streaming are recorded as revenues at the beginning of the license period in which the programs are made available for exhibition, which, among other reasons, may cause substantial fluctuations in the Entertainment segment’s operating results. Unrecognized revenues attributable to such license agreements were $749 million and $847 million at December 31, 2016 and December 31, 2015, respectively.
The Company has a global channel presence through domestic and international joint ventures. The Company owns a 50% interest in a joint venture with Lionsgate, which owns and operates the entertainment cable network, Pop™. The Company owns a 49% interest in a joint venture with a subsidiary of AMC Networks Inc., which owns and operates six channels in the U.K. and Ireland, including CBS Action™, CBS Drama™, CBS Reality™ and Horror Channel™. The Company also owns a 30% interest in a joint venture with another subsidiary of AMC Networks, which owns and operates six cable and satellite channels in Europe, the Middle East and Africa broadcasting CBS programming and branded as CBS Action, CBS Drama, CBS Reality and CBS Europa™. In Australia, the Company owns an approximately 33% interest in a joint venture with a subsidiary of Ten Network Holdings Limited to provide content to ELEVEN™, a digital television channel service. The Company owns a 30% interest in a joint venture with RTL Group, which owns and operates two cable channels in Southeast Asia in English and local languages, RTL CBS Entertainment™ and RTL CBS Extreme™.
CBS Interactive.CBS Interactive is one of the leading global publishers of premium content on the internet,Internet, delivering this content via Webweb properties, mobile properties and CBS apps on mobile, as well as internet-connectedInternet-connected television and other device platform apps. CBS Interactive is ranked among the top internetInternet properties in the world according to comScore Media Metrix. CBS Interactive’s leading brands including CNET®, CBS.com™, CBS All Access, CBSSports.com™, 247 Sports®, GameSpot®, MaxPreps®,TVGuide.com™, CBSNews.com™, CBSN, ZDNet®, Last.fm®, and MetroLyrics.com®, among others, serve targeted audiences with text, video, audio, and mobile content spanning technology, entertainment, sports, news, business, gaming and music categories. In addition to its U.S.‑based business, which reached approximately 163 million multi-platform unique monthly visitors during December 2016 according to comScore Media Metrix, January 2017, CBS Interactive operates in Asia, Australia and Europe.
CBS Interactive generates revenue principally from the sale of advertising and sponsorships, in addition to subscription fees, derivedlicense fees and e-commerce activities.
CBS Interactive operates CBS.com, the online destination for CBS Television Network programming. Further extending the CBS.com experience, we offer a CBS app for on-demand streaming of various programs from searchour current network and commerce partners, licensing fees, subscriptions,library programming to users on multiple digital platforms. CBS Interactive operates CBSNews.com, the online destination for CBS News content, and offers an app for on-demand screening of current and library news programming and the content published on the website. CBS Interactive also operates CBSSportsDigital™, the online destination for CBS Sports content, including CBSSports.com, which provides sports content, fantasy sports, and community and e-commerce activities,features, and a related app for on-demand viewing of certain sports events broadcast on CBS and other paid services. Advertising spending on the internet, as in traditional media, fluctuates significantly with economic conditions. In addition, online marketing spending follows seasonal consumer behavior throughout the calendar year to reflect trends during the calendar year.sports information; Max Preps; and 247Sports.
CBS Interactive also owns and operates other digital properties, including: CNET,, one of the preeminent digital properties for technology and consumer electronics information and featuring news, reviews, downloads and instructional and entertaining video and audio shows about technology; information;CNET en Espanol™, which delivers CNET.com’s information in the U.S. to Spanish speakers; Espanol®; TVGuide Digital™,which provides comprehensive information about television programming; Digital™; GameSpot, a leading gaming information digital property providing video game reviews®; Last.fm®; and previews, news, eSports, Webcasts, videos, and game downloads; CBSSports Digital™, which provides sports content, fantasy sports, community and e‑commerce features, and also owns and operates MaxPreps; Last.fm, which is a music recommendation, discovery and social networking property; MetroLyrics.com, which is one of the most popular databases for song lyrics online; and TV.com, which is a destination for entertainment and community around television where visitors can watch videos and discuss and obtain information about television shows across all networks.®.
Under CBS Interactive, also operates CBS.comViacom Digital Studios (“VDS”) and its international extension, Viacom Digital Studios International, produces original content for consumption across leading social platforms to build engagement with certain of our Cable Networks brands. VidCon®, an innovative conference and festival celebrating online video, drives additional growth at VDS and our live events business.
Our CBS-branded streaming subscription services and advertiser-supported services feature general entertainment, news, sports and/or children’s programming and generate revenue from subscription fees and the online destination for CBS Television Network programming. Further extending the CBS.com experience, the Company offers a CBS app for on-demand streamingsale of various programs from the Company’s current networkadvertising on such services, respectively. The services are offered to customers through mobile and library programming to users on multiple digital platforms, including Android, iOS, Amazon Fireconnected devices and Windows 8 mobile platforms, and Amazon Fire TV, Android TV, Apple TV, Chromecast, PlayStation, Roku and Xbox connected device platforms, among others.third-party platforms. The below-described services are operated under CBS Interactive operates in collaboration with our other businesses.
CBS All Access, the Company’s digital is a streaming subscription service, which includes a commercial-free option for on-demand content announced in August 2016. content. CBS All Access offers an extensive on-demand selection of both current and library programming and original series, such as the upcoming The Good Wife spin-offThe Good Fight and , Star Trek: Discovery, Star Trek: Picard, Why Women Kill and The Twilight Zone series; and CBSN’s live and original news reporting and our other streaming services, as described further below, as well as the ability to stream live programming from local CBS Television Stations and certain CBS television station affiliates. In December 2016, the Company commenced a multi-year deal with the NFL for the live, localAll NFL games broadcast by the CBS Television Network to beas well as other CBS Television Network programming are streamed on certain CBS All Access platforms. CBS All Access platforms. CBS All Access also offers children’s programming, including original series and select Nickelodeon programming. CBS All Access is available at CBS.com and on the multiple digital platforms described aboveand through CBS apps in the U.S. and Canada. A version of CBS app. CBS Interactive also operates All Access has launched internationally in Canada and 10 All Access in Australia includes programming from our Network 10 channels and certain of our other programming.
CBSN is a streaming live, digital streaming advertiser-supported news network available 24 hours a day, seven days a week. week (“24/7”). Local versions of CBSN complement CBSN and stream local news from our owned television stations in major markets, including New York, Los Angeles, Philadelphia, San Francisco, Boston and Minneapolis. CBSN is available at CBSNews.com and on the multiple digital platforms described above through
the CBS News app. app and through CBS Television Stations’ websites and mobile apps.
CBS Sports HQ is a streaming live, advertiser-supported sports news and highlights service available 24/7; and ET Live is a streaming advertiser-supported service based on the Entertainment Tonight brand covering entertainment stories and trends available 24/7.
Through the CBS Audience Network™Network™, the Company deliverswe deliver video content from itsour digital properties and television stations and affiliated television stations under an advertiser-supported distribution model to third-party digital properties. The growing slate of the Company’sour content available online includes full episodes, clips and highlights based on CBS, CBS Sports Network and Showtime Networksour programming as well as original made-for-the-Webmade-for-the-web content.
CBS Films. CBS Films produces, acquires and distributes theatrical motion pictures across all genres. The budget for each picture is intended to be up to $50 million (or, in certain cases, higher where a co-financing partner is involved) plus advertising and marketing costs at a level consistent with industry custom. The majority of motion pictures produced or acquired by CBS Films is intended for a wide, commercial theatrical release, similar to motion pictures typically produced and released by major studios. CBS Films’ theatrical releases in 2016 were Middle School: The Worst Years of My Life, Hell or High Water and Patriots Day. In 2017, CBS Films’ expected theatrical releases are Dean, The Sense of An Ending and American Assassin.
In general, motion pictures produced or acquired by CBS Films are exhibited theatrically in the U.S. and internationally, followed by exploitation via home entertainment (including DVDs and Blu-ray Discs and electronic rental and sell-through), video-on-demand, pay-per-view, pay television, free television and basic cable, digital media outlets, including subscription video-on-demand, and, in some cases, other channels such as airlines and hotels. CBS Films exploits its motion pictures (including certain ancillary rights such as licensing and merchandising) and generates revenues in all media in the relevant release windows either directly, through affiliated CBS entities, or via third-party distribution arrangements, including CBS Films’ multi-year agreement with Lions Gate Films, which was entered into in November 2014, for Lions Gate Films to distribute CBS Films’ new wide-release motion pictures in all media, except U.S. pay television.
Entertainment Competition.
Television Network. The television broadcast environment is highly competitive. The principal methods of competition in broadcast television are the development and acquisition of popular programming and the development of audience interest through programming and promotion, in order to sell advertising at profitable rates. Broadcast networks like CBS compete for audience, advertising revenues and programming with other broadcast networks, such as ABC, FOX, NBC, The CW and MyNetworkTV, independent television stations, cable program services, as well as other media, including DVDs and Blu‑ray Discs, digital program services, print and the internet. In addition, the CBS Television Network competes with the other broadcast networks to secure affiliations with independently owned television stations in markets across the country which are necessary to ensure the effective distribution of network programming to a nationwide audience.
Television Production and Syndication. As a producer and distributor of programming, the Company competes with studios, television production groups, and independent producers and syndicators, such as Disney, Fox, NBCUniversal, Sony and Warner Bros., to produce and sell programming both domestically and internationally. The Company also competes to obtain creative talent and story properties which are essential to the success of all of the Company’s entertainment businesses.
CBS Interactive. CBS Interactive competes with a variety of online properties for users, advertisers, and partners, including the following: general purpose portals, such as AOL, MSN and Yahoo!; search engines such as Google, Yahoo! and Bing; online comparison shopping and retail properties, including Amazon.com; vertical content sites in the categories that CBS Interactive’s brands serve such as technology, gaming, music, news, business, food, entertainment and lifestyle focused digital properties; other content sites and apps, such as ESPN.com, HBO GO, Hulu and Netflix, as well as major television broadcast company digital properties, including digital streaming services and apps; and platforms such as blogs, podcasts and video properties. CBS Interactive also competes for users and advertisers with diversified media companies that provide both online and offline content, including magazines, cable television, network television, radio and newspapers.
CBS Films. Motion picture production and distribution is a highly competitive business. During the life cycle of the development and production of a motion picture project, CBS Films must compete for the rights to compelling underlying source material and talent such as writers, producers, directors, on-screen performers and other creative personnel. CBS Films must also compete with other buyers for the acquisition of third-party produced motion pictures. Once a motion picture is completed or acquired, CBS Films must compete with numerous other motion pictures produced and/or distributed by various studios and independent producers, including Paramount Pictures Corporation, Walt Disney Studios Motion Pictures, Warner Bros. Entertainment Inc., Lions Gate Entertainment, STX Entertainment, The Weinstein Company, Metro-Goldwyn-Mayer Studios Inc. and Lakeshore Entertainment Group, among others, for audience acceptance as well as limited exhibition outlets across all of the relevant release windows. In addition, the ultimate consumer has many options for entertainment other than motion pictures including video games, sports, travel, outdoor recreation, the internet, and other cultural and computer-related activities.
Cable Networks (16%, 18% and 17% of the Company’s consolidated revenues in 2016, 2015 and 2014, respectively, and 33%, 37% and 37% of the Company’s total segment operating income in 2016, 2015 and 2014, respectively)
The Cable Networks segment is composed of Showtime Networks, which operates the Company’s premium subscription program services, including a digital streaming subscription offering; CBS Sports Network, the Company’s cable network focused on college athletics and other sports; and Smithsonian Networks, a venture with Smithsonian Institution, which operates Smithsonian Channel and a digital streaming subscription service.
Showtime Networks. Showtime Networks owns and operates three commercial-free, premium subscription program services in the U.S.: Showtime, offering original series, recently released theatrical feature films, documentaries, boxing and other sports-related programming, and special events; The Movie Channel, offering recently released theatrical feature films and related programming; and Flix, offering theatrical feature films primarily from the last several decades; and a digital streaming subscription offering of the Showtime service which launched in July 2015. At December 31, 2016, Showtime, The Movie Channel and Flix, in the aggregate, had approximately 76 million subscriptions in the U.S., certain U.S. territories and Bermuda.
Showtime Networks makes versions of Showtime, The Movie Channel and Flix available on-demand, enabling television subscribers to watch individual programs at their convenience. Showtime Networks also makes available Showtime Anytime®, an authenticated version of Showtime, which can be accessed on computers via showtimeanytime.com™ or via certain internet-connected devices through a Showtime Anytime app free of charge to Showtime subscribers as part of their Showtime subscription through participating Showtime Networks’ distributors. Through Showtime Anytime, Showtime subscribers can view on-demand programming as well as the live telecast of the east and west coast feeds of Showtime. Showtime Networks additionally operates the Website SHO.com™ which promotes Showtime, The Movie Channel and Flix programming, and provides information and entertainment and other services. Showtime Networks also makes available a digital streaming subscription offering of the Showtime service for purchase by consumers without a traditional MVPD video subscription. This offering allows subscribers to view on-demand programming as well as the live east and west coast linear feeds of Showtime, and is available at showtime.com™, through the Showtime app on multiple digital platforms, and as an add-on subscription to Amazon Prime, Hulu or Sony’s PlayStation Vue.
Showtime Networks derives revenue principally from the license of its program services to numerous MVPDs, with a substantial portion of such revenue coming from three of the largest such distributors. The costs of acquiring exhibition rights to programming and producing original series are the principal expenses of Showtime Networks. Showtime Networks enters into commitments to acquire rights, with an emphasis on acquiring exclusive rights for Showtime and The Movie Channel, from motion picture studios and other distributors typically covering the U.S. and Bermuda for varying durations, including exclusive motion picture output agreements with CBS Films, Open Road Films, STX Entertainment, Amblin Partners and, for certain DreamWorks motion pictures, Buena Vista Pay Television, a subsidiary of The Walt Disney Company. Showtime Networks’ original series telecast in 2016 included Ray Donovan, Billions, Masters of Sex, The Affair, The Circus, Penny Dreadful, Shameless and House of Lies, among others. In 2016, Showtime Networks also telecast various sports-related programs, including Inside the NFL, 60 Minutes Sports
and A Season With Florida State Football, and documentaries such as Weiner, Michael Jackson’s Journey from Motown to Off the Wall and Madonna: Rebel Heart Tour.
Showtime Networks has entered into and may from time to time enter into co-financing, co-production and/or distribution arrangements with other parties to reduce the net cost to Showtime Networks for its original programming. In addition, Showtime Networks derives revenue by licensing rights it retains in certain of its original programming. The Company enters into licensing arrangements with television networks, internet content distributors, such as Amazon and Netflix, and/or other media companies for the exhibition of certain Showtime original programming domestically and in various international territories. For example, the Company has output agreements with Bell Media Inc. for Canada, and with Sky-affiliated entities for Austria, Germany, Ireland, Italy and the U.K. The Company entered into an output agreement in January 2016 with Stan Entertainment PTY Limited for Australia, and an output agreement in September 2016 with Moviestar+ for Spain.
Showtime Networks also owns a majority of and manages Smithsonian Networks, a venture with Smithsonian Institution, which operates Smithsonian Channel, a basic cable service in the U.S., featuring programs of a cultural, historical, scientific and educational nature. Smithsonian Networks offers a companion on-demand version, makes Smithsonian Channel content available on an authenticated basis to certain distributors in the U.S. and licenses Smithsonian Channel content outside of the U.S., including to Blue Ant Television Ltd. in connection with Smithsonian Channel in Canada. In September 2016, Smithsonian Networks launched Smithsonian Channel in Singapore. Smithsonian Networks also operates the Website SmithsonianChannel.com™ and various apps, which promote Smithsonian Channel programming and provide information and entertainment services. Smithsonian Networks also operates Smithsonian Earth™, its digital streaming subscription service featuring original nature and wildlife content in ultra-high definition resolution (4K), which is available to consumers without a traditional MVPD video subscription. Consumers can subscribe to Smithsonian Earth on multiple digital platforms, including Apple TV, Roku and Amazon Fire TV and Prime.
CBS Sports Network. CBS Sports Network is a 24 hours a day, seven days a week24/7 cable program service that provides a diverse slate of sports and related content, with a strong focus on college sports. CBS Sports Network derives revenue from carriage fees from MVPDs and virtual MVPDs and advertising sales. The network televises over 600700 live professional, amateur semi-professional and collegiate events
annually, highlighted by Division I college football and basketball hockeygames, including games from the Big East Conference and lacrosse, as well asMountain West Conference. WNBA games and professional bull riding (PBR), professional lacrosse (MLL), arena football (AFL), World’s Toughest Mudder, and various styles of motor sports events (including asphalt, dirt, and off road racing).events. In addition, the network showcases a variety of original programming, including documentaries, features and studio shows, highlighted by NFL Monday QB,That Other Pre-Game Show (TOPS), NFL Monday QB, Inside College Basketball, Inside College Football, Time to Schein and a first of its kind all-female panel sports talk show, We Need to Talk. Talk. CBS Sports Network also provides ancillary coverage for CBS Sports relating to major events, such as the NCAA Division I Men’s Basketball Tournament, Masters Tournament and PGA Championship, and for Showtime Networks relating to Showtime Championship Boxing.Boxing. CBS Sports Network produces weekday simulcasts of the radio shows Boomer and CartonGio, Tiki and Tierney and The Doug GottliebJim Rome Show. Further, CBS Sports Network televises a diverse slate of additional programming under the CBS Sports Spectacular™ brand, including mixed martial arts, skiing, bowling, surfing, boxing, horse racing, volleyball, cheerleading and skate boarding, among other events. CBS Sports Network had approximately 55 million subscribers as of December 31, 2016. The network derives its revenues from subscription fees and the sale of advertising. CBS Sports Network has secured carriage arrangements with the top MVPDs. The Company also has agreements for the digital streaming of CBS Sports Network programming on several digital streaming services, including Hulu’s upcoming live television streaming service.
Cable Networks Competition.
Showtime Networks. Showtime Networks primarily competes with other providers of premium subscription program services in the U.S., including Home Box Office, Inc. and Starz, LLC. Competition among these premium subscription program services in the U.S. is dependent on: (i) the production, acquisition and packaging of original series and other original programming and the acquisition and packaging of an adequate number of recently released theatrical motion pictures; and (ii) the offering of prices, marketing and advertising support and other incentives to distributors for carriage so as to favorably position and package Showtime Networks’ premium subscription program
services to subscribers. In addition, Showtime Networks competes with non-traditional subscription programming services delivered via the internet, such as Amazon, Hulu and Netflix, for original programming, theatrical motion pictures and viewership. Showtime Networks also competes for programming, distribution and/or audiences with basic cable program services, broadcast television and other media, including video games and other internet apps.
Smithsonian Networks competes for programming, distribution and/or audiences with non‑fiction and other basic cable program services, including Discovery Channel, National Geographic Channel and History, as well as with broadcast television and other media.
CBS Sports Network. CBS Sports Network principally competes with cable programming services, including other sports‑oriented cable programming services, for distribution and license fee revenue among MVPDs, as well as for viewership and advertising revenue. The effects of consolidation among MVPDs and consumer pricing sensitivity have made it more difficult for niche channels to secure broad distribution in mainstream programming packages. In addition, the largest cable providers have created sports tiers for sports programming services which have not, in many cases, achieved significant subscriber penetration or acceptance. CBS Sports Network continues its repositioning to be included in programming packages with more subscribers. Re-alignment of college athletic conferences and their member institutions may adversely impact CBS Sports Network’s programming arrangements. CBS Sports Network also competes with cable programming services generally, including other sports programming services, such as ESPN, FOX Sports Networks and NBC Sports Network, in acquiring the television and multimedia rights to sporting events, resulting in increased rights fees and increased production expenses.
The terms and favorable renewal of agreements with distributors for the distribution of the Company’s subscription program services are important to the Company. The effects of consolidation among MVPDs and other marketplace factors make it more difficult to reach and maintain favorable terms and positioning and could have an adverse effect on revenues.
Publishing (6% of the Company’s consolidated revenues in each of 2016, 2015 and 2014, and 4% of the Company’s total segment operating income in each of 2016, 2015 and 2014)
The Publishing segment consists of Simon & Schuster, which publishes and distributes consumer books in the U.S. and internationally.
Simon & Schuster publishes and distributes adult and children’s consumer books in printed, digital and audio formats in the U.S. and internationally. Its digital formats include electronic books and audio books. Simon & Schuster’s major adult imprints include Simon & Schuster, Pocket Books, Scribner, Atria Books, Gallery Books, Touchstone and Howard Books®. Simon & Schuster’s major children’s imprints include Simon Pulse®, Aladdin®, Atheneum Books for Young Readers®, Margaret K. McElderry Books™, Saga Press™ and Simon & Schuster Books For Young Readers™. Simon & Schuster also develops special imprints and publishes titles based on the products of certain CBS businesses as well as that of third parties and distributes products for other publishers. Simon & Schuster distributes its products directly and through third parties. Simon & Schuster also delivers content and promotes its products on its own Websites, social media, general internet sites as well as those dedicated to individual titles. Its created assets include online videos showcasing Simon & Schuster authors and new releases on AOL, YouTube, Amazon, Bio.com, MSN.com, Google Newsstand, iTunes, SimonandSchuster.com and other sites. International publishing includes the international distribution of English-language titles through Simon & Schuster UK, Simon & Schuster Canada, Simon & Schuster Australia, Simon & Schuster India and other distributors, as well as the publication of locally originated titles by its international companies.
In 2016, Simon & Schuster had 277 New York Times bestsellers in hardcover, paperback and electronic formats, collectively, including 33 New York Times #1 bestsellers. Best-selling titles in 2016 include Born to Run by Bruce Springsteen, A Man Called Ove by Fredrik Backman and End of Watch by Stephen King. Best-selling children’s titles include Lady Midnight by Cassandra Clare, Dork Diaries 11: Tales from a Not-So-Friendly Frenemy by Rachel Renée Russell and Rush Revere and The Presidency by Rush Limbaugh and Kathryn Adams Limbaugh. Simon &
Schuster Digital™, through SimonandSchuster.com, publishes original content, builds reader communities and promotes and sells Simon & Schuster’s books over the internet.
The consumer publishing marketplace is subject to increased periods of demand in the summer months and during the end‑of‑year holiday season. Major new title releases represent a significant portion of Simon & Schuster’s sales throughout the year. Simon & Schuster’s top two accounts drive a significant portion of its annual revenue. Consumer print books are generally sold on a fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Company is subject to global trends and local economic conditions. In 2016, the sale of digital content represented approximately 23% of Simon & Schuster’s revenues. The Company expects that electronic books will continue to represent a significant portion of Simon & Schuster revenues in the coming years.
Publishing Competition. The consumer publishing business is highly competitive and has been affected over the years by consolidation trends and electronic distribution methods and models. Mass merchandisers and on‑line retailers are significant factors in the industry contributing to the general trend toward consolidation in the retail channel. The growth of the electronic book market has impacted print book retailers and wholesalers and could result in a reduction of these channels for the sales and marketing of the Company’s books. In addition, unfavorable economic conditions and competition may adversely affect book retailers’ operations, including distribution of the Company’s books. The Company must compete with other larger publishers, such as Penguin Random House, Hachette and HarperCollins, for the rights to works by authors and sales to retailers and customers. Competition is particularly strong for well‑known authors and public personalities. In addition, technological changes have made it increasingly possible for authors to self‑publish and have led to the development of new digital distribution models in which the Company’s books must compete with the availability of both a larger volume of books as well as non‑book content.
Local Media (14%, 12% and 13% of the Company’s consolidated revenues in 2016, 2015 and 2014, respectively, and 22%, 19% and 20% of the Company’s total segment operating income in 2016, 2015 and 2014, respectively)
The Local Media segment is composed of CBS Television Stations the Company’s 30group consists of our 29 owned broadcast television stations, all of which operate under licenses granted by the Federal Communications Commission (“FCC”) pursuant to the Communications Act of 1934, as amended (the “Communications Act”). The licenses are renewable every eight years. The Company’sCBS Television Stations Group principally derives revenue from the sale of advertising on our television stations and fees for authorizing the MVPDs’ and vMVPDs’ carriage of our television stations, which are also known as retransmission fees.
Our television stations are located in the 6 largest, and 15 of the top 20, television markets in the U.S. The Company ownsWe own multiple television stations within the same designated market area (“DMA”) in 10 major markets. These multiple station markets are: New York (market #1), Los Angeles (market #2), Philadelphia (market #4), Dallas-Fort Worth (market #5), San Francisco-Oakland-San Jose (market #6), Boston (market #9), Detroit (market #13)#14), Miami-Ft. Lauderdale (market #16), Sacramento-Stockton-Modesto (market #20), and Pittsburgh (market #23)#24). This group ofOur television stations enables the Companyenable us to reach a wide audience within and across geographically diverse markets in the U.S. The stations produce news and broadcast public affairs, sports and other programming to serve their local markets and offer CBS, The CW or MyNetworkTV programming and syndicated programming. The CBS Television Stations group principally derives its revenues from the sale of advertising time on its television stations. In addition, the CBS Television Stations group receives retransmission fees from MVPDs for authorizing the MVPDs’ carriage of the Company’s owned television stations. The Company also has agreements for the digital streaming of the Company’s owned television stations on several digital streaming services, including Hulu’s upcoming live television streaming service. The Company’s digital streaming subscription service,
CBS All Access, offers an extensive on-demand selection of both current programming and library, original series as well as the ability to streamstreamed live programming from local CBS Television Stations and certainmost CBS television station affiliates. CBS All Access is available at CBS.com and through the CBS app on multiple digital platforms. The Company’sLocal versions of CBSN offer streamed local news from our owned television stations in certain local markets. Our television stations have a digital presence on CBS Local Websiteslocal websites which are operated by CBS Local Digital Media. The CBS Local Websites and related apps promote the Company’s stations’ programming as well as provide live and on-demand news, traffic, weather, entertainment and sports information, among other services for their local communities. CBS Radio’s local sports and news radio stationsprogramming. We also have aagreements for the streaming of our owned television stations on virtual MVPDs. Our owned stations broadcast free, advertiser-supported digital presence onchannels using available broadcast spectrum, including local CBS Local Websites which is expected to continue for specified periods after the closing of the Radio Transaction pursuant to a digital services agreement with the Company. The CBS Local Websites principally derive revenues from the sale of advertising. The “Television Stations and CBS Local Digital Media Websites” table below includes information with respect to these properties within U.S. television markets. CBS Television Stations and Weigel Broadcasting own and operate through an
approximately 50/50 joint venture DECADESsyndicated programming, Start TV™, a national entertainment program service featuring classic television content moviesfocused on female audiences, which is an approximately 50/50 joint venture with Weigel Broadcasting, and original programming for local television stations’ digital sub-channels, which utilize a local television station's available broadcast spectrum to provide a companion to that station's primary channel.Dabl featuring lifestyle programming.
Local Media Competition. Television stations compete for programming, on‑air talent, audiences and advertising revenues with other stations and cable networks in their respective coverage areas and, in some cases, with respect to programming, with other station groups, and, in the case of advertising revenues, with other local and national media. The owned and operated television stations’ competitive position is largely influenced by the quality of the syndicated programs and local news programs in time periods not programmed by the network; the strength of the CBS Television Network programming and, in particular, the viewership of the CBS Television Network in the time period immediately prior to the late evening news; and in some cases, by the quality of the broadcast signal. The Company’s television stations face increasing competition from technologies such as audio and visual content delivered via the internet, which create new ways for audiences to consume content of their choosing while avoiding traditional commercial advertising. The Company’s television stations’ Websites face competition for advertisers and visitors from other digital sources of local content.
Television Stations, Local Websites and CBS Local Digital Media WebsitesCBSN Streaming Services
The following table sets forth information with regard to the Company’sregarding our owned television stations and related CBS Local Digital Media Websites,local websites and CBSN streaming services, as of February 10, 2017,18, 2020, within U.S. television markets:
|
| | | | | |
Television | | | CBS Local Digital Media(1)
|
Market and Market Rank(2)(1) | | Stations | Type | Network Affiliation | Local Websites and CBSN Streaming Services(2) |
New York, NY (#1) | | WCBS‑TV | UHF | CBS | newyork.cbslocal.com |
| | WLNY‑TV | UHF | Independent | CBSN New York |
| | | | | |
Los Angeles, CA (#2) | | KCAL‑TV | VHF | Independent | losangeles.cbslocal.com |
| | KCBS‑TV | UHF | CBS | CBSN Los Angeles |
| | | | | |
Chicago, IL (#3) | | WBBM‑TV | VHF | CBS | chicago.cbslocal.com |
| | | | | |
Philadelphia, PA (#4) | | KYW‑TV | UHF | CBS | philadelphia.cbslocal.com |
| | WPSG‑TV | UHF | The CW | CBSN Philly |
| | | | | |
Dallas‑Fort Worth, TX (#5) | | KTVT‑TV | UHF | CBS | dfw.cbslocal.com |
| | KTXA‑TV | UHF | Independent | |
| | | | | |
San Francisco, CA (#6) | | KPIX‑TV | UHF | CBS | sanfrancisco.cbslocal.com |
| | KBCW‑TV | UHF | The CW | CBSN Bay Area |
| | | | | |
Boston, MA (#9) | | WBZ‑TVWBZ-TV | UHF | CBS | boston.cbslocal.com |
| | WSBK‑TVWSBK-TV | UHF | MyNetworkTV | CBSN Boston |
| | | | | |
Atlanta, GA (#10) | | WUPA‑TVWUPA-TV | UHF | The CW | atlanta.cbslocal.com |
| | | | | |
Tampa‑St.Tampa-St. Petersburg, FL (#11)(#12) | | WTOG‑TVWTOG-TV | UHF | The CW | tampa.cbslocal.com |
| | | | | |
Seattle-Tacoma, WA (#13) | | KSTW-TV | VHF | The CW | seattle.cbslocal.com |
| | | | | |
Detroit, MI (#13)(#14) | | WKBD‑TV | UHF | The CW | detroit.cbslocal.com |
| | WWJ‑TV | UHF | CBS | |
| | | | | |
Seattle‑Tacoma, WA (#14) | | KSTW‑TV | VHF | The CW | seattle.cbslocal.com |
| | | | | |
Minneapolis, MN (#15) | | WCCO‑TV | UHF | CBS | minnesota.cbslocal.com |
| | KCCO‑KCCW‑TV(3)
| VHF | CBS | |
| | KCCW‑TV(4)
| VHF | CBS | CBSN Minnesota |
| | | | | |
Miami-Ft. Lauderdale, FL (#16) | | WFOR‑TV | UHF | CBS | miami.cbslocal.com |
| | WBFS‑TV | UHF | MyNetworkTV | |
| | | | | |
Denver, CO (#17) | | KCNC‑TV | UHF | CBS | denver.cbslocal.com |
| | | | | |
Sacramento, CA (#20) | | KOVR-TV | UHF | CBS | sacramento.cbslocal.com |
|
| | | | | |
Television | | | CBS Local Digital Media(1)
|
Market and Market Rank(2)
| | Stations | Type | Network Affiliation | Websites |
| | KMAX-TV | UHF | The CW | |
| | | | | |
Pittsburgh, PA (#23)(#24) | | KDKA-TV | UHF | CBS | pittsburgh.cbslocal.com |
| | WPCW-TV | VHF | The CW | |
| | | | | |
Indianapolis, IN (#25) | | WBXI-CA(4) | UHF | Independent | |
| | | | | |
Baltimore, MD (#26) | | WJZ‑TV | VHF | CBS | baltimore.cbslocal.com |
| | | | | |
Indianapolis, IN (#27) | | WBXI-CA(5)
| UHF | Independent | |
| | | | |
| | | | | |
| |
(1) | The Company’sTelevision market (DMA) rankings based on Nielsen Media Research Local Market Universe Estimates, September 2019. |
| |
(2) | Our television stations’ Websites, which are operated bywebsites and the CBS Local Digital Media group,local versions of CBSN feature and promote the stations’ programming and provide news, traffic, weather, entertainment and sports information, among other services for their local communities. |
| |
(2) | Television market (DMA) rankings based on Nielsen Media Research Local Market Universe Estimates, September 2016. |
| |
(3) | KCCO-TV is operated as a satellite station of WCCO-TV. |
| |
(4) | KCCW-TV is operated as a satellite station of WCCO-TV. |
| |
(5)(4) | WBXI-CA is a Class A low power television station. Class A low power television stations do not implicate the FCC’s ownership rules. |
REGULATION
CABLE NETWORKS
Overview
Our Cable Networks segment provides entertainment content, services and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. The Cable Networks segment also delivers advertising and marketing services, including those under our advanced marketing solutions portfolio, which both utilizes advanced addressable video inventory to allow dynamic ad insertion and advanced targeting, and provides our marketing partners with a variety of consulting and creative services and associated activations. The Cable Networks segment also licenses its brands and properties for consumer products and recreation experiences, produces live events and creates original programming for third-party distributors.
Our Cable Networks segment includes our premium subscription cable networks, Showtime, The Movie Channel and Flix; our basic cable networks, including Nickelodeon, MTV, BET, Comedy Central,Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TVandSmithsonian Channel; and the international extensions of our multimedia brands, and our program services created specifically for international audiences such as public service broadcaster (“PSB”) Channel 5® and Milkshake!® in the UK, Televisión Federal S.A., or Telefe®, in Argentina, COLORS® in India, Paramount Channel™ in various countries and international broadcast network Network 10® in Australia.
Our Cable Networks segment also develops and operates an extensive portfolio of digital and mobile experiences, including our streaming subscription offering of Showtime (“Showtime OTT”), Noggin, Nickelodeon’s preschool streaming subscription service, BET+, a subscription streaming service focused on Black audiences and consumers of Black culture, and Smithsonian Channel Plus.
Our studio production business is a global network of production studios producing premium episodic and film content across both our owned and operated platforms and for third parties. This business is primarily driven by Paramount Television Studios, Awesomeness, Nickelodeon, MTV and Comedy Central and utilizes our considerable intellectual property library to create long-form episodic content for third-party platforms.
Our Cable Networks segment’s revenues are generated primarily from affiliate revenues comprised of fees from MVPDs and virtual MVPDs for carriage of our cable networks and subscription fees from our streaming services; advertising sales; and the licensing of its content and brands. In 2019, our Cable Networks segment affiliate revenues, advertising revenues and content licensing revenues were approximately 49%, 41% and 10%, respectively, of total revenues for this segment. Our Cable Networks segment generated 45%, 46% and 47% of our consolidated revenues in 2019, 2018 and 2017, respectively.
Our most significant Cable Networks brands are discussed below.
Our three commercial-free, premium subscription program services in the U.S. are Showtime (including Showtime OTT), which offers original scripted and unscripted series, recently released and other theatrical feature films, documentaries, sports-related programming, comedy and other specials, and special events; The Movie Channel, which offers recently released and other theatrical feature films and related programming; and Flix, which offers theatrical feature films primarily from the last several decades.
Programming highlights in 2019 included Showtime original series Billions, Ray Donovan, The L Word: Generation Q and Shameless, limited series The Loudest Voice, documentary features including Hitsville: The Story
of Motown, documentary series including The Circus: Inside the Wildest Political Show on Earth, and various sports-related programs and documentary series including Inside the NFL. As of December 31, 2019, subscriptions to Showtime (including Showtime OTT) totaled approximately 27 million in the U.S., certain U.S. territories and Bermuda.
Showtime OTT allows subscribers to view on-demand programming as well as the live telecast of the east and west coast feeds of Showtime, and is available for purchase (without an MVPD video subscription) at showtime.com™, through the Showtime app and from multiple digital platforms. Showtime Anytime®, an authenticated version of Showtime, is available onlineand, via certain Internet-connected devices, through the Showtime Anytime app, free of charge to Showtime subscribers as part of their Showtime subscription through participating distributors.
Showtime Networks also produces and/or provides special events on a pay-per-view basis available for purchase by both Showtime subscribers and non-subscribers through the Showtimeapp and third-party distributors, including the Manny Pacquiao vs. Adrien Broner boxing match in January 2019.
Nickelodeon, now in its 40th year, is one of the most globally recognized and widely distributed multimedia entertainment brands for kids and family. Nickelodeon has been the number-one-rated ad-supported basic cable network for 24 consecutive years among kids 2 to 11. Nickelodeon features leading original and licensed series for kids across animation, live-action and preschool genres, and during the evening and overnight hours, the linear cable channel airs as Nick at Nite and features licensed family comedies. Nick Jr. entertains and educates preschoolers, engaging them with characters they love, building their imaginations and gaining key cognitive and social-emotional skills. Other Nickelodeon brands include TeenNick, Nicktoons and Nick Music.
Programming highlights in 2019 included Ryan’s Mystery Playdate, SpongeBob SquarePants, PAW Patrol, The Loud House, The Casagrandes, Henry Danger, Bubble Guppies, Blue’s Clues & You and Are You Smarter Than a 5th Grader? with John Cena and tentpole events such as Kids’ Choice Awards.
Nickelodeon is a key part of our global consumer products licensing business, licenses its brands for recreation experiences such as hotels and theme parks, and has numerous live and location-based experiences, such as JoJo Siwa’s D.R.E.A.M. The Tour, a multi-city live concert tour, its SlimeFest music festival in Chicago, multiple PAW Patrol live tours around the world, and Kids’ Choice Awards events in various international markets. In 2019, we acquired the entity holding global intellectual property rights to the Garfield franchise, including related to content, consumer products and location-based experiences. Noggin, Nickelodeon’s preschool subscription streaming service featuring over 1,000 full-length library episodes, interactive videos and short-form educational content, has an Amazon Prime Video Channel. In partnership with Paramount, Nickelodeon Movies™ produces branded films based on some of Nick’s most iconic franchises and characters.
Awesomeness creates programming for various social and SVOD platforms and produces premium original series and films through its Emmy®-winning dedicated television and film studios. Awesomeness’ portfolio is strengthened by a branded content sales team, a creator network, a creative agency and a roster of talent relationships. Programming highlights in 2019 included PEN15, which was nominated for a 2019 Emmy® for outstanding writing for a comedy series,season two of Light as a Feather on Hulu, and The Perfect Date and Trinkets on Netflix.
MTV is the leading global youth media brand, with operations spanning cable and mobile networks, live events, theatrical films and MTV Studios.
Programming highlights in 2019 included new series launches The Hills: New Beginnings and Double Shot at Love with DJ Pauly D and Vinny, returning favorites Teen Mom, MTV Floribama Shore, Ridiculousness, Wild ‘N Out, Are You The One?, Siesta Key, The Challenge franchise and Jersey Shore: Family Vacation. The signature MTV hit Jersey Shore format has been adapted for our international audiences, with multiple versions around the world, including as Geordie Shore in the UK (now in its 20th season) and Acapulco Shore in Mexico, and some of our international programming formats have been imported to the U.S., such as Ex on the Beach,which originated in the UK and has become a global franchise with 14 local adaptations airing worldwide.
MTV’s signature programming event, the MTV Video Music Awards, in 2019 drew 5.5 million viewers across its live linear simulcast and 269 million video views from the launch of the VMA website through the day of the show. MTV’s annual tentpole programming events also include the MTV European Music Awards, MTV Movie and TV Awards, MTV MIAWs (celebrating the best in Latin music and the digital world of the millennial generation) and MTV Fandom Awards. In July 2019, MTV hosted its 13th annual Isle of MTVMalta concert and Malta Music Week events.
BET is a leading consumer brand in the urban marketplace, and the nation’s leading provider of entertainment, music, news and public affairs programming to African American audiences. Other BET brands include BET Her, the first network designed for black women, delivering a wide variety of culturally relevant programming, BET Gospel, featuring gospel music and spiritual programming, and BET Hip Hop, spotlighting hip hop music programming and performances.
Programming highlights in 2019 included new series launches American Soul and Boomerang, and returning favorites such as Martin, House of Payne and Meet the Browns. BET’s tentpoles and live events in 2019 included the seventh annual BET Experience, BET’s weekend-long celebration of music, entertainment and Black culture featuring the 2019 BET Awards, which aired as the number one cable awards show for the fifth consecutive year among adults 18 to 49; Black Girls Rock; and BET Hip Hop Awards. BET’s programming received seven NAACP Image Awards nominations and two wins in 2019.
BET has a multi-year content partnership with award-winning writer, director, producer, actor and playwright Tyler Perry, that extends through 2024 and spans television, film and short-form video. In October 2019, The Oval and Sistas premiered, the first two series in the multi-year partnership. In 2019, BET and Tyler Perry launched BET+, an online SVOD service focused on Black audiences and consumers of Black culture and featuring more than 1,000 hours of advertising-free premium content, including original programming from Tyler Perry and exclusive series and other content from leading Black content creators.
Comedy Central is a leading destination for comedic talent and all things comedy, providing viewers access to a world of funny, provocative and relevant comedy, ranging from award-winning late-night, scripted and animated series, to stand-up specials, short-form and sketch.
Programming highlights in 2019 included the launch of South Side, the network’s highest-rated series premiere since 2012 among African Americans 18 to 49; returning hits The Daily Show with Trevor Noah, Drunk History and digital original Hack Into Broad City, each of which received several Emmy® nominations for outstanding series in their respective categories in 2019, South Park, which was renewed in September 2019 for three additional seasons, and the premieres of the critically-acclaimed scripted series The Other Two and sketch comedy Alternatino with Arturo Castro.
Comedy Central also produces nationwide stand-up events and festivals, operates a Grammy Award-winning record label, produces a global podcast network and operates Comedy Central Radio on SiriusXM. In May 2019, Comedy Central launched Comedy Central Productions, a new studio-production arm partnering with comedy’s best writers, producers and on-screen talent to develop and distribute compelling, premium comedy content on all platforms. In June 2019, Comedy Central hosted its third annual Clusterfest, a three-day festival in San Francisco featuring world-class standup comedy, live music and experiential activities. Internationally, Comedy Central hosted the experiential events FriendsFest and Comedy Central Fest in a number of international markets.
Comedy Central’s strategic partnership with Trevor Noah’s production company, Day Zero Productions, gives us exclusive “first-look” rights on all projects developed by Day Zero Productions across television, feature films, digital and short-form video content.
Paramount Network is a premium entertainment destination targeting adults 18 to 49 with original scripted and non-scripted series inspired by over a century of cinema, with stories that are immersive, inclusive and deeply personal. Programming highlights in 2019 included Yellowstone, starring Kevin Costner and written and directed by critically-acclaimed screenwriter Taylor Sheridan, which in its second season was cable’s most-watched scripted cable series of the summer. The network also featured the premiere of competition series The Last Cowboy, I Am Patrick Swayze, the most-watched episode of the network’s I Am documentary series, and new episodes of Ink Master, Bar Rescue and Bellator MMA.
VH1 is a leading pop culture brand for adults 18 to 49 with an array of digital channels and services, including the VH1 app, VH1.com and @VH1. Programming highlights in 2019 included the critically-acclaimed original series RuPaul’s Drag Race, which received 14 Emmy® nominations and won four, including outstanding competition program and outstanding host; new series Girls’ Cruise with Lil’ Kim; and returning hits Love & Hip Hop, Black Ink Crew and Basketball Wives.
TV Land features a mix of original programming, classic and contemporary television shows and specials that appeal to adults aged 25 to 54. Programming highlights in 2019 included the sixth season of Darren Star’s hit original series Younger, which was the number one rated ad-supported cable original sitcom among female viewers 18 to 49 and 25 to 54 for the third consecutive year.
CMT is a leading country music and lifestyle destination, offering a mix of original series, music events and specials. Programming highlights in 2019 included the launch of Racing Wives; returning favorite Dallas Cowboys
Cheerleaders; and tentpole events and music programming such as the CMT Music Awards, CMT Artists of the Year, CMTHot 20 Countdown and CMT Crossroads.
Smithsonian Channel features series and documentaries of a cultural, historical, and scientific nature. Smithsonian Channel content is available via MVPDs and virtual MVPDs in the U.S. and versions of Smithsonian Channel are distributed in Canada, Singapore, Brazil, Latin America, Africa, Asia and the UK. The website SmithsonianChannel.com™ and various apps promote Smithsonian Channelprogramming and provide information and entertainment services. Smithsonian Channel Plus is a streaming subscription service that allows subscribers to view on-demand programming, including 4K Ultra HD series and documentaries.
Pop TV is a general entertainment basic cable service focused on producing and licensing popular culture programming, such as the Emmy®-nominated original series Schitt’s Creek and Critics Choice Award®-nominated original series One Day at a Time, and licensed CBS programming, including NCIS: New Orleans and Scorpion. Pop TV is also available via the Pop Now app.
Network 10 is one of the three major free-to-air commercial broadcast networks in Australia. Network 10 includes the channels 10™, 10 Bold™ and 10 Peach™, which broadcast a mix of entertainment, drama, news and sports programming, such as Australian Survivor, Have You Been Paying Attention? and The Australian Formula 1 Grand Prix. Network 10 also includes the digital platforms 10 Play™, 10 Daily™ as well as 10 All Access, our streaming subscription service in Australia featuring Network 10 programming as well as our other programming.
Channel 5, a free-to-air PSB in the UK, and its affiliated channels air a broad mix of popular content, including factual programming, entertainment, reality, sports, acquired and original drama, and preschool programming through its award-winning Milkshake! brand. Programming highlights in 2019 included new dramas 15 Days, Blood and Agatha and the Truth of Murder, documentaries including RTS Programme Award winner The Abused and Suicidal: In Our Own Words, and critically acclaimed factual shows such as Critical Condition and Warship: Life at Sea.
Telefe is a leading free-to-air channel and one of the biggest content producers in Argentina, with 11 studios and more than 3,500 hours of content produced each year. Telefe studios co-produced four films in 2019. Programming highlights in 2019 included La Voz Argentina (a local version of The Voice), Por el Mundo, 100 Días Para Enamorarse, PH: Podemos Hablar, Pequeña Victoria and Quien Quiere Ser Millonario (local version of Who Wants to be a Millionaire).
Paramount+ is an advertising-free, premium video-on-demand service, featuring films from Paramount Pictures and hundreds of television episodes from ViacomCBS’ library. Available as an authenticated service or to customers of select subscription service providers, as of December 2019, Paramount+ was available in Sweden, Denmark, Norway, Finland, Hungary, Poland and across Latin America.
COLORS is a highly-rated Hindi-language general entertainment pay television channel operated by our Viacom18joint venture in India. COLORS is available in India and over 120 additional countries, including in the U.S. as Aapka Colors. COLORSalso extends to the English language through COLORS Infinity, an English general entertainment channel, six Indian regional languages and two Hindi channels, COLORS Rishtey and COLORS Cineplex in the entertainment and movie space, respectively. Programming highlights in 2019 included the first season of Dance Deewane, a dance reality show; returning seasons of Bigg Boss, Fear Factor: Khatron Ke Khiladi, Naagin, Rising Star (India’s first-ever live singing reality show) and India’s Got Talent; and the 19th edition of the International Indian Film Academy (IIFA) Awards, Bollywood’s biggest awards extravaganza.
Viacom18 Studios, Viacom18’s filmed entertainment business, includes Viacom18 Motion Pictures, a fully-integrated motion pictures studio, and Tipping Point, a digital content unit. Viacom18 Motion Pictures also partners with Paramount to market and distribute Paramount films for theatrical exhibition in the Indian sub-continent.
Pluto TV is a leading free streaming TV platform in the U.S. Pluto TV is available across mobile devices, desktops, streaming players and game consoles and is integrated across a growing number of Smart TVs and other video and broadband platforms.
With more than 22 million monthly active users in the U.S., the majority of whom are on connected TVs, and over 175 content partners, Pluto TV offers over 250 live linear channels and thousands of hours of on-demand content, including movies, news, sports, general entertainment, African Americans, kids and digital series. In July 2019, Pluto
TV launched Pluto TV Latino, a suite of 22 channels streaming over 4,000 hours of programming in Spanish and Portuguese, including hit TV series and movies, sports, reality, lifestyle and more. In addition, Pluto TV is available in the UK, Germany, Austria and Switzerland, and plans to expand to Latin America and additional territories.
FILMED ENTERTAINMENT
Overview
Our Filmed Entertainment segment develops, produces, finances, acquires and distributes films, television programming and other entertainment content in various markets and media worldwide through its Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios divisions. It partners on various projects with key ViacomCBS brands, including Nickelodeon Movies, MTV Films® and BET Films™.
Films produced, acquired and/or distributed by the Filmed Entertainment segment are generally first exhibited theatrically in domestic and/or international markets and then released in various markets through airlines and hotels, electronic sell-through, DVDs and Blu-ray discs, transactional video-on-demand (“TVOD”), pay television, SVOD, basic cable television, free television and free video-on-demand (“FVOD”).
Our Filmed Entertainment segment’s revenues are generated primarily from the release and/or distribution of films theatrically, the release and/or distribution of film and television product through home entertainment, the licensing of film and television product to television and digital platforms and other ancillary activities. In 2019, our Filmed Entertainment segment licensing revenues, home entertainment revenues and theatrical revenues were approximately 57%, 21% and 18%, respectively, of total revenues for this segment. Our Filmed Entertainment segment generated 10%, 11% and 12% of our consolidated revenues in 2019, 2018 and 2017, respectively.
Paramount Pictures is a major global producer and distributor of filmed entertainment and has an extensive library consisting of approximately 1,300 film titles produced by Paramount, acquired rights to approximately 2,100 additional films and a number of television programs. Paramount’s library includes many Academy Award winners, including Titanic, Braveheart, Forrest Gump, The Godfather, The Godfather Part II and Wings, which won the first Academy Award ever awarded for Best Picture in 1929. The Paramount library also includes other Academy Award Best Picture nominees such as Arrival, Fences, The Big Short, Selma and The Wolf of Wall Street, classics such as The Ten Commandments, Breakfast at Tiffany’s and Sunset Boulevard, and a number of successful franchises such as Mission: Impossible, Transformers, Star Trek and Paranormal Activity. In 2019, Paramount’s theatrical releases included Terminator: Dark Fate, Rocketman, Gemini Man, Pet Sematary, Crawl and Playing with Fire.
Paramount Players aims to expand Paramount’s slate of films by partnering with our Cable Networks brands to develop, produce and release distinctive feature films that showcase the network brands to movie audiences worldwide. Paramount Players also focuses on modest budget films of specific genres for target audiences. In 2019, Paramount
Players produced Dora and the Lost City of Gold, a live-action adaptation of the classic Nickelodeon series Dora the Explorer,co-produced with Nickelodeon Movies.
Paramount Animation creates high-quality animated films and aims to release one to two titles per year. In 2019, Paramount Animation released Wonder Park, a film about the adventures of a young girl in a magical amusement park.
Paramount Television Studios develops and finances a wide range of original, premium television content across all types of media platforms for distribution worldwide. Paramount Television Studios’ productions include Tom Clancy’s Jack Ryan for Amazon; 13 Reasons Why for Netflix; The Alienist and The Angel of Darkness for TNT; Catch-22 for Hulu; Defending Jacob forApple; Boomerang and First Wives Club for BET and BET+, respectively; and Berlin Station forEPIX. In 2019, Paramount Television Studios’ programming received seven Emmy® nominations.
Film Production, Distribution and Financing
Paramount produces many of the films it releases and also acquires films for distribution from third parties. In some cases, Paramount co-finances and/or co-distributes films with third parties, including other studios. Paramount also enters into film-specific financing and slate financing arrangements from time to time under which third parties participate in the financing of the costs of a film or group of films in exchange for an economic participation and a partial copyright interest. Paramountdistributes films worldwide or in select territories or media, and may engage third-party distributors for certain pictures in certain territories.
Paramount has several multi-picture production, distribution and financing relationships, including its agreement with Skydance Productions (“Skydance”), under which Paramountand Skydance produce and finance certain films, and Paramount has a first look on Skydance-initiated projects. Paramount also has an agreement with Hasbro Inc. (“Hasbro”) involving the production, financing and distribution of live action and animated films based on Hasbro’s expansive list of properties. In December 2019, in connection with ViacomCBS’ entry into an agreement to acquire a 49% interest in Miramax, Paramount and Miramax entered into first-look, co-financing and distribution agreements under which they will collaborate on production and financing of new film and television projects, and Paramountwill distribute such new projects, as well as Miramax library content.
Domestically, Paramount generally performs marketing and distribution services for theatrical releases and sales and marketing services for its home entertainment releases. Paramount has an agreement with Universal Studios for certain back-office and distribution services for all physical DVD and Blu-ray discs released by Paramount in the U.S. and Canada. Paramount also distributes CBS’ television and other library content and Nickelodeon television shows on DVD and Blu-ray disc on a worldwide basis. Internationally, Paramount generally distributes its theatrical releases through its own international affiliates or, in territories where it does not have an operating presence, through United International Pictures, a joint venture with Universal Studios. For home entertainment releases, Paramount’s physical DVD and Blu-ray discs are distributed in certain international territories by Universal Pictures Home
Entertainment and in certain other territories by Paramount licensees. Paramount also distributes films and television shows domestically and internationally on electronic sell-through, TVOD, SVOD, FVOD and television platforms. In the first domestic pay television distribution window, Paramount’s feature films initially theatrically released in the U.S. are generally exhibited on EPIX.
Producing, marketing and distributing films and television programming can involve significant costs, and the timing of a film’s release can cause our financial results to vary. For example, marketing costs are generally incurred before and throughout the theatrical release of a film and, to a lesser extent, other distribution windows, and are expensed as incurred. As a result, we typically incur losses with respect to a particular film prior to and during the film’s theatrical exhibition, and recoupment of investment as well as profitability for the film may not be realized until well after its theatrical release. Therefore, the results of the Filmed Entertainment segment can be volatile as films work their way through the various distribution windows.
PUBLISHING
Our Publishing segment consists of Simon & Schuster, which publishes and distributes adult and children’s consumer books in printed, digital and audio formats in the U.S. and internationally. Its digital formats include electronic books and audio books.
Simon & Schuster’s major adult imprints include Simon & Schuster, Scribner, Atria Books and Gallery Books. Simon & Schuster’s major children’s imprints include Simon & Schuster Books For Young Readers™, Aladdin® and Little Simon®. Simon & Schuster also develops special imprints and publishes titles based on the products of certain of our businesses as well as those of third parties and distributes products for other publishers. Simon & Schuster distributes its products directly and through third parties. Simon & Schusteralso delivers content and promotes its products on its own websites, social media, and general Internet sites as well as those dedicated to individual titles. International publishing includes the international distribution of English-language titles through Simon & Schuster in the UK, Canada, Australia and India and other distributors, as well as the publication of locally originated titles by its international companies.
In 2019, Simon & Schuster had 200 New York Times bestsellers in hardcover, paperback, audio and combined print and ebook formats, collectively, including 21 New York Times #1 bestsellers. Best-selling titles in 2019 included Howard Stern Comes Again by Howard Stern, The Institute by Stephen King and The Pioneers by David McCullough. Best-selling children’s titles included Dork Diaries 14: Tales from a Not-So-Best Friend Forever by Rachel Renée Russell and Red Scrolls of Magic by Cassandra Clare. Simon & Schuster Digital™, through SimonandSchuster.com, publishes original content, builds reader communities and promotes and sells Simon & Schuster’s books over the Internet.
Our Publishing segment’s revenues are generated from the publishing and distribution of consumer books in print, digital and audio formats. In 2019, the sale of digital content represented approximately 25% of Publishing’s revenues. Our Publishing segment generated 3% of our consolidated revenues in each of 2019, 2018 and 2017.
REVENUES
Our TV Entertainment, Cable Networks, Filmed Entertainment and Publishing segments generate advertising revenues, affiliate revenues, content licensing revenues, theatrical revenues and publishing revenues. For additional information regarding our sources of revenues, see “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition – Consolidated Results of Operations – 2019 vs. 2018 – Revenues” and “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements.” For information regarding seasonal factors affecting our revenues, see “Item 1A. Risk Factors – Our revenues, expenses and operating
results may vary based on the timing, mix, number and availability of our films and other programming and on seasonal factors.”
Advertising
Advertising revenues are generated primarily from the sale of advertising spots on the CBS Television Network, our basic cable networks and our television stations, as well as on our ad-supported streaming services, including CBS All Access and Pluto TV, and on our websites. Our advertising revenues include integrated marketing services, which provide unique branded content and custom sponsorship opportunities to our advertisers, as well as advanced marketing solutions, including addressable video and brand solutions.
Affiliate
Affiliate revenues are principally comprised of fees received from MVPDs and virtual MVPDs for carriage of our cable networks, fees received from television stations affiliated with the CBS Television Network, fees for authorizing the MVPDs’ and virtual MVPDs’ carriage of our owned television stations, and subscription fees for our streaming services.
Content Licensing
Content licensing revenues are principally comprised of fees from the licensing of exhibition rights for our internally-produced television and film programming to television stations, cable networks and SVOD and FVOD services; home entertainment revenues, which are derived from the sale and distribution of our content through DVDs and Blu-ray discs to wholesale and retail partners, as well as from the viewing of our content on a transactional basis through TVOD and electronic sell-through services; fees from the use of our trademarks and brands for consumer products, recreation and live events, and fees from the distribution of third-party programming.
Theatrical
Theatrical revenues are principally comprised of the worldwide theatrical distribution of films through audience ticket sales.
Publishing
Publishing revenues are principally comprised of the domestic and international publishing and distribution of consumer books in printed, digital and audio formats.
COMPETITION
All of our businesses operate in highly competitive environments, and compete for creative talent and intellectual property, as well as audience and distribution of our content.
Our TV Entertainment, Cable Networks and Filmed Entertainment segments compete with a variety of media companies that have substantial resources to produce and acquire content worldwide, including broadcast networks, basic and premium cable networks, streaming services, film and television studios, production groups, independent producers and syndicators, television stations and television station groups. These segments compete with other content creators for creative talent including producers, directors, actors and writers, as well as for new program ideas and intellectual property and for the acquisition of popular programming. Similarly, our Publishing segment competes with large publishers for the rights to works by authors, and competition is particularly strong for well-known authors and public personalities.
Our businesses also face significant competition for audience share from various sources. Our Filmed Entertainment segment competes for audiences for its theatrical films with releases by other major film studios, television producers and streaming services as well as with other forms of entertainment and consumer spending
outlets. Our TV Entertainment and Cable Networks segments compete for audiences and advertising revenues primarily with other cable and broadcast television networks; social media platforms; websites, apps and other online experiences; radio programming; and print media. In addition, our television and basic cable networks businesses face increasing competition from technologies providing digital audio and visual content in ways that allow audiences to consume content of their choosing while avoiding traditional commercial advertising. Moreover, our businesses face competition from the many other entertainment options available to consumers including video games, sports, travel and outdoor recreation.
We also face competition for distribution of our content. Our TV Entertainment and Cable Networks segments compete for distribution of our program services (and receipt of related fees) with other broadcast networks, cable networks and programmers. The CBS Television Network also competes with other broadcast networks to secure affiliations with independently owned television stations to ensure the effective distribution of network programming nationwide. Our TV Entertainment, Cable Networks and Filmed Entertainment segments compete with studios and other producers of entertainment content for distribution on third party platforms. Our Publishing segment competes with large publishers for sales to retailers, and mass merchandisers and on-line retailers have contributed to a general trend toward consolidation in the retail channel. In addition, the growth of the electronic book market has impacted print book retailers and wholesalers, and could result in a reduction of these channels for the sales and marketing of our books.
For additional information regarding competition, see “Item 1A. Risk Factors – Our businesses operate in industries that are highly competitive and swiftly consolidating.”
ENVIRONMENTAL, SOCIAL AND GOVERNANCE STRATEGY
ViacomCBS is committed to responsible and sustainable business practices, which strengthen our ability to innovate and better serve our partners, audiences and stockholders. We are proactively identifying, measuring and mapping the environmental, social and governance (“ESG”) impacts of our global operations and are working to manage and report on various non-financial ESG impacts in an effort to transparently address them with stakeholders.
As content creators, we are passionate about entertaining and informing the world and are committed to our legacy of creating lasting impact through our work. From groundbreaking HIV awareness initiatives to campaigns supporting education, the empowerment of women and youth, health issues and the military, veterans and their families, we have always strived to be at the forefront of championing the causes that matter to our audiences. Today, we continue to leverage our brands and our global reach to amplify the efforts of those who are working to make positive changes in their communities. Striving to be a good corporate citizen and to make a positive impact in communities around the world is fundamental to what we do every day. Below are just a few examples of our efforts:
We continue to use the immense power of our media platforms to heighten social awareness on important issues through our award-winning CBS Cares public service announcement (“PSA”) campaigns. In 2019, the CBS Television Network scheduled CBS Cares PSAs with an estimated value of $276 million and featuring a wide array of CBS talent on a variety of important topics such as heritage and history months, child advocacy, empowerment of women and girls, support for the military, veterans and their families, and health awareness. Examples include:
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• | We and Girls Inc. created a PSA that aired in-game during the CBS Television Network’s Super Bowl LIII coverage, and post-game on the CBS Sports Network. Featuring the voiceover of CBS This Morning’s Gayle King and players from the NY Giants, the PSA encourages girls to believe they can succeed at the highest levels. |
We produce and air annual PSAs as part of our commitment to honor the victims of the Holocaust on International Holocaust Remembrance Day.
We and the Association of National Advertisers again teamed up for a multi-pronged partnership in support of the #SeeHer initiative to accurately portray girls and women in media. Supporting PSAs ran in primetime as part of Women’s History Month and featured Norah O’Donnell, Gayle King, Tea Leoni, Carrie Ann Inaba and others.
CBS Cares tackled the issue of sexual harassment, by continuing to air PSAs featuring Bridget Moynahan, Daniela Ruah and Aisha Tyler.
PSAs featuring Shemar Moore, Aisha Tyler, Sara Gilbert and Sheryl Underwood continued to air, teaching children about the importance of other cultures, races and religions, and emphasizing that we are all enriched by our differences.
Get Schooled inspires and empowers students nationwide to thrive in high school, college and their first jobs through a unique blend of powerful digital content, gamification and personalized support. In its 10-year history, Get Schooled has partnered with over 15,000 educators and their students, and has been recognized by Fast Company as a “Most Innovative Company.”
The Company’sSave The Music Foundation helps kids, schools, and communities realize their full potential through the power of making music. Founded in 1997, Save The Music partners with school districts and raises funds to restore music programs in public schools. Since inception, we have donated over $58 million worth of new musical instruments and technology to 2,159 schools in 276 school districts around the country, impacting the lives of countless students.
Beyond the Backpack is a celebration of Nickelodeon’s curriculum-based preschool properties. The initiative champions kindergarten and pre-k readiness by providing fun, simple and unique tools to address the five areas identified as critical to educational success: Family Engagement, Health & Wellness, Literacy Skills, Social & Emotional Skills, and STEAM (Science, Technology, Engineering, Arts and Math) Skills. Beyond the Backpack reinforces the academic community’s view that parents and caregivers are their child's first teachers and that it is never too early to start getting ready. In 2019, Nickelodeon donated 75,000 printed toolkits and 2,500 backpacks full of school supplies.
Paramount has a long and proud tradition of giving back with a corporate social responsibility program focused on four key initiatives: supporting public education; protecting the environment; combating HIV/AIDS; and promoting volunteerism. By offering employee engagement opportunities, coupled with financial and in-kind contributions, Paramount supports numerous local, national, and global non-profit organizations. Kindergarten to Cap & Gown - Paramount’s signature education program - mentors students through their educational experience, targeting four partner schools in Paramount’s Los Angeles neighborhood.
In 2019, Paramount Network debuted the first installments of Take Action - a short-form digital documentary series addressing important social issues related to our content themes. We believe that stories of individual volunteers and activists have the power to connect us, inspire action and, ultimately, create real change. Each film includes a call-to-action, partnering with a nonprofit organization to give the audience the opportunity to learn more and take action themselves.
The MTV Staying Alive Foundation produces multi-award-winning, impactful behavior change campaigns to further its purpose of storytelling to save lives and enable young people to make empowered, informed choices about their health and wellbeing.
Our robust Veterans Network (“VetNet”) engages in multiple programs and supports numerous veteran-related causes. Among its activities in 2019, VetNet worked with our legal teams to provide more than 4,000 hours of critical, pro-bono legal assistance to more than 200 veterans and their families, representing approximately $1.5 million of legal fees donated; hosted a virtual career advice event for veterans in partnership with American Corporate Partners; worked with partners to provide mentorship and internships for 850 veterans; and collected more than 100,000 donations, including toys for veteran families and toiletries for the homeless.
REGULATION AND PROTECTION OF OUR INTELLECTUAL PROPERTY
We are, fundamentally, a content company, so the trademark, copyright, patent and other intellectual property laws that protect our brands and content are of paramount importance to us. Our businesses and the intellectual property they create or acquire are either subject to orand affected by laws and regulations of U.S. federal, state and local governmental authorities, inas well as laws and regulations of countries other than the U.S. and of national, regionalpan-national bodies such as the European Union (“EU”). The laws and local authorities in foreign countries. The rules, regulations policies and procedures affecting theseour businesses are constantly subject to change. The descriptions which followchange, as are summaries and should be read in conjunction with the texts of the statutes, rulesprotections that those laws and regulations described herein.afford us. The descriptions dodiscussion below describes certain, but not purport to describe all, present and proposed statutes, ruleslaws and regulations affecting the Company’sour businesses.
Intellectual Property and Privacy
Laws affecting intellectual property are of significant importance to the Company. (See “Intellectual Property” on page I-16 for more information on the Company’s brands).
Unauthorized Distribution of Copyrighted Content and Piracy. Unauthorized distribution, reproduction or display of copyrighted material in digital formats without regard to content owners’ copyright rights in television programming, motion pictures, clips and books, such as through pirated DVDs and Blu-ray Discs, unauthorized stored copies and livestreaming, internet downloads, file “sharing” and peer-to-peer services, is a threat to copyright owners’ ability to protect and exploit their property. The Company’s digital delivery services and commercial arrangements with digital content providers help reduce the risks associated with unauthorized access to its content. The Company is also engaged in enforcement and other activities to protect its intellectual property and participates in various litigation, public relations programs and legislative activity. These business strategies and enforcement efforts are dependent upon laws and practices that protect the rights of creators and authorized distributors of content.
Laws and Content. The Company derives revenues from the creation and exploitation of creative content, for which the copyright law grants certain exclusive rights, including to reproduce, publicly perform and distribute. The duration of the protection afforded to the Company’s intellectual property depends on the type of property and the laws and regulations of the relevant jurisdiction.Any changes to copyright laws or related regulations that enable the Company to control the distribution of its content, including through court decisions, which diminish the scope of a copyright owner’s exclusive rights, could impact the Company. Proposed legal amendments, such as to the law governing territorial exclusivity of the distribution of content in Europe, could adversely impact the Company’s ability to control and distribute its content.
Privacy. The laws and regulations governing the collection, use and transfer of consumer information are complex and rapidly evolving, particularly as they relate to the Company’s interactive businesses. The Company monitors and considers these laws and regulations in the design and operation of its Websites, digital content services and legal and regulatory compliance programs.
FCC and Similar Regulation
Broadcasting
General. Television Broadcast television and radio broadcastingcertain aspects of cable programming are subject to the jurisdiction of the FCC pursuant to the Communications Act. The Communications Act empowers the FCC, among other actions, to issue, renew, revoke and modify broadcasting licenses; penalize broadcasters for airing indecent or profane content; regulate the airing of emergency alerting and the use of emergency alerting tones by broadcasters or cable channels; require video programming to be accessible to persons with disabilities; determine stations’ frequencies, locations and operating power; regulate some of the equipment used by stations; adopt other regulations to carry out the provisions of the Communications Act and other laws, including requirements affecting the content of broadcasts; and to impose penalties for violation of its regulations, including monetary forfeitures, short-term renewal of licenses and, in egregious cases, license revocation or denial of license renewals.
Under the Communications Act, the FCC also regulates certain aspects of the operation of MVPDs and certain other electronic media that compete with broadcast stations.stations and cable programming.
IndecencyWe provide below a brief summary of certain laws and Profanity Regulation. The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition against broadcasting indecent or profane material because the vagueness of the FCC’s indecency/profanity definition makes it difficult to apply, particularly with respect to spontaneous, live programming. The FCC’s maximum forfeiture penalty per station for broadcasting indecent or profane programming is approximately $383,000 per indecent or profane utterance with a maximum forfeiture exposure of approximately $3.5 million for any continuing violation arising from a single act or failure to act. The Company has been involved in litigation and, from time to time, has received and may receive in the future letters of inquiry from the FCC prompted by complaints alleging that certain programming on its broadcast stations included indecent or profane material.regulations under which we operate.
License Renewals. Television and radio broadcast licenses are typically granted for standard terms of eight years. The Communications Act requires the FCC to renew a broadcast license if the FCC finds that the station has served the public interest, convenience and necessity and, with respect to the station, there have been no serious violations by the licensee of either the Communications Act or the FCC’s rules and regulations and there have been no other violations by the licensee of the Communications Act or the FCC’s rules and regulations that, taken together, constitute a pattern of abuse. The Company hasWe have no pending renewal applications.applications, but we will be filing renewal applications with respect to all of our stations on a staggered basis between 2020 and 2023. A station remains authorized to operate while its license renewal application is pending.
License Assignments.Assignments and Transfers of Licensee Control. The Communications Act requires prior FCC approval for the assignment of a license or transfer of control of an FCC licensee. Third parties may oppose the Company’sour applications to assign, acquire, or transfer or acquirecontrol of broadcast licenses.
Ownership Regulation. The Communications Act and FCC rules and regulations limit the ability of individuals and entities to have certain official positions or ownership interests, known as “attributable” interests, above specific levels in broadcast stations as well as in other specified mass media entities.stations. In seeking FCC approval for the acquisition of a broadcast television or radio station license, the acquiring person or entity must demonstrate that the acquisition complies with the FCC’s ownership rules or that a waiver of the rules is in the public interest.
In August 2016, theBelow are descriptions of broadcast ownership rules. The FCC issued an Order as part ofis reviewing its local television ownership and dual network rules through its most recent quadrennial review ofthat commenced in November 2018 and is separately reviewing its broadcast ownership rules (the “2016television national audience reach rule. The FCC Order”) that largely retained the existing rules, which are briefly summarized below. However, several parties have petitioned the FCC to reconsider this decision and the FCC may relaxhad relaxed certain of these rules in 2017, including those relatedbut in November 2019, a federal appellate court vacated that 2017 action and ordered the FCC to local television ownership.conduct further proceedings.
Local Television Ownership. Under the The FCC’s local television ownership rule one partylimits the number of full-power television stations that may own up to two television stationsbe commonly owned in the same DMA, so long asDMA. For example, common ownership of two full-power stations in a market generally is allowed only if at least eight independently owned and operating full-power stations will remain in the market following the acquisition of the second station, and if at least one of the two stations is not amongoutside of the top-four ranked stations in the market based on audience share as of the date an application for approval of an acquisition is filed with the FCC, and at least eight independently owned and operating full-power television stations would remain in the market following the acquisition of the second television station. The 2016 FCC Order modified the local television station ownership rule to prohibit transactions involving the sale or swap ofshare.
network affiliations between same-market television station owners that would result in an entity holding an attributable interest in two top-four ranked television stations. Further, without regard to the number of remaining independently owned television stations, the rule permits the ownership of more than one television station within the same DMA so long as certain signal contours of the stations involved do not overlap. “Satellite” television stations that simply rebroadcast the programming of a “parent” television station are exempt from the local television ownership rule if located in the same DMA as the “parent” station.
Television National Audience Reach Limitation. Under the national television ownership rule, one party may not own television stations which reach more than 39% of all U.S. television households. In a separate September 2016 decision, the FCC eliminated the UHF discount, pursuant to which a UHF television station was attributed with reaching only 50% of the television households in its market. This action is under reconsideration by the FCC, which may lead to the reinstatement of the UHF discount in 2017. The Company currently owns and operates television stations that reach approximately 38% of all U.S. television households not taking into account the UHF discount.
Radio-Television Cross-Ownership Rule. The radio-television cross-ownership rule limits the common ownership of radio and television stations in the same market. The cross-ownership rule may in certain circumstances be more restrictive than the rules that separately limit the ownership of local television stations or local radio stations. The numeric limit under the cross-ownership rule varies according to the number of independent media voices in the market. The Company is in compliance with the cross-ownership rule.
Newspaper-Broadcast Cross-Ownership. The newspaper-broadcast cross-ownership rule, which was largely left unchanged by the 2016 FCC Order, prohibits the common ownership of a television or radio station and daily newspaper in the same market absent a waiver by the FCC.
Local Radio Ownership. The FCC’s local radio ownership rule applies in all markets where the Company owns radio stations. Under that rule, one party may own up to eight radio stations in the largest markets, no more than five of whichmay be either AM or FM. With a few exceptions, the rule permits the common ownership of 8 radio stations in the top 50 markets, where CBS Radio has significant holdings.
Dual Network Rule. The dual network rule prohibits any of the four major networks, ABC, CBS, FOX and NBC, from combining.combining or being under common control.
Attribution of Ownership.Television National Audience Reach Limitation. Under the FCC’s attributionnational television ownership rule, one party may not own television stations that reach more than 39% of all U.S. television households, although under current FCC rules a direct or indirect purchaser of various types of securities of an entity which holds FCC licenses, such as the Company, could violate the foregoing FCC ownership regulations or policies if that purchaser owned or acquired an “attributable” interest in other media properties. Under the FCC’s rules, an “attributable” interest for purposesUHF station is attributed with reaching only 50% of the FCC’s broadcast ownershiptelevision households in its market. In December 2017, the FCC issued a Notice of Proposed Rulemaking pursuant to which it will consider modifying, retaining or eliminating the 39% national television audience reach limitation and/or the UHF
discount. We currently own and operate television stations that reach approximately 38% or 25% of all U.S. television households on an undiscounted or discounted basis, respectively.
Cross-ownership restrictions. FCC “cross-ownership” rules generally includes: equity and debt interests which combined exceed 33%reinstated as a result of a licensee’s total assets, ifdecision by a federal appellate court (a) prohibit common ownership of one or more broadcast stations (whether radio or television) and a daily newspaper in the interest holder supplies more than 15%same DMA, and (b) limit the number of the licensee’s total weekly programming, or has an attributable same-market media interest, whetherradio and television radio, cable or newspaper; a 5% or greater direct or indirect voting stock interest, including certain interests held in trust, unless the holder is a qualified passive investor in which case the threshold is a 20% or greater voting stock interest; any equity interestbroadcast stations that may be commonly owned in a limited liability companygiven DMA. We do not currently own cognizable interests in any daily newspapers or a partnership, including a limited partnership, unless the interest holder is properly “insulated” from management activities; and any position as an officer or director of a licensee or of its direct or indirect parent. The FCC is reviewing its single majority voting stockholder attribution exemption, which renders as non‑attributable voting interests up to 49% in a licensee controlled by a single majority voting stockholder. Because NAI holds an attributable interest in both the Company and Viacom Inc., the business of each company is attributable to the other for certain FCC purposes, which may have the effect of limiting and affecting the activities, strategic business alternatives and business terms available to the Company. (See Item 1A. “Risk Factors—The Businesses of the Company and Viacom Inc. Will Be Attributable to the Other Company for Certain Regulatory Purposes, Which May Limit Business Opportunities”).radio broadcast stations.
Alien Ownership. In general, the Communications Act prohibitsrestricts foreign individuals or entities from collectively owning more than 25% of theour voting power or equity of the Company. In September 2016, theequity. FCC clarified
and expanded certain rules and procedures and adopted and standardized filing and review procedures for broadcasters seeking to obtain FCC consentapproval is required to exceed the 25% threshold. The FCC has recently approved foreign ownership levels of up to 100% in certain instances, subsequent to its review and approval of specific, named foreign individuals.
Cable and Satellite Carriage of Television Broadcast Stations. The 1992 CableCommunications Act and implementing FCC regulations govern the retransmission of commercial television stations by cable television operators. Every three years, a television station must elect, with respect to cable systems within its DMA, either “must carry” status, pursuant to which the cable system’s carriage of the station is mandatory, or “retransmission consent,” pursuant to which the station gives up its right to mandatory carriage and secures instead the right to negotiate consideration in return for consenting to carriage. The Company’s owned television stations have elected the retransmission consent option in substantially all cases, and, since 2006, the Company has implemented a systematic process of seeking monetary consideration for its retransmission consent.
Similarly, federal legislation and FCC rules govern the retransmission of broadcast television stations by DBS operators. DBScable system operators, are requireddirect broadcast satellite operators, and other MVPDs. Pursuant to these regulations, we have elected to negotiate with MVPDs for the right to carry the signals of all localour broadcast television broadcast stations requesting carriage in local markets in which the DBS operator carries at least one signal pursuant to the statutory local-to-local compulsory copyright license. Every three years, each television station in such markets must elect “must carry” or “retransmission consent” status, in a manner similar to that described above with respect to cable systems. The Company’s owned and operated television stations are being transmitted into their local markets by the two major DBS operators pursuant to retransmission consent agreements. Federal law requires that broadcasters and MVPDs negotiate in good faith for retransmission consent. Some MVPDs have sought changes to federal law that would eliminate or otherwise limit the ability of broadcasters to obtain fair compensation for the grant of retransmission consent.
National Broadband Plan/Post-Auction Repack. In 2017, the FCC concluded a series of voluntary auctions to repurpose certain spectrum then utilized by broadcast television stations for use by wireless broadband services. The FCC has mandated that certain television stations that are continuing to operate subsequent to these auctions must change their channels as the FCC “repacks” the remaining spectrum dedicated to broadcast television use. Congress provided that the FCC will assist television stations in retaining their current coverage areas and established a fund to at least partially reimburse broadcasters for reasonable relocation expenses relating to the spectrum-repacking. Certain broadcast television stations, including some of those owned by us, are in the process of undertaking this repacking process and seeking reimbursement of associated costs.
Program Regulation. The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material between the hours of 6 a.m. and 10 p.m. The FCC’s maximum forfeiture penalty per station for broadcasting indecent or profane programming is approximately $415,000 per indecent or profane utterance, with a maximum forfeiture exposure of approximately $3.83 million for any continuing violation arising from a single act or failure to act. FCC regulations also prohibit broadcast television stations and cable networks from transmitting or causing the transmission of Emergency Alert System (“EAS”) tones in the absence of an actual emergency, authorized test of the EAS, or a qualified public service announcement. In September 2019, the FCC issued a Notice of Apparent Liability for Forfeiture finding that a CBS Television Network program broadcast in April 2018 violated the EAS rule and imposed a forfeiture of $272,000, which we timely paid.
Broadcast Transmission Standard. In November 2017, the FCC adopted rules to permit television broadcasters to voluntarily broadcast using the “Next Generation” broadcast television transmission standard developed by the Advanced Television Systems Committee, Inc., also called “ATSC 3.0.” Those full-service television stations using the new standard are subject to certain requirements, including the obligation to continue broadcasting a generally identical program stream in the current ATSC 1.0 broadcast standard. The ATSC 3.0 standard can be used to offer better picture quality and improved mobile broadcast viewing. A television station converting to ATSC 3.0 operation will incur significant costs in equipment purchases and upgrades. In addition, consumers may be required to obtain new television sets or other equipment that are capable of receiving ATSC 3.0 broadcasts. We are participating in various ATSC 3.0 testing with other broadcasters, but it is too early to predict any impact of this technical standard on our operations.
Children’s Television Programming. FederalOur business is subject to various regulations, both in the U.S. and abroad, applicable to children’s programming. Since 1990, federal legislation and rules of the FCC rules limithave limited the amount and content
of commercial matter that may be shown on broadcast television stations and cable channels during programming designed for children 12 years of age and younger, and requiresince 2006 the FCC has limited the display of certain commercial website addresses during children’s programming. Moreover, each of our broadcast television stations is required to broadcast on their main program streamair, in general, three hours per week of educational and informational programming (“E/I programming”) designed for children 16 years of age and younger.younger, with at least two of those three hours appearing on the station’s primary program stream. The FCC rules also imposemade certain modifications to its E/I programming requirementsrules in 2019, which provided additional flexibility to broadcasters with respect to certain aspects of these rules.
In addition, some policymakers have sought limitations on eachfood and beverage marketing in media popular with children and teens. For example, restrictions on the television advertising of foods high in fat, salt and sugar (“HFSS”) to children aged 15 and under have been in place in the UK since 2007. The UK government is currently considering tighter controls, including a ban on all HFSS advertising before 9:00 p.m. Various laws with similar objectives have also been enacted in Ireland, Turkey, Mexico, Chile, Peru, Taiwan and South Korea, and significant pressure for similar restrictions continues to be felt globally, most acutely in Australia, Brazil, Canada, Colombia, India, Hungary, Singapore, South Africa and France. The implementation of these or similar limitations and restrictions could have a negative impact on our Cable Networks advertising revenues, particularly for our networks with programming for children and teens.
Certain Other Regulations Affecting Our Business
Global Data Protection Laws and Children’s Privacy Laws. A number of data protection laws impact, or may impact, the manner in which ViacomCBS collects, processes and transfers personal data. In the EU, the General Data Protection Regulation (“GDPR”) mandates data protection compliance obligations and authorizes significant fines for noncompliance, requiring significant compliance resources and efforts on our part. Further, a number of other regions where we do business, including the U.S., Asia and Latin America, have enacted or are considering new data protection regulations that may impact our business activities that involve the processing of personal data. For example, in the U.S., the California Consumer Privacy Act, which went into effect on January 1, 2020, creates a host of new obligations for businesses regarding how they handle the personal information of California residents, including creating new data access, data deletion and opt out rights. In addition, some of the mechanisms ViacomCBS relies upon for the transfer of personal data from the EU to the U.S., such as utilizing standard contractual clauses approved by the European Commission (“EC”), have been subject to legal challenges, and the EU-U.S. Privacy Shield framework, which permits the transfer of personal data from the EU to the U.S., is subject to review by the relevant EU and U.S. authorities. The outcomes of these proceedings are uncertain and may require changes to our international data transfer mechanisms.
In addition, we are subject to other laws and regulations intended specifically to protect the interests of children, including the privacy of minors online. The U.S. Children’s Online Privacy Protection Act (“COPPA”) limits the collection by operators of websites or online services of personal information online from children under the age of 13. In July 2019, the Federal Trade Commission initiated a review of its regulations implementing COPPA, which we anticipate will be updated to address changes in technology. In the EU, GDPR also limits our ability to process data from children under the age of 16. Such regulations also restrict the types of advertising we are able to sell on these sites and apps and impose strict liability on us for certain actions of ViacomCBS, advertisers and other third parties, which could affect advertising demand and pricing. State and federal policymakers are also considering regulatory and legislative methods to protect consumer privacy on the Internet, and these efforts have focused particular attention on children and teens.
Compliance with enhanced data protection laws, which may be inconsistent with one another, requires additional resources and efforts on our part, and noncompliance with personal data protection regulations could result in increased regulatory enforcement and significant monetary fines.
EU Commission’s Digital Single Market Strategy. The EU continues to pursue its Digital Single Market (“DSM”) Strategy, which contains a broad range of proposals designed to create a more complete EU-wide market for digital multicast program stream transmittedgoods and services, several of which are likely to impact ViacomCBS’ businesses.
In November 2018, the EU adopted a number of reforms to the Audiovisual Media Services Directive (the “AVMSD”), which sets content and advertising rules for European broadcasters. The AVMSD applies the country-of-origin principle to linear and non-linear TV services, enabling cross-border broadcasts from a single regulatory jurisdiction, and sets compulsory minimum pan-EU content and advertising rules that Member States may choose to exceed. These reforms include a mandatory quota for European works on on-demand audiovisual services platforms, the option for EU states to introduce levies on the revenues of audiovisual media-service providers, and liberalized rules governing the scheduling of advertising on linear broadcasters. Member States have until September 2020 to transpose the reforms into national law. These changes could impact revenues for the VCNI television channels business in Europe and affiliate deals with platforms for both film and TV distribution.
In June 2019, two new EU directives became effective and may impact the way we acquire and distribute content online. The Copyright Directive introduced a requirement to agree to terms for the carriage of copyrighted content on online platforms (or to remove content in the absence of such agreement), and also granted rights to authors and performers to “fair and proportionate” remuneration, greater transparency and a right to revoke agreements if their work is not adequately exploited. The Online Broadcasting Directive extends the system of mandatory collective exercise of cable retransmission rights to other forms of retransmission including Internet protocol television and mobile, thereby potentially reducing the control that rights owners have over online distribution. EU states have until June 2021 to transpose these Directives into national law, if similar provisions do not already exist.
In 2020, the EU will evaluate the impact of the 2018 EC Geo-blocking Regulation that prohibits unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment. As part of its evaluation, it will consider whether the scope of the regulation should be extended to services that offer audio-visual and other copyrighted content, which may impact content owners’ ability to distribute on an exclusive, territorial basis within the EU.
Restrictions on Content Distribution. In addition to the EU, numerous countries around the world impose restrictions on the amount and nature of content that may be distributed in that country. Such regulations in China have the greatest impact, as only 34 foreign films, as selected by relevant authorities in China, may be distributed annually on a revenue share basis based on box office performance. In addition, in September 2018, China’s film and television stations,regulator, the National Administration of TV and Radio, published proposed regulations that would severely limit the streaming and broadcasting of foreign film and television content in China, further reducing foreign access to the Chinese market.
UK Regulations Affecting Channel 5 Business. As a PSB in the UK, Channel 5 is subject to certain UK Office of Communications (“OFCOM”) broadcasting regulations that impose detailed obligations, including mandating the proportion of total programming and programming during peak hours that must be original productions, the hours devoted to news and current affairs and the proportion of commissioned programming that must be made by independent producers. Channel 5 has also undertaken to air a certain amount of UK-originated children’s programming. Like all UK broadcasters, Channel 5 must abide by the OFCOM Broadcasting Code, which contains content and scheduling regulations relating to harm and offense, protection of individuals under the age of 18, privacy, fairness and product placement, and by OFCOM’s Code on the Scheduling of Television Advertising, which contains regulations on the amount and scheduling of advertising.
Protecting our Content from Copyright Theft
The unauthorized reproduction, distribution, exhibition or other exploitation of copyrighted material interferes with the requirement increasingmarket for copyrighted works and disrupts our ability to distribute and monetize our content. The theft of films, television, books and other entertainment content presents a significant challenge to our industry, and we take a number of steps to address this concern. Where possible, we use technological protection tools, such as encryption, to protect our content. We are actively engaged in proportionenforcement and other activities to protect our intellectual property, including: monitoring online destinations that distribute or otherwise infringe our content and sending takedown or cease and desist notices in appropriate circumstances; using filtering technologies employed by some user-generated content sites; and pursuing litigation and referrals to law enforcement with respect to websites and other online platforms that distribute or facilitate the distribution and exploitation of our content without authorization. Through
partnerships with various organizations, we also are actively involved in educational outreach to the additional hourscreative community, state and federal government officials and other stakeholders in an effort to marshal greater resources to combat copyright theft. Additionally, we participate in various industry-wide enforcement initiatives, public relations programs and legislative activities on a worldwide basis. We have had notable success with site-blocking efforts in parts of free programming offered on multicast channels. These rules also limitEurope and Asia, which can be effective in diverting consumers from piracy platforms to legitimate platforms.
Notwithstanding these efforts and the display during children’s programmingmany legal protections that exist to combat piracy, the proliferation of internet addresses of Websites that contain or linkcontent theft and technological tools with which to commercial material or that use program characters to sell products.
Program Access. Under the Communications Act, vertically integrated cable programmers (more fully described below) are generally prohibited from offering different prices, terms or conditions for programming to competing MVPDs unless the differential is justified by certain permissible factors set forth in the FCC’s regulations. Until 2012, the FCC’s “program access” rules also generally prohibited vertically integrated cable programmers from entering into exclusive distribution arrangements with cable operators. The FCC continues to assess the competitive impact of such individual exclusive contracts. A cable programmer is consideredcarry it out continue to be vertically integrated undera challenge. The failure to maintain enhanced legal protections and enforcement tools and to update those tools as threats evolve could make it more difficult for us to adequately protect our intellectual property, which could negatively impact its value and further increase the FCC’s program access attribution rules if it owns or is owned in whole or in part by either a cable operator or a telephone company that provides video programming directlycosts of enforcing our rights as we continue to subscribers.expend substantial resources to protect our content.
The Company’s wholly owned program services are not currently subject to the program access rules. The Company’s flexibility to negotiate the most favorable terms available for carriage of these services and its ability to offer cable operators exclusive programming could be adversely affected if it were to become subject to the program access rules. Because the Company and Viacom Inc. are under common control by NAI, Viacom Inc.’s businesses could be attributable to the Company for purposes of the FCC’s program access rules. (See Item 1A. “Risk Factors—The Businesses of the Company and Viacom Inc. Will Be Attributable to the Other Company for Certain Regulatory Purposes, Which May Limit Business Opportunities”).
National Broadband Plan. In response to the FCC’s March 2010 National Broadband Plan, which seeks to provide affordable broadband access throughout the U.S., Congress passed legislation in February 2012 authorizing the FCC to conduct voluntary auctions to reclaim spectrum utilized by broadcast television stations to provide additional spectrum for wireless broadband services. The television stations that continue their operations may have to change channels once the FCC “repacks” the remaining spectrum dedicated to broadcast television use after the auctions. The legislation provides that the FCC will assist television stations in retaining their current coverage areas, no UHF band stations will be forced into the VHF band and a fund will be established to reimburse broadcasters for reasonable
relocation expenses relating to the spectrum‑repacking. These spectrum auctions commenced in May 2016 and are expected to conclude in 2017.
INTELLECTUAL PROPERTY
The Company creates, owns, distributesWe create, own and exploits under licensesdistribute intellectual property worldwide. It is the Company’sour practice to protect its products, including its television, radio and motion picture products,our films, programs, content, brands, formats, characters, games, publications and other original and acquired works, and audiovisual works made for digital exploitation.ancillary goods and services. The following brands, logos, trade names, trademarks and related trademark families are amongthe most significant of those strongly identified with the product lines they represent and are significant assets of the Company: ViacomCBS™, CBS®, CBS Entertainment™, CBS NewsViacom®, CBS SportsAwesomenessTV®, CBSSports.comBET®, CBS All Access®, CBSNCBS Entertainment™, CBS Interactive®, CNETCBS News®, CBS Sports®, CBSN®, Channel 5® (UK), CMT®, COLORS®, Comedy Central®, Flix®, MTV®, MTV Films®, Network 10®, Nickelodeon®, Nick at Nite®, Nickelodeon Movies™, Nick Jr.®, Paramount Animation®, Paramount Network®, Paramount Pictures®, Paramount Players™, Paramount Television Studios™, Pluto TV™, Pop TV™, Showtime®, Showtime AnytimeSimon & Schuster®, Smithsonian Channel™, Telefe® (Argentina), The Movie Channel®, FlixTV Land®, CBS FilmsVH1®, CBS Audience NetworkVidCon®, TV.com™, Last.fmWhoSay®, MetroLyrics®, CSI:®, NCIS®, Entertainment Tonight®, Star Trek®, Simon & Schuster®, CBS Sports Network®, CBS Interactive™, CBS Local Digital Media™, CBS Radio® and other domestic and international program services and digital properties and all the call letters for the Company’sour stations. As a result, domestic and foreign laws protecting intellectual property rights are important to the Company and the Company actively enforces its intellectual property rights against infringements.
EMPLOYEES
AtAs of December 31, 2016, the Company2019, we employed approximately 15,55023,990 full-time and part-time salaried employees worldwide, and had approximately 5,7204,580 additional project-based staff includingon our payroll. We also use many other temporary employees and project-based staff of CBS Radio, which has been presented as a discontinued operation in the Company’s consolidated financial statements.ordinary course of our business.
FINANCIALAVAILABLE INFORMATION ABOUT SEGMENTS AND FOREIGN AND DOMESTIC OPERATIONS
FinancialWe file annual, quarterly and current reports, proxy and information statements and other information by segment and relating to foreign and domestic operations for each ofwith the last three years ending December 31 is set forth in Note 17 to the Consolidated Financial Statements.
AVAILABLE INFORMATION
CBS Corp. makes available free of charge on its Website, www.cbscorporation.com (Investors section), its Annual ReportSEC. Our annual reports on Form 10-K, Quarterly Reportsquarterly reports on Form 10-Q, Current Reportscurrent reports on Form 8-K and any amendments to thosesuch reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. Such material is made1934, as amended, will be available through the Company’s Websitefree of charge on our website at www.viacbs.com (under “Investors”) as soon as reasonably practicable after such material is electronicallythe reports are filed with or furnished to the Securities and Exchange Commission.SEC. These documents are also available on the SEC’s Websitewebsite at www.sec.gov.www.sec.gov.
Item 1A. Risk Factors.
CAUTIONARY STATEMENT CONCERNING FORWARD‑LOOKINGFORWARD-LOOKING STATEMENTS
This document,Annual Report on Form 10-K, including “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition,” and the documents incorporated by reference into this Annual Report on Form 10-K, containcontains both historical and forward-looking statements. All statements other thanthat are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements are not based on historical facts, but rather reflect the Company’sour current expectations concerning future results, and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “may,” “could” or other similar words or phrases. Similarly, statements that describe the Company’s objectives, plans orand goals, are or may be forward-looking statements. These forward-looking statementsand involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause the actualfuture results, performance or achievements of the Company to be different from any future results, performance and achievements expressed or implied by these statements. More information about these risks, uncertainties and
other factors is set forth below. Additionaldiffer. These risks, uncertainties and other factors are discussed in “Item 1A. Risk Factors” below. Other risks, or updates to the risks discussed below, may be described in our news releases and filings with the Company’s filings made under the securities laws. There may be additional risks, uncertaintiesSEC, including but not limited to our reports on Form 10-Q and factors that the Company does not currently view as material or that are not necessarily known.Form 8-K. The forward-looking statements included in this document are made only made as of the date of this document, and the Company doeswe do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.
RISK FACTORS
For an enterprise as large and complex as the Company, aI-24
Item 1A. Risk Factors.
A wide range of factors couldrisks may affect our business, financial condition or results of operations, now and financial results. The factorsin the future. We consider the risks described below are considered to be the most significant. There may be other currently unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our business, financial condition or results of operations.
Risks Relating to ViacomCBS’ Business and Industry
Changes in consumer behavior, as well as evolving technologies, distribution platforms and packaging, may negatively affect our business, financial condition or results of operations
The ways in which consumers view content, and technology and business models in our industry continue to evolve rapidly, and new distribution platforms, as well as increased competition from new entrants and emerging technologies, have added to the Company’s future results. Past financial performance may not be a reliable indicatorcomplexity of future performancemaintaining predictable revenue streams.
Technological advancements have driven changes in consumer behavior and historical trends should not be usedempowered consumers to anticipate results or trends in future periods.seek more control over when, where and how they consume content and have affected the options available to advertisers for reaching their target audiences. The following discussionevolution of risk factors should be read in conjunction with “Item 7. Management’s Discussionconsumer preferences towards digital services and Analysis of Results of Operations and Financial Condition”other subscription services, and the consolidatedsubstantial increase in availability of programming without advertising or adequate methodologies for audience measurement, may continue to have an adverse effect on our business, financial statementscondition or results of operations. Examples of the foregoing include the convergence of television telecasts and related notesdigital delivery of programming to televisions and other devices, video-on-demand platforms, tablets, new video and electronic book formats, user-generated content sites, unauthorized digital distribution of video content including via streaming and downloading, simultaneous live streaming of telecast content which allows users to consume content on demand and in “Item 8. Financial Statementsremote locations while avoiding traditional commercial advertisements or subscription payments and Supplementary Data”“cloud-based” DVR storage.
In addition, consumers are increasingly using time-shifting and advertising-blocking technologies that enable users to fast-forward or circumvent advertisements, such as DVRs, or increase the sharing of this Form 10-K.subscription content and reduce the demand for electronic sell-through, DVD and Blu-ray disc products. Substantial use of these technologies could impact the attractiveness of our programming to advertisers, adversely affecting our advertising revenue. Our business also may be adversely affected by the use of antennas (and their integration with set-top boxes or other consumer devices) to access broadcast signals to avoid subscriptions and live and stored video streaming boxes and services, which deliver unauthorized copies of copyrighted content, including those emanating from other countries in various languages.
A DeclineIn response to perceived consumer demand, distributors of programming and program services are continuing to develop alternative offerings for consumers, including “skinny bundles,” smaller, often customizable programming packages delivered at lower costs than traditional offerings; SVOD and other subscription services; ad-supported FVOD services developed by television manufacturers, cable providers and others; and original programming hosted on mobile and social media platforms. Also, the impact of technological changes on MVPDs may adversely affect our cable networks’ ability to grow revenue. If these alternative offerings continue to gain traction and our networks and brands are not included in Advertising Expenditures Could Causethose packages and services, or if consumers increasingly favor alternative offerings over traditional broadcast television and cable subscriptions, we may continue to experience a decline in viewership and ultimately demand for our programming, which could lead to lower revenues. These changing distribution models may also impact our ability to negotiate carriage deals on terms favorable to us, thereby having an adverse effect on our business, financial condition or results of operations.
In order to respond to these developments, we regularly consider and from time to time implement changes to our business models and strategies to remain competitive, and there can be no assurance that we will successfully anticipate or respond to these developments, that we will not experience disruption as we respond to such developments, or that the Company’s Revenuesbusiness models we develop will be as profitable as our current business models.
Our advertising revenues have been and Operating Resultsmay continue to Decline Significantlybe adversely impacted by changes in Any Given Period orconsumers’ content viewership, deficiencies in Specific Marketsaudience measurement and advertising market conditions
The Company derivesWe derive substantial revenues from the sale of advertising on its broadcasta variety of platforms, and basic cable networks, television stations, radio stations, syndicated programming, and digital properties. A decline in the economic prospects of advertisers, the economy in general or the economy of any individual geographic market, particularly a major market, such as Los Angeles, New York or Chicago, in which the Company owns and operates sizeable businesses, could alter current or prospective advertisers’ spending priorities. Natural and other disasters, acts of terrorism, political uncertainty or hostilities could lead to a reduction in advertising expenditures as a result of disrupted programming and services, uninterrupted news coverage and economic uncertainty. Advertising expenditures may also be affected by increasing competition for the leisure time of audiences. In addition, advertising expenditures by companies in certain sectors of the economy, including the automotive, financial and pharmaceutical segments, represent a significant portion of the Company’s advertising revenues. Any political, economic, social or technological change resulting in a reduction in these sectors’ advertising expenditures may adversely affect the Company’s revenue. Advertisers’ willingness to purchase advertising from the Company may also be affected by a decline in audience ratingsadvertising revenues could have a significant adverse effect on our business, financial condition or results of operations in any given period.
Consumers are increasingly turning to online sources for viewing and purchasing content, and an increasing number of companies offer SVOD services, including some that offer exclusive high-quality original video programming delivered directly to consumers over the Company’s programming, the inability of the Company to retain the rights to popular programming, increasing audience fragmentation caused by new program channels and the proliferation of media formats, including the internet and video‑on‑demand and the deployment of portable digital video devices andInternet. Consumers are also using new technologies whichthat allow consumerscustomers to live stream and time shift programming, make and store digital copies and skip or fast‑forwardfast-forward through advertisements. The increasing number of entertainment choices available to consumers has intensified audience fragmentation and reduced the viewing of content through traditional MVPDs and virtual MVPDs, which has caused, and likely will continue to cause, audience ratings declines for our cable networks and may adversely affect the pricing and volume of advertising. In addition, the pricing and volume of advertising may be affected by shifts in spending toward digital and mobile offerings, which can deliver targeted advertising promptly, from more traditional media, or toward newnewer ways of purchasing advertising, such as through automated purchasing, dynamic advertising insertion, third parties selling local advertising spots and advertising exchanges, some or all of which may not be as beneficial to the Companyus as traditional advertising methods. Any reduction in
In addition, advertising expenditures could have an adverse effectsales are largely dependent on audience measurement, and the Company’s revenues and results of operations.
The Company’s Successaudience measurement techniques can vary for a variety of reasons, including the platforms on which viewing is measured and Profitability Are Dependent Upon Audience Acceptance of Its Content, Including Its Television Programs and Motion Pictures, Which Is Difficult to Predict
Television, radio, motion picture and other content production and distribution are inherently risky businesses becausevariations in the revenues derived from the production and distribution of such content, and the licensing of rights to the associated intellectual property, depend primarily upon their acceptance by the public, which is difficult to predict. The commercial success of a program or motion picture also depends upon the quality and acceptance of other competing programs and motion pictures released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, all of which are difficult to predict. Rating points are also factors that are weighed when determining
the advertising rates that the Company receives.statistical sampling methods used. The use of evolving ratings technologies and measurements, and viewership on platforms or devices, such as tablets, smart phones and other mobile devices, that isare not being fully measured, could have an impact on the Company’sour program ratings and advertising revenues. For example, while C-3, a current television industry ratings system, measures live commercial viewing plus three daysAlso, consumer viewership of DVRstreaming services continues to grow and video-on-demand playback, the growing viewership occurring on subsequent days of DVR and video‑on‑demand playback is excluded from C-3 and other subsequent ratings. Poorunder measured. Low ratings can lead to a reduction inlower pricing and advertising spending. For example, thereWhile Nielsen’s statistical sampling method is the primary measurement technique used in our television advertising sales, we measure and monetize our campaign reach and frequency on and across digital platforms based on other third-party data as well as first-party data using a variety of methods, including the number of impressions served and demographics. In addition, multi-platform campaign verification remains in its infancy, and viewership on tablets, smartphones and other mobile devices, which continues to grow rapidly, still is not measured by any one consistently applied method. These variations and changes could have a significant effect on our advertising revenues. There can be no assurance that any replacement programming on the Company’sour television or radio stations will generate the same level of revenues or profitability ofas previous programming.
The strength of the advertising market can fluctuate in response to the economic prospects of specific advertisers or industries, advertisers’ current spending priorities and the economy in general or the economy of any individual geographic market, particularly a major market, such as Los Angeles or New York, in which we own and operate sizeable businesses, and this may adversely affect our advertising revenues. Natural and other disasters, acts of terrorism, political uncertainty or hostilities could lead to a reduction in domestic and international advertising expenditures as a result of disrupted programming and services, uninterrupted news coverage and economic uncertainty. In addition, advertising expenditures by companies in certain sectors of the economy, including the financial, pharmaceutical and automotive segments, represent a significant portion of our advertising revenues. Any political, economic, social or technological change resulting in a reduction in these sectors’ advertising expenditures may adversely affect our revenue. Our ability to generate advertising revenue is also dependent on demand for our content, the consumers in our targeted demographics, advertising rates and results observed by advertisers. These factors could have an adverse effect on our business, financial condition or results of operations.
Our success depends on our ability to maintain attractive brands andour reputation, and to offer popular programming and other content
Our ability to maintain attractive brands and our reputation, and to create popular programming and other content, tentpole and other live events and consumer products are key to the success of our business and our ability to generate revenues. The production and distribution of television and other programming, films and other entertainment content
and the licensing of rights to the associated intellectual property is inherently risky because the revenues we derive from various sources primarily depend on our ability to satisfy consumer tastes and expectations in a consistent manner. The popularity of our content is affected by our ability to maintain or develop our strong brand awareness and reputation and to target key audiences, and by the quality and attractiveness of competing entertainment content and the availability of alternative forms of entertainment and leisure time activities, including online, mobile and other offerings. Audience tastes change frequently and it is a challenge to anticipate what offerings will be successful at any point in time. We invest substantial capital in creating and promoting our content, including in the production of original content on our networks, in our films, in our television production business and in our publications, before learning the extent to which it will garner critical success and popularity with consumers.
In our Cable Networks and TV Entertainment businesses, the popularity of our brands and programming has a significant impact on the revenues we are able to generate from advertising, affiliate fees, content licensing, consumer products and other licensing activities, and our ability to expand our presence internationally depends, in part, on our ability to successfully predict and adapt to changing consumer tastes and preferences outside the U.S. In addition, the success of the Company’s cable networks and Simon & Schusterour Publishing business is similarly dependent on audience acceptance of its programming and publications, respectively. Thepublications. In our Filmed Entertainment business, the theatrical successperformance of a motion picture, based in large part upon audience acceptance, is a significant factor in determiningfilm affects not only the theatrical revenues it is likely to generate inwe receive but also revenues from other distribution outlets, such as TVOD and SVOD, television, home entertainment sales, licensing fees and other exploitation during the various other distribution windows. Consequently, low public acceptance of the Company’s content, including its television and radio programs, motion pictures and publications, will have an adverse effect on the Company’s results of operations. In addition, any decreased popularity of programming for which the Company has incurred significant commitments could have an adverse effect on its profitability. Programming and talent commitments of the Company, estimated to aggregate approximately $11.08 billion as of December 31, 2016, primarily included $8.06 billion for sports programming rights, $2.26 billion relating to the production and licensing of television and film programming, and $758 million for talent contracts with $2.30 billion of these amounts payable in and after 2022. Alicensed consumer products. Additionally, a shortfall, now or in the future, in the expected popularity of our programming that we expect to distribute or the sports events for which the Company haswe have acquired rights, or in the television and radio programming the Company expects to distribute, could lead to decreased profitability or losses for a significant period of time.
Failure by Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners and culture may damage our brands or reputation, even if such claims are untrue. A lack of popularity of our offerings or damage to Obtain, Createour reputation could have an adverse effect on our business, financial condition or results of operations in a particular period or over a longer term.
Increased costs for programming, films and Retain the Rights Related to Popular Programming Could Adversely Affect the Company’s Revenues
The Company’s revenue from its television, cable networks, radioother rights, and motion picture business is partially dependentjudgments we make on the Company’s continued ability to anticipatepotential performance of our content, may adversely affect our business, financial condition or results of operations
In our TV Entertainment and adapt to changesCable Networks segments, we produce a significant amount of original programming and other content and we invest significant resources in consumer tastesour brands, in part with the aim of developing higher quality and behavior on a timely basis. Moreover, the Company derivesquantity of original content, and we also derive a portion of its revenuesour revenue from the exploitation of itsour extensive library of television programming. Generally, aIn our Filmed Entertainment segment, we invest significant amounts in the production, marketing and distribution of films and television series. We also acquire programming, films and television series, must haveas well as a network runvariety of at least three digital content and other ancillary rights such as consumer and home entertainment product offerings, and we pay license fees, royalties and/or four years to be successfully soldcontingent compensation in domestic syndication, however, increasingly,connection with these time frames are being shortened. If the content of its television programming library ceases to be widely accepted by audiences or is not continuously replenished with popular content, the Company’s revenues could be adversely affected. The Company obtains a significant portion of its popular programming from third parties.acquired rights. For example, some of CBS Television Network’s most widely viewed broadcasts, including golf’s Masters Tournament, the PGA Championship, NFL games, NCAA Division I Men’s Basketball Tournament games and series such as The Big Bang TheoryYoung Sheldon, are made available based upon programming rights of varying duration that the Company haswe have negotiated with third parties. In addition, Showtime Networks enters into commitments to acquireWe also license various music rights to certainfrom the major record companies, music publishers and performing rights organizations.
Our investments in original and acquired programming for Showtime, The Movie Channelare significant and Flix from motion picture producersinvolve complex negotiations with numerous third parties, and other suppliers for varying durations, and CBS Radio acquiresrapid changes in consumer behavior have increased the broadcast rights to syndicated shows and to various programs such as sports events from third parties. CBS Films competes for compelling source material for andrisk associated with the talent necessary to produce motion pictures, as well as with other buyers for the acquisitionsuccess of third‑party produced motion pictures.all kinds of programming. Competition for popular programming that is licensed from third partiescontent is intense, and we may have to increase the Companyprice we are willing to pay for talent and intellectual property rights, which may result in significantly increased costs. Further, increased competition in the market for development and production of original programming, such as from Amazon, Apple, Facebook, Hulu, Netflix and YouTube, and streaming services by large entertainment companies, increases our content costs as they introduce different ways of compensating talent and approaching production. We may be outbid by itsour competitors for the rights to new, popular programming or in connection with the renewalrenewals of popular programming that we currently licensedlicense. Finally, certain of our counterparties and vendors may encounter financial and operational pressures, which could result in increased costs to us or delays in production. As such, there can be no assurance that we will recoup our investments in programming, films and other content when the content is broadcast or distributed. If our content offerings cease to be widely accepted by the Company. The Company’s failure to obtainaudiences or retain rights toare not continuously replenished with popular content, our revenues could be adversely affect the Company’s revenues.affected.
The Company Must Respond to Rapid Changes in Technology, Content Creation, Services and Standards in Order to Remain Competitive
Video, telecommunications, radio and data services technologies used in the entertainment industry are changing rapidly as are the digital publishing and distribution models for books. Advances in technologies or alternative methods of product delivery or storage, including “cloud-based” DVR storage, or certain changes in consumer behavior driven by these or other technologies and methods of delivery and storage, could have a negative effect on the Company’s businesses. Examples of the foregoing include the convergence of television broadcasts and online delivery of programming to televisions and other devices, video-on-demand platforms, tablets, satellite radio, new video and
electronic book formats, user-generated content sites, internet
The accounting for the expenses we incur in connection with our programming and mobile distributionfilms requires that we make judgments about their potential success and useful life. We initially estimate the ultimate revenues of video content via streaminga television program or film and downloading, simultaneous live streamingthen update our estimate of ultimate revenues based on expected future and actual results, including following a television program’s initial broadcast content, and place-shifting of content from the homeor a film’s initial theatrical release. If our estimates prove to portable devices on which content is viewable outside the home. For example, devices that allow users to viewbe incorrect or listen to television or radio programs onare reduced, it may result in decreased profitability as a time-delayed basis; technologies, such as DVRs, that enable users to fast-forward or skip advertisements or increase the sharing of subscription content; systems that allow users to access copyrighted productresult of the Company over the internet or other media; and portable digital devices and systems that enable users to view programming or store or make portable copies of programming, may cause changes in consumer behavior that could affect the attractivenessaccelerated recognition of the Company’s offerings to advertisers and adversely affect its revenues. Also, the growing uses of antennas to access broadcast signals to avoid subscriptions, user-generated content sites and live and stored video streaming sites, which deliver unauthorized copies of copyrighted content, including those emanating from other countries in various languages, may adversely impact the Company’s businesses. In addition, further increases in the use of internet-connected television expense and/or other digital devices, which allow users to consume content on-demand and in remote locations while avoiding traditional commercial advertisements or subscription payments, could adversely affect the Company’s television and radio broadcasting advertising and subscription revenues. Users who reduce, cancel or never had cable television subscription services are also known as “cord-shavers,” “cord-cutters” or “cord-nevers,” respectively. Cable providers and DBS operators are developing new techniques that allow them to transmit more channels on their existing equipment to highly targeted audiences, reducing the cost of creating channels and potentially leading to the divisionwrite-down of the television marketplace into more specialized niche audiences. More television and video programming options increase competition for viewers and competitors targeting programming to narrowly defined audiences may gain an advantage over the Company for television advertising and subscription revenues. Television manufacturers, cable providers and others are developing and offering technology to enable viewers to locate digital copies of programming from the internet to view on television monitors or other devices, which could diminish viewershipvalue of the Company’s programming. Generally, changing consumer behavior may impact the Company’s traditional distribution methods,asset. Similarly, if we determine it is no longer advantageous for example, by reducing viewership of its programming (including motion pictures), the demand for DVD and Blu-ray Disc product and/us to air a program on our broadcast or the desire to see motion pictures in theaters, which could have an adverse impact on the Company’s revenues and profitability. Also, the impact of technological changes on traditional distributors of video programming may adversely affect the Company’s cable networks’ ability to grow revenue. Anticipating and adapting to changes in technology on a timely basis and exploiting new sources of revenue from these changes will affect the Company’s ability to continue to increase its revenue.
Piracynetworks, we would accelerate our amortization of the Company’s Programming and Other Content, Including Digital Piracy, May Decrease Revenue Received from the Exploitation of the Company’s Programming and Other Content and Adversely Affect Its Businesses and Profitabilityprogram costs.
Piracy of programming (including motion pictures), books and other copyrighted material is prevalent in many parts of the world and is made easier by the availability of digital copies of content, which facilitates the creation, transmission and sharing of high quality unauthorized copies of the Company’s content. Technological advances, which facilitate the streaming of programming via the internet to television screens and other devices, may increase piracy. The proliferation of unauthorized access to content, including through unauthorized live streaming, streaming boxes programmed to seek pirated copies of content, the unauthorized premature release of content and unauthorized account sharing of subscription program services, has an adverse effect on the Company’s businesses and profitability because these unauthorized actions reduce the revenue that the Company potentiallyThese factors could receive from the legitimate sale and distribution of its products and services. In addition, if piracy were to increase, it would have an adverse effect on the Company’s businesses and profitability. Also, while legal protections exist, piracy and technological tools with which to carry it out continue to escalate, evolve and present challenges for enforcement. The Company vigorously defends itself against entities that illegally secure and exhibit its content, including streaming the Company’s content without obtaining the consentour business, financial condition or results of or paying compensation to the Company. Failure of legal protections to evolve and enable enhanced enforcement efforts to combat piracy could make it more difficult for the Company to adequately protect its intellectual property, which could negatively impact its value and further increase the Company’s enforcement costs.operations.
The Company’s Businesses Operateloss of key talent could adversely affect our business, financial condition or results of operations
Our business depends upon the continued efforts, abilities and expertise of not only our corporate and divisional executive teams, but also the various creative talent and entertainment personalities with whom we work. For example, we employ or contract with several entertainment personalities with loyal audiences and we produce films with highly regarded directors, producers, writers, actors and other talent. These individuals are important to achieving the success of our programs, films and other content. There can be no assurance that these individuals will remain with us or will retain their current appeal, or that the costs associated with retaining them or new talent will be reasonable. If we fail to retain these individuals on current terms or if our entertainment personalities lose their current appeal or we fail to attract new talent, our business, financial condition or results of operations could be adversely affected.
Our businesses operate in Highly Competitiveindustries that are highly competitive and Consolidating Industriesswiftly consolidating
The Company competesWe depend on the popularity of our content and other offerings, our appeal to advertisers and widespread distribution of our content. We compete with other media companies forto attract creative talent and produce high quality content, to achieve large audiences and to generate advertising revenue. The Company also competes for distribution on various MVPD and othera variety of third-party digital platforms. The Company’s abilityplatforms to attractdraw large audiences. Competition for talent, content, audiences, and advertisers and obtain favorable distribution depends in part on its ability to provide popular television programming and radio programming, motion pictures and books and adapt to new technologiesservice providers, production infrastructure, advertising and distribution platforms. The consolidation of advertising agencies, distributorsis intense and television service providers also has increased their negotiating leverage and made competition for audiences, advertising revenue, and distribution more intense. In addition, consolidation among book retailers and the growth of online sales and electronic books sales have resulted in increased competition for limited physical shelf space for the Company’s publications and for the attention of consumers online. Competition for audiences and advertising comes from:from broadcast television stations and networks;networks, cable television systems and networks; motion picture studios;networks (including our own), streaming service distributors, the internet;Internet and social media platforms, film studios and independent film producers and distributors, consumer products companies and other entertainment outlets and platforms, as well as from search engines, program guides and “second screen” applications and non-traditional programming services; technological innovations in content distribution; terrestrial and satellite radio and portable devices; local, regional and national newspapers; direct mail; andservices, such as streaming offerings. Additionally, other communications and advertising media that operate in these markets. Other television and radio stations or cable networks may change their formats or programming, a new station or new network may adopt a format to compete directly with the Company’sour stations or networks, or stations or networks might engage in aggressive promotional campaigns. Further, competition from additional entrants into the market for development and production of original programming and streaming services, such as Amazon, Apple, Facebook, Hulu, Netflix and YouTube, and major entertainment companies, continues to increase. In book publishing, competition among electronic and print book retailers could decrease the prices for new releases and the outlets available for book sales. Moreover, the growing use of self-publishing technologies by authors increases competition and could result in decreased use of traditional publishing services.
Our ability to obtain widespread distribution on favorable terms, which contributes to our ability to attract audiences and, in turn, advertisers, is adversely affected by the consolidation of advertising agencies, programmers, content providers, distributors (including telecom companies) and television service providers. This consolidation reduces the number of distributors with whom we negotiate and increases the negotiating leverage and market power of the combined companies. In addition, consolidation in the film business may adversely affect the distribution of our films on various platforms. Consolidation among book retailers and the growth of online sales and electronic books sales have resulted in increased competition for limited physical shelf space for our publications and for the attention of consumers online.
In addition, our competitors generally include market participants with interests in multiple media businesses that are often vertically integrated, whereas our Cable Networks business generally relies on distribution relationships with third parties. As more cable and satellite operators, Internet service providers, telecom companies and other content distributors, aggregators and search providers create or acquire their own content, they may have significant
competitive advantages, which could adversely affect our ability to negotiate favorable terms for distribution or otherwise compete effectively in the delivery marketplace. Our competitors could also have preferential access to important technologies, customer data or other competitive information, as well as significant financial resources.
This competition and consolidation could result in lower ratings and advertising, and subscriptionlower affiliate and other revenues, orand increased content costs and promotional and other expenses, negatively affecting our ability to generate revenues and consequently, lower earnings and cash flow for the Company. The Company cannotprofitability. There can be assuredno assurance that itwe will be able to compete successfully in the future against existing new or potentialnew competitors, or that competition andor consolidation in the marketplace will not have a materialan adverse effect on itsour business, financial condition or results of operations.
Because we derive a significant portion of our revenues from a limited number of distributors, the loss of affiliation and distribution agreements, renewal on less favorable terms or adverse interpretations could have a significant adverse effect on our business, financial condition or results of operations
A significant portion of our revenues, particularly from Cable Networks and TV Entertainment, are attributable to agreements with MVPDs and virtual MVPDs, and other distributors of our programming and program services. These agreements generally have fixed terms that vary by market and distributor, and there can be no assurance that these agreements will be renewed in the future, or renewed on favorable terms, including but not limited to those related to pricing and programming tiers. We may also be unable to modify existing agreements with terms that have over time become less favorable. The Lossloss of Affiliation Agreementsexisting packaging, positioning, pricing or Retransmission Agreementsother marketing opportunities and the loss of carriage on cable and satellite programming tiers or Renewalsthe failure to renew our agreements with any distributor, or renew or modify them on Less Favorable Terms Could Materially Adversely Affectfavorable terms, could reduce the Company’s Resultsdistribution of Operationsour programming and program services and decrease the potential audience for our programs, thereby negatively affecting our growth prospects and revenues from both affiliate fees and advertising.
The CBS Television Network provides its affiliates with up to approximately 98 hours of regularly scheduled programming per week. In return, the CBS Television Network’s affiliated stations broadcast network-inserted commercials during that programming and pay the Companyus station affiliation fees. Loss of station affiliation agreements of the CBS Television Network could adversely affect the Company’sour results of operations by reducing the reach of the Company’sour programming and therefore itsour attractiveness to advertisers, and renewal of these affiliation agreements on less favorable terms may also adversely affect the Company’sour results of operations. The non-renewal or termination of retransmission agreements with MVPDs or continued distribution on less favorable terms, could also adversely affect the Company’s revenues and its ability to distribute its network programming to a nationwide audience and affect the Company’s ability to sell advertising, which could have a material adverse effect on the Company’s results of operations. Showtime Networks, CBS Sports Network and Smithsonian Networks are also dependent upon the maintenance of distribution agreements with MVPDs and other third-party digital platforms and there can be no assurance that these agreements will be renewed in the future on terms acceptable to such programmers. The loss of one or more of these arrangements could reduce the distribution of Showtime Networks’, CBS Sports Network’s and Smithsonian Networks’ program services and reduce revenues from subscriber fees and advertising, as applicable. Further, the loss of favorable packaging, positioning, pricing or other marketing opportunities with any distributor could reduce revenues from subscriber fees. Also, consolidation
Consolidation among MVPDs and increased vertical integration of such distributors into the cable or broadcast network business have provided more leverage to these distributors and could adversely affect the Company’sour ability to maintain or obtain distribution for itsour network programming or distribution and/or marketing of itsour subscription program services on favorable or commercially reasonable terms, or at all. Also, consolidation among television station group owners could increase their negotiating leverage. Moreover, competitive pressures faced by MVPDs, particularly in light of the lower retail prices of streaming services, could adversely affect the terms of our renewals with MVPDs. In addition, MVPDs and streaming services continue to develop alternative offerings for consumers, which are generally smaller than the traditional program package or may allow the consumer to customize its package of program services.including “skinny bundles.” To the extent these packages do not include the Company’sour programming and become widely accepted in lieu of traditional program packages, the Companywe could experience a decline in affiliate and subscription revenues.
The Company’s Operating Results Are Subject to Seasonal Variations and Other Factors
The Company’s business has experienced and is expected to continue to experience seasonality due to, among other things, seasonal advertising patterns and seasonal influences, on people’s viewing, reading, attendance and listening habits. Typically, the Company’s revenue from advertising increases in the fourth quarter, Simon & Schuster generates a substantial portion of itsSimilarly, our revenues in the fourth quarter, and license fees for television programming and CBS Films’ revenue from motion pictures are dependent on the timing, mix,compliance of major distributors with the terms of our affiliation or distribution agreements. As these agreements have grown in complexity, the number of disputes regarding the interpretation, and even validity, of the agreements has grown, resulting in greater uncertainty and, from time to time, litigation with respect to our rights and obligations. For example, some of our distribution agreements contain “most favored nation” (“MFN”) clauses, which provide that if we enter into an agreement with a distributor and such agreement includes specified terms that are more favorable than those held by a distributor holding an MFN right, we must offer some of those terms to the distributor holding the MFN right. These clauses are generally complex and may lead to disagreement over their interpretation and application. Disagreements with a distributor on the interpretation or validity of an agreement could adversely impact our revenues from both affiliate fees and advertising, as well as our relationship with that distributor.
These factors could have an adverse effect on our business, financial condition or results of operations.
The integration of the CBS and Viacom businesses may not be successful or may be more difficult, time consuming or costly than expected. Synergies and other benefits may not be realized within the expected time frames, or at all.Operating costs, customer loss and business disruption may be greater than expected and revenues may be lower than expected following the Merger. Our ongoing investment in new businesses, products, services and technologies present many risks, and we may not realize the financial and strategic goals we had contemplated.
Our ability to realize the anticipated benefits of the Merger will depend, to a large extent, on our ability to integrate the businesses of the combined companies in a manner that facilitates growth opportunities and achieves the projected standalone cost savings and revenue growth trends that have been identified without adversely affecting current revenues and investments in future growth. The failure to meet the challenges involved in combining CBS’ and Viacom’s businesses following the Merger and to realize the anticipated benefits of the Merger, including expected synergies, could cause an interruption of, or a loss of momentum in, the activities of ViacomCBS and could adversely affect the results of operations of ViacomCBS. The overall combination of our businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships. The difficulties of combining the operations of the companies include, among others:
the diversion of management attention to integration matters;
difficulties in integrating operations and systems, including administrative and information technology infrastructure and financial reporting and internal control systems;
challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;
difficulties in integrating employees and attracting and retaining key personnel, including talent;
challenges in retaining existing, and obtaining new customers, viewers, suppliers, distributors, licensors, employees and others, including material content providers, studios, producers, directors, actors, authors and other talent, and advertisers;
difficulties in achieving anticipated cost savings, synergies, business opportunities, financing plans and growth prospects from the combination;
difficulties in managing the expanded operations of a significantly larger and more complex company;
challenges in continuing to develop valuable and widely accepted content and technologies;
contingent liabilities that are larger than expected; and
potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Merger.
In addition, even if our operations are integrated successfully, the full benefits of the Merger may not be realized, including, among others, the synergies, cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all. Further, additional unanticipated costs may be incurred in the integration of our businesses. Many of these factors are outside of our control, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact our business, financial condition and results of operations.
In the past, we have acquired and invested, and expect to continue to acquire and invest, in new businesses, products, services and technologies as part of our ongoing strategic initiatives. Such acquisitions and strategic initiatives may involve significant risks and uncertainties, including the types described above as well as insufficient revenues from such investments to offset any new liabilities assumed and expenses associated with the new
investments, unidentified issues not discovered in our due diligence that could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities and a failure to successfully further develop an acquired business or technology. Because new investments are inherently risky, and the anticipated benefits or value of these investments may not materialize, no assurance can be given that such investments and other strategic initiatives will not adversely affect our business, financial condition or results of operations.
Service disruptions or failures of, or cybersecurity attacks upon, our or our service providers’ networks, information systems and other technologies could result in the disclosure of confidential or valuable business or personal information, disruption of our businesses, damage to our brands and reputation, legal exposure and financial losses
Networks, cloud services, information systems and other technologies, including technology systems used in connection with the production and distribution of our programming, films and other content by us or our third-party providers (“Systems”), are critical to our business activities, and shutdowns or service disruptions of, and cybersecurity attacks on, these Systems pose increasing risks. Such shutdowns, disruptions and attacks may be caused by third-party hacking of computers and Systems; dissemination of computer viruses, worms, malware, ransomware and other destructive or disruptive software; denial of service attacks and other bad acts; human error; and power outages, natural disasters, extreme weather, terrorist attacks or other similar events. Shutdowns, disruptions and attacks could have an adverse impact on us, our business partners, employees, advertisers, viewers and users of our content offerings, including degradation or disruption of service, loss of data and damage to equipment and data. Steps we take to add software and hardware, upgrade our Systems and network infrastructure, and improve the stability and efficiency of our Systems may not be sufficient to avoid shutdowns, disruptions and attacks. Significant events could result in a disruption of our operations and reduction of our revenues, the loss of or damage to the integrity of data used by management to make decisions and operate our businesses, viewer or advertiser dissatisfaction or a loss of viewers or advertisers, and damage to our reputation or brands.
We operate communications and computer hardware Systems located both in our facilities and that of third-party providers. In addition, we use third-party “cloud” computing services in connection with our business operations. We also use content delivery networks to help us stream programming, films and other content in high volume to viewers and users of our online, mobile and app offerings over the internet. Problems faced by us, our hosting providers, our third-party “cloud” computing or other network providers, including technological or business-related disruptions, as well as cybersecurity attacks and regulatory interference, could result in a disruption of our operations and reduction of our revenues, adversely impact the experience of our viewers and users, and could damage our reputation and brands.
We are subject to risks caused by the misappropriation, misuse, falsification or intentional or accidental release or loss of business or personal data or programming content maintained in our or our third-party providers’ Systems, including proprietary and personal information (of third parties, employees and users of our online, mobile and app offerings), business information including intellectual property, or other confidential information. Outside parties may attempt to penetrate our Systems or those of our third-party providers or fraudulently induce employees, business partners or users of our online, mobile and app offerings to disclose sensitive or confidential information in order to gain access to our data or our subscribers’ or users’ data, or our programming. The number and availabilitysophistication of attempted and successful information security breaches in the U.S. and elsewhere have increased in recent years, and because of our prominence, we and/or third-party providers we use may be a particularly attractive target for such attacks. Because the techniques used to obtain unauthorized access to, or disable, degrade or sabotage, these Systems change frequently and often are not recognized until launched, we may be unable to anticipate these techniques, implement adequate security measures or remediate any intrusion on a timely or effective basis. Moreover, the development and maintenance of security measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite our efforts, the possibility of these events occurring cannot be eliminated.
If a material breach of our Systems or those of our third-party providers occurs, the market perception of the Company’s television programmingeffectiveness of our security measures could be harmed, we could lose subscribers, viewers, advertisers and motion pictures,other
business partners, and users of our online, mobile and app offerings; and our reputation, brands and credibility could be damaged; and we could be required to expend significant amounts of money and other resources to repair or replace such Systems or to comply with regulatory requirements. We could also be subject to actions by regulatory authorities and claims asserted in private litigation. The costs relating to any data breach could be material, and we may not have adequate insurance coverage to compensate us for any losses associated with such events.
Each of these factors could have an adverse effect on our reputation, business, financial condition or results of operations.
We are subject to complex, often inconsistent and potentially costly laws, rules, regulations, industry standards and contractual obligations relating to privacy and personal data protection
We are subject to laws, rules and regulations in the U.S. and in other countries relating to privacy and the collection, use and security of personal data. In the EU, for example, the GDPR mandates data protection compliance obligations and authorizes significant fines for noncompliance, requiring significant compliance resources and efforts on our part. Further, a number of other regions where we do business have enacted or are considering new data protection regulations that may impact our business activities. In the U.S., the California Consumer Privacy Act, which went into effect on January 1, 2020, creates a host of new obligations for businesses regarding how they handle the personal information of California residents. We are also subject to laws and regulations intended specifically to protect the interests of children and the privacy of minors online, including COPPA in the U.S. and the GDPR in the EU, and we have been required to limit some functionality on our websites and apps as applicable,a result of these regulations. Such regulations also restrict the types of advertising we are able to sell on these sites and apps and impose strict liability on us for certain actions of ViacomCBS, advertisers and other third parties, which could affect advertising demand and pricing. We will continue to expend resources to comply with data protection and privacy standards imposed by law, industry standards or contractual obligations, which may cause operating results to increasebe inconsistent with one another, and despite such efforts we may face regulatory and other legal actions. See “Regulation and Protection of our Intellectual Property—Certain Other Regulations Affecting Our Business—Global Data Protection Laws and Children’s Privacy Laws.”
Each of these factors could have an adverse effect on our reputation, business, financial condition or decrease during a period and create non-comparable results relative to the corresponding period in the prior year. In addition, advertising revenues in even-numbered years benefit from advertising placed by candidates for political offices. The effects of such seasonality make it difficult to estimate future operating results based on the previous results of any specific quarteroperations.
The failure, destruction and/or breach of satellites and mayfacilities that we depend upon to distribute our programming could adversely affect operating results.our business, financial condition or results of operations
Economic Conditions May Adversely Affect the Company’s Businesses and Customers
The U.S.We use satellite systems, fiber and other countries where the Company operates have experienced slowdownsmethods to transmit our programs and volatilities in their economies. A downturn could leadprogram services to lower consumerbroadcast television and business spending for the Company’s products and services, particularly if customers, including advertisers, subscribers, licensees, retailers, theatercable television operators and other consumersdistributors worldwide. The distribution facilities include uplinks, communications satellites and downlinks. Notwithstanding certain back-up and redundant systems, transmissions may be disrupted as a result of power outages, natural disasters, extreme weather, terrorist attacks, cyber attacks, failures or impairments of communications satellites or on-ground uplinks or downlinks used to transmit programming or other similar events. Currently, there are a limited number of communications satellites available for the transmission of programming, and if a disruption occurs, we may not be able to secure alternate distribution facilities in a timely manner. There can be no assurance that such failure or disruption would not have an adverse effect on our business, financial condition or results of operations.
Theft of our content, including digital copyright theft and other unauthorized uses of our content, reduces revenue received from legitimate distribution of our programming, films, books and other entertainment content and adversely affects our business, financial condition or results of operations
The success of our businesses depends in part on our ability to maintain and monetize our intellectual property rights. We are fundamentally a content company and theft of our content - specifically, the infringement of our films and home entertainment products, television programming, digital content, books and other intellectual property rights - affects us and the value of our content. Intellectual property theft is particularly prevalent in many parts of the Company’sworld that either lack effective laws and technical protection measures similar to those existing in the U.S. and Europe or
lack effective enforcement of such measures, or both. Such foreign copyright theft often creates a supply of pirated content offeringsfor major markets as well. The interpretation of copyright, trademark and other intellectual property laws as applied to our content, and our infringement-detection and enforcement efforts, remain in flux, and some methods of enforcement have encountered political opposition. The failure to appropriately enforce and/or the weakening of existing intellectual property laws could make it more difficult for us to adequately protect our intellectual property and thus negatively affect its value.
Content theft is made easier by the wide availability of higher bandwidth and reduced storage costs, as well as tools that undermine encryption and other security features and enable infringers to cloak their identities online. We and our numerous production and distribution partners operate various technology systems in connection with the production and distribution of our programming and films, and intentional or unintentional acts could result in unauthorized access to our content. The continuing proliferation of digital formats and technologies heightens this risk. The unauthorized distribution and consumption of our content through a wide array of platforms and devices remain problematic and an ever-present challenge, as Internet-connected televisions, set-top boxes and mobile devices are ubiquitous and many can support illegal re-transmission platforms, illicit video-on-demand/streaming services and pre-loaded hardware, providing more accessible, versatile and legitimate-looking environments for consuming pirated film and television content. Unauthorized access to our content could result in the premature release of films, television programs or other content as well as a reduction in legitimate audiences, which would likely have significant adverse effects on the value of the affected content and our ability to monetize our content.
Copyright theft has an adverse effect on our business because it reduces the revenue that we are able to receive from the legitimate sale and distribution of our content, undermines lawful distribution channels, reduces the public’s and some affiliate partners’ perceived value of our content and inhibits our ability to recoup or profit from the costs incurred to create such content. While legal protections exist, piracy and technological tools with which to engage in copyright theft continue to escalate, evolve and present challenges for enforcement. We are actively engaged in enforcement and other activities to protect our intellectual property, and it is likely that we will continue to expend substantial resources in connection with these efforts. Efforts to prevent the unauthorized reproduction, distribution and exhibition of our content may affect our profitability and may not be successful in preventing harm to our business and may have an adverse effect on our business, financial condition or results of operations.
Political and economic conditions in a variety of markets around the world could have an adverse effect on our business, financial condition or results of operations
Our businesses operate and have audiences, customers and partners worldwide, and we are focused on expanding our international operations in key markets, some of which are emerging markets. For that reason, economic conditions in many different markets around the world affect a number of aspects of our businesses, in particular revenues in both domestic and international markets derived from advertising sales, theatrical releases, home entertainment distribution, television licensing and sales of consumer products. Economic conditions in each market can also impact our audience’s discretionary spending and therefore their willingness to access our content, as well as the businesses of our partners who purchase advertising on our networks, causing them to reduce demands for the Company’s products and services.their spending on advertising. We may also be subject to longer payment cycles. In addition, in unfavorable economic environments,as we have expanded our international operations, our exposure to foreign currency fluctuations against the Company’s customers may have difficulties obtaining capital at adequate or historical levelsU.S. dollar (compared to, finance their ongoing business and operations and may face insolvency, all of which could impair their ability to make timely payments and continue operations, including distribution offor example, the Company’s content. The Company is unable to predictArgentinian peso, the duration and severity of weakened economic conditions and such conditions and resultant effects could adversely impact the Company’s businesses, operating results, and financial condition.
Volatility and Weakness in Capital Markets May Adversely Affect Credit Availability and Related Financing Costs for the Company
Bank and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, the Company’s ability to refinance,British pound and the related costEuro, among others) has increased. Such fluctuations could have an adverse effect on our business, financial condition or results of refinancing, some or all of its debt could be adversely affected. Although the Company can currently access the bankoperations, and capital markets, there is no assurance that such marketsdownward trending currencies will continuerebound or that stable currencies will remain stable in any period.
Our businesses are also exposed to becertain political risks inherent in conducting a reliable source of financing for the Company. In addition, the Company’s accessglobal business, including retaliatory actions by governments reacting to and cost of borrowing can be affected by the Company’s short- and long-term debt ratings assigned by ratings agencies. These factors, including the tightening of credit markets, or a decreasechanges in the Company’s debt ratings, could adversely affect the Company’s ability to obtain cost‑effective financing.
Increased Programming and Content Costs May Adversely Affect the Company’s Profits
The Company produces and acquires programming (including motion pictures)U.S. and other contentcountries, including in connection with trade negotiations; issues related to the presence of corruption in certain markets and incurs costs with respect to its content, including for all typesenforcement of creative talent, including actors, authors, writersanti-corruption laws and producers, composers and publishersregulations; increased risk of music,political instability in some markets as well as conflict and sanctions preventing us from accessing those markets; escalating trade, immigration and nuclear disputes; wars, acts of terrorism or other hostilities; and other political, economic or other uncertainties.
The UK left the EU on January 31, 2020. It is now in a ‘transition period’ scheduled to end on December 31, 2020 that allows the negotiation of a future UK-EU trade relationship while remaining part of the EU Single Market. Depending on the ultimate terms of a trade deal, the UK could lose access to the single EU market and to the global trade deals negotiated by the EU on behalf of its members. It is possible that the UK could revert to World Trade Organization terms if no deal is reached. The effects of Brexit and the on-going trade negotiations may continue to adversely affect business activity, political stability and economic and market conditions in the UK, the Eurozone, the EU and elsewhere and contribute to instability in global financial and foreign exchange markets, including volatility in the value of the Euro and the British Pound. A new trade deal, or no deal at all, could lead to additional political, legal and economic instability and uncertainty in the EU, including changes in the regulatory environment, which could impact our ability to use UK law under “country of origin” rules for marketingprogramming in the EU, potential trade barriers between the UK and distribution. An increasethe EU and between the UK and other countries, and potential content production quota regulations. Given that a portion of our business is conducted in the EU, including the UK, any of these effects of Brexit and a trade deal, and others we cannot anticipate, could have an adverse effect on our business, financial condition or results of operations.
These political and economic risks could create instability in any of these costs and increased competition from consolidated entities and new entrants into the market for the production and acquisitionmarkets where our businesses derive revenues, which could result in a reduction of new content may lead to decreased profitability.revenue or loss of investment that adversely affects our businesses, financial condition or results of operations.
Changes in Communications LawsU.S. or Other Regulations May Haveforeign laws or regulations may have an Adverse Effectadverse effect on our business, financial condition or results of operations
Our program services, filmed entertainment and online, mobile and app properties are subject to a variety of laws and regulations, both in the Company’s BusinessU.S. and/or in the foreign jurisdictions in which we or our partners operate, including relating to intellectual property, content regulation, user privacy, data protection, anti-corruption, repatriation of profits, tax regimes, quotas, tariffs or other trade barriers, currency exchange controls, operating license and permit requirements, restrictions on foreign ownership or investment, export and market access restrictions, and exceptions and limitations on copyright and censorship, among others.
The television and radio broadcasting and distribution industries in the U.S. are highly regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC. The television and radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act. For example, the Company iswe are required to obtain licenses from the FCC to operate itsour television and radio stations. The CompanyIt cannot be assured that the FCC will approve itsour future renewal applications or that the renewals will be for full terms or will not include conditions or qualifications. The non-renewal, or renewal with substantial conditions or modifications,
of one or more of the Company’sour licenses could have a material adverse effect on the Company’sour revenues. The CompanyWe must also comply with extensive FCC regulations and policies in the ownership and operation of itsour television and radio stations and itsour television networks. FCC regulationsnetworks, which prohibit the common ownership of two or more than one of the top four television networks ABC, CBS, FOX and NBC, and limit the number of television and radio stations that a licensee can own in a market and the number of television stations that can be owned nationwide,in the U.S., which could restrict the Company’sour ability to consummate future transactions and in certain circumstances could require itus to divest some television stations. Our programming directed towards children is subject to a number of additional regulations. For example, privacy regulations make it difficult to measure online viewership by children. The threat of regulatory action or radio stations. increased scrutiny that deters certain advertisers from advertising or reaching their intended audiences could adversely affect advertising revenue.
The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations, and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation and ownership of the Company’sour television and radio properties. For example, from time to time, proposals have been advanced in the U.S. Congress and at the FCC to require television and radio broadcast stations to provide advertising time to political candidates for free or at a reduced charge. Any restrictions on political or other advertising may adversely affect the Company’sour advertising revenues. Changes to the media ownership and other FCC rules may affect the competitive landscape in ways that could increase the competition faced by the Company.us. Proposals have also been advanced from time to time before the U.S. Congress and the FCC to extend the program access rules (currently applicable only to those cable program services which also own or are owned in whole or in part by cable distribution or telephone company systems) to all cable program services. The Company’sOur ability to
obtain the most favorable terms available for itsour content could be adversely affected should such an extension be enacted into law. In response to the FCC’s March 2010 National Broadband Plan, which seeks to provide affordable broadband access throughout the U.S., Congress passed legislation in February 2012 authorizing the FCC to conduct voluntary auctions to reclaim spectrum utilized by broadcast television stations to provide additional spectrum for wireless broadband services. The television stations that continue their operations may have to change channels once the FCC “repacks” the remaining spectrum dedicated to broadcast television use after the auctions. These spectrum auctions commenced in May 2016 and are expected to conclude in 2017 followed by repacking, which could adversely impact the Company’s broadcast coverage and related revenues. It is difficult to predict the timinglikelihood or outcomeimpact of any proposed actions by the FCC’s actionsU.S. Congress or their effect, if any,the FCC on our television properties.
Laws in some non-U.S. jurisdictions differ in significant respects from those in the Company’s broadcasting properties. Legislation couldU.S., and the enforcement of such laws can be enactedinconsistent and unpredictable, which could remove over-the-air broadcasters’ existing exemption from payment of a performance royaltyimpact our ability to record companiesexpand our operations and performers of music which is broadcast on radio stations and could have an adverse impact on the cost of music programming for the Company.undertake activities that we believe are beneficial to our business. In addition, changes in or new interpretations of international laws and regulations governing the broadcast and distribution of content, competition and the internet,Internet, including those affecting data privacy,, as well as the new EU law requiring 30% local content on SVOD services and proposed amendments to the law governing territorial exclusivity of the distribution of content in Europe, may have an adverse impact on the Company’sour international businesses and internetdigital properties. The Company
Our businesses are also subject to laws and regulations in the U.S. and internationally governing the collection, use, sharing, protection and retention of personal data, which has implications for how such data is unablemanaged. For example, GDPR expands the regulation of personal data processing throughout the EU and significantly increases penalties for non-compliance. Complying with these laws and regulations could be costly, require us to predictchange our business practices, or limit or restrict aspects of our business in a manner adverse to our business operations. Many of these laws and regulations continue to evolve, and substantial uncertainty surrounds their scope and application. Our failure to comply could result in exposure to enforcement by U.S. or foreign governments, as well as significant negative publicity and reputational damage.
Our businesses could be adversely affected by new laws and regulations, changes in existing laws, changes in interpretations of existing laws by courts and regulators and the effectthreat that anyadditional laws or regulations may be forthcoming, as well as our ability to enforce our legal rights. We could be required to change or limit certain of our business practices, which could impact our ability to generate revenues. We could also incur substantial costs to comply with new and existing laws and regulations, or substantial fines and penalties or other liabilities if we fail to comply with such laws regulations or policies may have on its operations.and regulations.
Vigorous Enforcementenforcement or Enhancementmodification of FCC Indecencyindecency and Other Program Content Rules Againstother program content rules against the Broadcastbroadcast and Cable Industries Could Havecable industries could have an Adverse Effectadverse effect on the Company’s Businessesour businesses and Resultsresults of Operationsoperations
The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material on television or radio broadcast stations between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition against broadcasting indecent material because of the vagueness of the FCC’s indecency/profanity definition, coupled with the spontaneity of live programming. The FCC enforces its indecency rules against the broadcasting industry. The FCC has found on a number of occasions that the content of television and radio broadcasts has contained indecent material. In such instances, the FCC issued fines or advisory warnings to the offending licensees. Moreover, the FCC has in some instances imposed separate fines for each allegedly indecent “utterance,” in contrast with its previous policy, which generally considered all indecent words or phrases within a given program as constituting a single violation. The fines for broadcastingBroadcasting indecent material could result in fines per station areof a maximum of approximately $383,000$415,000 per utterance.utterance and/or the loss of a station’s FCC license. If the FCC denied a license renewal or revoked the license for one of the Company’s broadcastour television or radio stations, the Companywe would lose itsour authority to operate the station. The determination of whether content is indecent is inherently subjective and, as such, it can be difficult to predict whether particular content could violate indecency standards. The difficulty in predicting whether individual programs, words or phrases may violate the FCC’s indecency rules adds significant uncertainty to the Company’sour ability to comply with the rules. Violation of the indecency rules could lead to sanctions which may adversely affect the Company’sour businesses and results of operations. Some policymakers support the extension of the indecency rules that are applicable to over-the-air
broadcasters to cover cable and satellite programming and/or attempts to increase enforcement of or otherwise expand existing laws and rules. If such an extension, attempt to increase enforcement or other expansion took place and were found to be constitutional, some of the Company’sour cable content could be subject to additional regulation and might not be able to attract the same subscription and viewership levels.
The Failure or Destruction of Satellites and Transmitter Facilities that the Company Depends Upon
We could be subject to Distribute Its Programming Could Materially Adversely Affect the Company’s Businesses and Results of Operations
The Company uses satellite systems to transmit its broadcast and cable networks to affiliates. The distribution facilities include uplinks, communications satellites and downlinks. Transmissions may be disruptedmaterial liabilities as a result of adoption of or changes in tax laws, regulations and administrative practices, interpretations and policies
We are subject to taxation in the U.S. and numerous international jurisdictions. Our tax rates are impacted by the tax laws, regulations and administrative practices, interpretations and policies in the federal, state and local disastersand international territories where our businesses operate, and these rates may be subject to significant change. Our tax returns are routinely audited and litigation, adverse outcomes, or settlements may occur because tax authorities may disagree with certain positions we have taken, including extreme weatherour methodologies for intercompany arrangements. Additionally, shifting economic and political conditions may result in significant changes to tax policies, laws or tax rates in various jurisdictions. Such changes, litigation, adverse outcomes, or audit settlements may result in the recognition of additional charges to our income tax provision in any given period and may adversely affect our effective income tax rate or cash payments and may therefore adversely affect our business, financial condition or results of operations.
Volatility and weakness in capital markets may adversely affect our credit availability and related financing costs
Bank and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be adversely affected. Although we can currently access the bank and capital markets, there is no assurance that impair on-ground uplinks such markets will continue to be a reliable source of financing for us. In addition, our access to and cost of borrowing can be affected by our short- and long-term debt ratings assigned by ratings agencies. In addition, the interest rates included in certain agreements that govern certain of our debt securities and/or downlinks,credit facilities may be based on the London Interbank Offered Rate (“LIBOR”). In the future, use of LIBOR may be discontinued and we cannot be certain how long LIBOR will continue to be a viable benchmark interest rate. Use of alternative interest rates could result in increased borrowing costs or asvolatility in the markets and interest rates. These factors, including the tightening of credit markets, or a resultdecrease in our debt ratings, could adversely affect our ability to obtain cost-effective financing.
We could be adversely affected by strikes and other union activity
We and our business partners engage the services of an impairmentwriters, directors, actors, musicians and other talent, production crew members, trade employees, players in sports leagues and others who are subject to industry-wide or specially-negotiated collective bargaining agreements, and occasionally individual agreements. The Alliance of Motion Picture and Television Producers (AMPTP) is a satellite. Currently, there aremulti-employer trade association that, along with and on behalf of hundreds of member companies including Paramount Pictures and CBS Studios, negotiates the industry-wide collective bargaining agreements with these parties, and we may lack practical control over the negotiations and terms of the agreements. The Writers Guild of America contract expires on May 1, 2020, and the Directors Guild of America and Screen Actors Guild-American Federation of Television and Radio Artists contracts expire on June 30, 2020. The AMPTP expects to negotiate successor deals with these guilds and unions in the coming months. Any labor disputes that arise may disrupt our operations and cause delays in the production of our programming, and we may not be able to negotiate favorable terms for a limited number of communications satellites available for the transmission of programming. If a disruption occurs, failure to secure alternate distribution facilities in a timely mannerrenewal, which could increase our costs. Depending on its duration, any lockout, labor dispute, strike or work stoppage could have a materialan adverse effect on our revenues, cash flows and/or operating income and/or their timing.
Our revenues, expenses and operating results may vary based on the Company’s businessestiming, mix, number and availability of our films and other programming and on seasonal factors
Our revenues, expenses and operating results fluctuate due to the timing, mix, number and/or availability of our theatrical films, home entertainment releases and programs for licensing. For example, our operating results may increase or decrease during a particular period relative to the corresponding period in the prior year due to differences in the number and/or mix of films released, the commencement of a license period or the timing of delivery of programming to licensees for exhibition. Our operating results also fluctuate due to the timing of the recognition of marketing expenses, which are generally incurred before and throughout the theatrical release of a film, with the recognition of related revenues through the film’s theatrical exhibition and subsequent distribution windows.
Our business also has experienced and is expected to continue to experience seasonality due to, among other things, seasonal advertising patterns and seasonal influences on audiences’ viewing, reading and attendance habits. Typically, our revenue from advertising is highest in the first and fourth quarters. In the Cable Networks segment, advertising is typically highest in the fourth quarter due to the holiday season, among other factors. In the TV Entertainment segment, advertising revenues benefit principally in the first quarter of the years in which we telecast the Super Bowl and NCAA Division I Men’s Basketball Tournament National Semifinals and Championship and in the fourth quarter due to the holiday season and, in even-numbered years, advertising placed by candidates for political offices. Revenues from the Filmed Entertainment segment’s theatrical film releases tend to be cyclical with increases during the summer. The Publishing segment is subject to increased periods of demand during the summer and year-end holiday season. The effects of these variances make it difficult to estimate future operating results based on the previous results of operations. Each of the Company’s televisionany specific quarter.
We could suffer losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and radio stations and cable networks uses studio and transmitter facilities that are subject to damage or destruction. Failure to restore such facilities in a timely manner could have a material adverse effect on the Company’s businesses and results of operations.programming
Breach of Security Measures Regarding Information Systems Could Disrupt Operations and Damage the Company’s Reputation and Could Materially Adversely Affect the Company’s Businesses and Results of Operations
Network and information systems and other technologies are important to the Company’s business activities. Despite the Company’s security measures and disaster recovery planning, network and information systems‑related events, such as computer compromises, cyber threats, security breaches, viruses, or other destructive or disruptive software, process breakdowns, employee or partner error or malicious or other activities, and power outages, terrorism, natural or other disasters could result in a disruption of the Company’s services and operations. These events could also result in the improper disclosure of personal data or confidential or proprietary information, including through third parties which receive any of such information on a confidential basis for business purposes and could be subject to any of these events, and damage the Company’s reputation and require the Company to expend resources to remedy any such breaches. The occurrence of any of these events could have a material adverse effect on the Company’s business and results of operations.
The Company Could Suffer Losses Due to Asset Impairment Charges for Goodwill, Intangible Assets, FCC Licenses and Programming
The Company willWe test goodwill and indefinite-lived intangible assets, including FCC licenses, for impairment during the fourth quarter of each yearon an annual basis and between annual tests if events or circumstances require an interim impairment assessment. ACertain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in advertising markets, a decrease in audience acceptance of our programming or films, a shift by advertisers to competing advertising platforms and/or changes in consumer behavior could result in a downward revision in the estimated fair value of a reporting unit or intangible assets, including FCC licenses, which could result in a non-cash impairment charge. Also, any significant shortfall, now or in the future, in the expected popularity of the programming for which the Company has acquired rights could lead to a downward revision in the fair value of such assets. Any such impairment charge for goodwill, intangible assets and/or programming could have a material adverse effect on the Company’sour reported net earnings.
Dividends and Dividend Rates Cannot Be Guaranteed
The Company’s Board of Directors assesses relevant factors when considering the declaration of a dividend on the Company’s common stock. The Company cannot guarantee that it will continue to declare dividends, including at the same or similar rates.
The Loss of Key Personnel, Including Talent, Could Disrupt the Management or Operations of the Company’s Business and Adversely Affect Its Revenues
The Company’s business depends upon the continued efforts, abilities and expertise of its chief executive officer and other key employees and entertainment personalities. The Company believes that the unique combination of skills and experience possessed by its executive officers would be difficult to replace, and that the loss of its executive officers could have a material adverse effect on the Company, including the impairment of the Company’s ability to execute its business strategy. While the Company does not maintain a written succession plan with respect to Chairman of the Board, in accordance with the Company’s Corporate Governance Guidelines, designated independent committees of the CBS Board together periodically review succession planning for the position of Chairman and report to the non-management directors of the CBS Board. Because approximately 79.5% of the voting shares are controlled by Sumner Redstone there can be no assurance now or in the future that he or the successors to the voting control may not seek to effect succession of the Chairman; however, and in all cases, the Board will elect the next Chairman by a majority vote of the Board. Additionally, the Company employs or independently contracts with several entertainment personalities and authors with significant loyal audiences or readership. Entertainment personalities are sometimes significantly responsible for the ranking of a television or radio station and, therefore, the ability of the station to sell advertising, and an author’s popularity can be significantly responsible for the success of a particular book. The Company’s cable networks, CBS Television Studios and CBS Television Distribution produce programming and CBS Films produces motion pictures with highly regarded directors, actors and other talent who are important to attracting and retaining audiences fortheir content. There can be no assurance that these entertainment personalities, authors and talent will remain with or be drawn to the Company or will retain their current audiences or readership. If the Company fails to retain or attract these entertainment personalities, authors and talent or they lose their current audiences or readership, the Company’s revenues could be adversely affected.
The Company's Proposed Separation of its Radio Business Is Subject to Approvals and Closing Conditions
During 2016, the Company announced its intention to explore strategic options to separate its radio business. On February 2, 2017, the Company entered into an agreement with Entercom Communications Corp. to combine the Company’s radio business with Entercom in a merger following a split-off of the Company’s radio business, which is expected to occur through an exchange offer. These transactions are subject to customary approvals and closing conditions and other risks and uncertainties, including the ability to complete the transactions on the anticipated terms and schedule; the ability to obtain regulatory and stockholder approvals; changes in U.S. federal tax laws and interpretations and the ability to obtain the anticipated tax treatment of the transactions; the ability to obtain financingOur liabilities related to the transactions upon acceptable terms or at all;discontinued operations and changes in economic, political and market conditions. These risksformer businesses could adversely impact the Company’s timing and the ability to consummate or achieve the benefits of the transactions.our financial conditions
The Company’s Liabilities Related to Discontinued Operations and Former Businesses Could Adversely Impact Its Financial Condition
The Company hasWe have both recognized and potential liabilities and costs related to discontinued operations and former businesses, certain of which are unrelated to the media business, including leases, guarantees, environmental liabilities, liabilities related to the pensions and medical expenses of retirees, asbestos liabilities, contractual disputes and other pending and threatened litigation. The CompanyWe cannot be assured that its reservesour accruals for these matters are sufficient to cover these liabilities in their entirety or any one of these liabilities when it becomes due or at what point any of these liabilities may come due. Therefore, there can be no assurances that these liabilities will not have a material adverse effect on the Company’sour financial position, operating performance or cash flow.
The Company Could Be Adversely Affected by Strikes and Other Union Activity
The Company and its suppliers engage the services of writers, directors, actors and other talent, trade employees and others who are subjectRisks Relating to collective bargaining agreements. If the Company or its suppliers are unable to renew expiring collective bargaining agreements, it is possible that the affected unions or others could take action in the
form of strikes or work stoppages. Such actions, higher costs in connection with these agreements or a significant labor dispute could adversely affect the Company’s television, radio, cable networks, interactive and motion picture businesses by disrupting the Company’s ability to provide scheduled services and programming or by causing delays in the production of the Company’s television or radio programming or motion pictures. Depending on its duration, any lockout, strike or work stoppage could have an adverse effect on the Company’s revenues, cash flows and/or operating income and/or the timing thereof.
Fluctuations in Foreign Exchange Rates and Political and Economic Risks Associated with the Company’s International Businesses Could Harm the Company’s Financial Condition or Results of Operations
The Company’s businesses operate and have customers worldwide. Certain of the Company’s revenues are earned and expenses are incurred in foreign currencies. The value of these currencies fluctuates relative to the U.S. dollar. As a result, the Company is exposed to exchange rate fluctuations, which could have an adverse effect on its results of operations. Other inherent risks of doing business in international markets include changes in the economic environment, potentially adverse tax developments, export restrictions, exchange controls, tariffs and other trade and sanctions barriers and longer payment cycles. The Company may incur substantial expense as a result of the imposition of new restrictions or changes in the existing economic environment in the regions where it does business. For example, the June 2016 non-binding “Brexit” referendum to withdraw the U.K. from the European Union may adversely affect economic and market conditions in the U.K. and other regions where the Company conducts business and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the Euro and British Pound. In addition, acts of terrorism or other hostilities, or other future financial, political, economic or other uncertainties, could lead to a reduction in advertising expenditures, which could materially adversely affect the Company’s business, financial condition or results of operations.
NAI, Through ItsNAI’s Voting Control of the Company, IsViacomCBS and Pledged Shares
NAI, through its voting control of ViacomCBS, will be in a Positionposition to Control Actionscontrol actions that Require Stockholder Approvalrequire stockholder approval
NAI, through its direct and indirect ownership of the Company’sour Class A Common Stock, has voting control of the Company.ViacomCBS. At December 31, 2016,2019, NAI directly or indirectly owned approximately 79.5%79.4% of the Company’s votingshares of our Class A Common Stock outstanding, and approximately 10.2% of the shares of our Class A Common Stock and approximately 9.5% of the Company’s Class A Common Stock and non-votingour Class B Common Stock outstanding on a combined basis. Mr. Sumner M. Redstone is the beneficial owner of the controlling interest in NAI and, accordingly, beneficially owns all such shares. Mr. Redstone is the controlling stockholder, chairmanChairman of the board of directors and chief executive officer of NAI, serves as Chairman Emeritus of the Company's Board of Directors and Ms.Chief Executive Officer of NAI. Shari E. Redstone, the presidentPresident and a director of NAI, serves as Vicenon-executive Chair of the Company’sViacomCBS Board of Directors. In addition, Mr. David R. Andelman is a director of NAI and serves as a director of the Company.Directors (the “ViacomCBS Board”). NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns 80% of the voting interest of NAI, and such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to seven trustees, who will include CBS Corporation directors Ms. Shari Redstone and Mr. David R. Andelman.Redstone. No member of the Company’sour management is a trustee of the SMR Trust.
Subject to the terms of the Governance Agreement dated as of August 13, 2019, which is incorporated by reference as an exhibit in this Annual Report on Form 10-K, NAI is in a position to control the outcome of corporate actions that require, or may be accomplished by, stockholder approval, including amending ViacomCBS’ bylaws, the election or removal of directors and transactions involving a change of control. OtherFor example, the ViacomCBS bylaws provide that:
the affirmative vote of not less than a majority of the aggregate voting power of all outstanding shares of our capital stock then entitled to vote generally in an election of directors, voting together as a single class, is required for our stockholders to amend, alter, change, repeal or adopt any of our bylaws;
any or all of our directors may be removed from office at any time prior to the expiration of his or her term of office, with or without cause, only by the affirmative vote of the holders of record of outstanding shares representing at least a majority of all the aggregate voting power of outstanding shares of our Common Stock then entitled to vote generally in the election of directors, voting together as a single class at a special meeting of our stockholders called expressly for that purpose; provided that during the two-year period following the closing date of the ViacomCBS Merger, the removal of our Chief Executive Officer requires the approval of the ViacomCBS Board by the “Requisite Approval” (as defined in the ViacomCBS certificate of incorporation incorporated by reference as an exhibit in this Annual Report on Form 10-K); provided further, that during the two-year period following the closing date, NAI and NAI Entertainment Holdings LLC are not permitted to remove any other persons who were members of the ViacomCBS Board at the effective time of the Merger in accordance with the Merger Agreement or who otherwise become members the ViacomCBS Board (other than any of the NAI Affiliated Directors (as defined in the bylaws)) without the Requisite Approval; and
in accordance with the General Corporation Law of the State of Delaware, our stockholders may act by written consent without a meeting if such stockholders hold the number of shares representing not less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote thereon were present and voted.
Accordingly, ViacomCBS stockholders who may have different interests are unable to affect the outcome of theany such corporate actions of the Company for so long as NAI retains voting control. For more information, see the Governance Agreement incorporated by reference as an exhibit in this Annual Report on Form 10-K.
Sales of SharesNAI’s shares of ViacomCBS Common Stock, bysome of which are pledged to lenders, could adversely affect the stock price
At December 31, 2019, NAI Could Adversely Affect the Stock Price
NAI, through its direct and indirect ownershipdirectly or indirectly owned approximately 79.4% of the Company’sshares of our Class A Common Stock has voting controloutstanding, and approximately 10.2% of the Company.shares of our Class A Common Stock and our Class B Common Stock outstanding on a combined basis. Based on information received from NAI, NAI has pledged to its lenders a portion of shares of the Company’s votingour Class A Common Stock and non-votingour Class B Common Stock owned directly or indirectly by certain wholly‑owned subsidiariesNAI.
At December 31, 2019, the aggregate number of shares of our Common Stock pledged by NAI are pledged to such subsidiaries’ lenders. NAI holds more than 50%its lenders represented approximately 4.1% of the Company’s votingtotal outstanding shares of our Class A Common Stock and our Class B Common Stock, on a combined basis. At December 31, 2019, the amount of our Class A Common Stock that NAI directly or indirectly owned and that was not pledged by NAI to its lenders represented approximately 64.0% of the total outstanding shares directly and these shares are not pledged. of our Class A Common Stock.
If any of such subsidiaries defaultsthere is a default on itsNAI’s debt obligations and the lenders foreclose on the collateral,pledged shares, the lenders may not effect a transfer, sale or anyone to whom the lenders transfer the Company’sdisposition of any pledged shares could sell such shares or convert those shares
of votingour Class A Common Stock, into sharesunless NAI and its affiliates beneficially own 50% or less of non-voting Class B Common Stock and sell such shares, which could adversely affect the Company’s share price. Additionally, if the lenders foreclose on the pledged shares of votingour Class A Common Stock NAI will no longer directlythen outstanding or indirectly own thosesuch shares and such lenders or other transferees would have voting rights infirst been converted into our Class B Common Stock. A sale of the Company.pledged shares could adversely affect our Common Stock share price. In addition, there can be no assurance that NAI or its subsidiaries at some future time NAI will not sell or pledge additional shares of the Company’s stock,our Common Stock, which could adversely affect the Company’sour Common Stock share price.
Many Factors May Cause the Stock Price of the Company’s Class A Common Stock and Class B Common Stock to Fluctuate
The stock price of Class A Common Stock and Class B Common Stock may fluctuate significantly as a result of many factors. These factors, some or all of whichI-38
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our principal physical properties are beyond the Company’s control, include: actual or anticipated fluctuations in the Company’s operating results; changes in expectations as to the Company’s future financial performance or changes in financial estimates of securities analysts; success of the Company’s operating and growth strategies; investor anticipation of strategic, technological or regulatory threats, whether or not warranted by actual events; operating and stock price performance of other comparable companies; and realization of any of the risks described in these risk factors.below. In addition, the stock market has experienced volatility that often has been unrelated or disproportionate to the operating performance of particular companies. These broad marketwe own and industry fluctuations may adversely affectlease office, studio, production and warehouse space and broadcast, antenna and satellite transmission facilities throughout the trading prices of the Company’s common stock, regardless of the Company’s actual operating performance.
The Businesses of the Company and Viacom Inc. Will Be Attributable to the Other Company for Certain Regulatory Purposes, Which May Limit Business Opportunities
So long as the Company and Viacom Inc. are under common control, each company’s businesses, as well as the businesses of any other commonly controlled company, will be attributable to the other company for purposes of certain rules and regulations of the FCC, U.S. and non-U.S. antitrust rules and regulations and certain rules regarding political campaign contributions inaround the U.S., among others potentially. The businesses of one company will continue to be attributable to the other companyworld for certain FCC and other purposes even after the two companies cease to be commonly controlled, if the two companies share common officers, directors, or attributable stockholders. As a result, the businesses and conduct of Viacom Inc. may have the effect of limiting and affecting the activities, strategic business alternativesour businesses. We consider our properties adequate for our present needs.
ViacomCBS
Our world headquarters is located at 1515 Broadway, New York, New York, where we lease approximately 1.4 million square feet for executive, administrative and business terms available to the Company, including limitations to which the Company contractually agreed in connection with the Company’s separation of former Viacom Inc. (“Former Viacom”) into two publicly traded entities, CBS Corporation and new Viacom Inc., which was completed on December 31, 2005 (the “Separation”).
In Connection with the Separation, Each Company Will Rely on the Other Company’s Performance Under Various Agreements Between the Companies
In connection with the Separation, the Company and Viacom Inc. entered into various agreements, including a Separation Agreement dated December 19, 2005, a Tax Matters Agreement dated December 30, 2005, which are filed as exhibits to this report, and certain related party arrangements pursuant to which the Company and Viacom Inc. will provide services and products to each other from and after the Separation. The Separation Agreement sets forth the allocation of assets, liabilities, rights and obligations of the Company and Viacom Inc. following the Separation, and includes indemnification obligations for such liabilities and obligations. In addition, pursuant to the Tax Matters Agreement, certain income tax liabilities and related responsibilities are allocated between, and indemnification obligations are assumed by, each of the Company and Viacom Inc. Each company will rely on the other to satisfy its performance and payment obligations under these agreements. Certain of the liabilities to be assumed or indemnified by the Company or Viacom Inc. under these agreements are legal or contractual liabilities of the other company. If Viacom Inc. were to breach or be unable to satisfy its material obligations under these agreements, including a failure to satisfy its indemnification obligations, the Company could suffer operational difficulties or significant losses.
NAI, Certain Directors and Members of Management May Face Actual or Potential Conflicts of Interest
NAI has voting control of each of the Company and Viacom Inc. Mr. Redstone, the controlling stockholder through the SMR Trust, chairman of the board of directors and chief executive officer of NAI, serves as Chairman Emeritus of the Company and Chairman Emeritus of Viacom Inc. Ms. Redstone, the president and a director of NAI, serves as Vice Chair of the Board of Directors of each of the Company and Viacom Inc. Mr. David R. Andelman is a director of NAI and serves as a director of the Company. This ownership overlap and these common directors could create, or appear to create, potential conflicts of interest when the Company’s and Viacom Inc.’s directors and controlling stockholder face decisions that could have different implicationsoffices for the Company and Viacom Inc. For example, potential conflictscertain of interest could arise in connectionour operating divisions. The lease runs through 2031, with two renewal options based on market rates at the resolutiontime of any dispute between the Company and Viacom Inc. regarding the terms of the agreements governing the Separation and the relationship between the Company and Viacom Inc. thereafter. These agreements include the Separation Agreement, the Tax Matters Agreementand any commercial agreements between the parties or their affiliates. On occasion, the Company and Viacom Inc. may compete with each other in various commercial enterprises. Potential conflicts of interest couldrenewal for ten years each.
We also arise if the Company and Viacom Inc. enter into any commercial arrangements with each other in the future. CBS Corp.’s certificate of incorporation contains provisions related to corporate opportunities that may be of interest to both the Company and Viacom Inc. CBS Corp.’s certificate of incorporation provides that in the event thatown a director, officer or controlling stockholder of the Company who is also a director, officer or controlling stockholder of Viacom Inc. acquires knowledge of a potential corporate opportunity for both the Company and Viacom Inc., such director, officer or controlling stockholder may present such opportunity to the Company or Viacom Inc. or both, as such director, officer or controlling stockholder deems appropriate in his or her sole discretion, and that by doing so such person will have satisfied his or her fiduciary duties to the Company and its stockholders. In addition, CBS Corp.’s certificate of incorporation provides that the Company renounces any interest in any such opportunity presented to Viacom Inc. These provisions create the possibility that a corporate opportunity of one of such companies may be used for the benefit of the other company.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
The Company maintains its world headquartersbuilding at 51 West 52nd Street, New York, New York where it owns a building containing approximately 900,000892,000 square feet of space, 831,000space. Of the 855,000 square feet of which is office space. The Company occupiesspace in the building, we occupy approximately 275,000270,000 square feet of the office space and leaseslease the balance to third parties. The Company ownsWe have retained a real estate brokerage firm to explore a possible sale of this property.
We maintain facilities for our Global Business Services Center at our offices in Budapest, Hungary, where we lease approximately 44,000 square feet of space through 2023, and at our offices in Warsaw, Poland, where we lease approximately 50,000 square feet of space through 2025.
TV Entertainment
We own the CBS Broadcast Center complex located on approximately 3.7 acres at 524 West 57th Street, New York, New York, which consists of approximately 860,000 square feet of office and studio space. The Company also owns two
We own studio facilities in California: (a)at the CBS Studio Center at 4024 Radford Avenue, Studio City, California, located on approximately 40 acres,acres.
CBS Interactive occupies approximately 193,000 square feet of space at 235 Second Street, San Francisco, California, under a lease expiring in 2022.
We occupy approximately 106,000 square feet of office, production and (b) CBStechnical space at Television City, at 7800 Beverly Boulevard, Los Angeles, California locatedunder a lease expiring in 2024.
Cable Networks
In addition to occupying space at 1515 Broadway in New York, we occupy the following major office facilities:
Our Cable Networks business occupies approximately 277,000 square feet of office and production space at 345 Hudson Street, New York, New York, under a lease expiring in 2022.
Our Cable Networks business occupies approximately 210,000 square feet of office and production space at 1575 North Gower Street, Los Angeles, California, under a lease expiring in 2028.
Our Cable Networks’ Network Operations Center in Hauppauge, New York contains approximately 65,000 square feet of floor space on approximately 25 acres. nine acres of owned land.
The Nickelodeon Animation Studio at 203-231 West Olive Avenue, Burbank, California contains approximately 180,000 square feet of studio and office space, leased under two leases expiring in 2036.
Nickelodeon’s Live Action Studio contains approximately 108,000 square feet of stage and office space at Burbank Studios, 3000 West Alameda Avenue, Burbank, California, under a lease expiring in 2024.
Showtime Networks leases approximately 230,000253,000 square feet at 1633 Broadway, New York, New York, under a lease which expiresexpiring in 2026. 2026 and leases approximately 56,000 square feet at The Lot, 1041 N. Formosa Avenue, West Hollywood, California, under a lease expiring in 2028.
Telefe occupies approximately 496,000 square feet of office, studio and production space, transmission facilities and for other ancillary uses at its owned and leased facilities in Buenos Aires, Argentina.
ViacomCBS Networks International occupies approximately 140,000 square feet of space at its owned and leased Hawley Crescent facilities in London.
Network 10 leases approximately 100,000 square feet of space at 1 Saunders Street, Pyrmont, New South Wales, Australia, under a lease expiring in 2023.
Filmed Entertainment
Paramount owns the Paramount Pictures Studio situated at 5555 Melrose Avenue, Los Angeles, California, located on approximately 62 acres of land, and containing approximately 1.85 million square feet of floor space used for executive, administrative and business offices, sound stages, production facilities, theatres, equipment facilities and other ancillary uses. Paramount has embarked on a planned 25-year expansion and revitalization project for the studio.
Publishing
Simon & Schuster leases approximately 292,000300,000 square feet of office space at 1230 Avenue of the Americas, New York, New York, which lease runs to 2019. CBS Interactive leases approximately 283,000 square feet of space at 235 Second Street, San Francisco, California under a lease which expiresexpiring in 2022. CBS Interactive subleases approximately 77,000 square feet of this space to third parties. The Company and its subsidiaries also own and lease office, studio and warehouse space and broadcast, antenna and satellite transmission facilities throughout the U.S., Canada and several other foreign countries for its businesses. The Company considers its properties adequate for its present needs.2034.
Item 3. Legal Proceedings.
General. On an ongoing basis,The information set forth under the Company vigorously defends itselfcaption “Legal Matters” in numerous lawsuits and proceedings and responds to various investigations and inquiries from federal, state, local and international authorities (collectively, ‘‘litigation’’). Litigation may be brought against the Company without merit, is inherently uncertain and always
difficult to predict. However, based on its understanding and evaluation of the relevant facts and circumstances, the Company believes that the below-described legal matters and other litigation to which it is a party are not likely, in the aggregate, to have a material adverse effect on its results of operations, financial position or cash flows. Under the Separation Agreement between the Company and Viacom Inc., the Company and Viacom Inc. have agreed to defend and indemnify the other in certain litigation in which the Company and/or Viacom Inc. is named.
Claims Related to Former Businesses: Asbestos. The Company is a defendant in lawsuits claiming various personal injuries related to asbestos and other materials, which allegedly occurred principally as a result of exposure caused by various products manufactured by Westinghouse, a predecessor, generally priorNote 19 to the early 1970s. Westinghouse was neither a producer nor a manufacturer of asbestos. The Companyconsolidated financial statements in “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements” is typically named as one of a large number of defendants in both state and federal cases. In the majority of asbestos lawsuits, the plaintiffs have not identified which of the Company’s products is the basis of a claim. Claims against the Company in which a product has been identified principally relate to exposures allegedly causedincorporated herein by asbestos-containing insulating material in turbines sold for power-generation, industrial and marine use.reference.
Claims are frequently filed and/or settled in groups, which may make the amount and timing of settlements, and the number of pending claims, subject to significant fluctuation from period to period. The Company does not report as pending those claims on inactive, stayed, deferred or similar dockets which some jurisdictions have established for claimants who allege minimal or no impairment. As of December 31, 2016, the Company had pending approximately 33,610 asbestos claims, as compared with approximately 36,030 as of December 31, 2015 and 41,100 as of December 31, 2014. During 2016, the Company received approximately 4,160 new claims and closed or moved to an inactive docket approximately 6,580 claims. The Company reports claims as closed when it becomes aware that a dismissal order has been entered by a court or when the Company has reached agreement with the claimants on the material terms of a settlement. Settlement costs depend on the seriousness of the injuries that form the basis of the claims, the quality of evidence supporting the claims and other factors. In 2016, the Company’s costs for settlement and defense of asbestos claims after insurance and taxes were approximately $48 million. In 2015, as the result of an insurance settlement, insurance recoveries exceeded the Company’s after tax costs for settlement and defense of asbestos claims by approximately $5 million. The Company’s costs for settlement and defense of asbestos claims may vary year to year and insurance proceeds are not always recovered in the same period as the insured portion of the expenses.
Filings include claims for individuals suffering from mesothelioma, a rare cancer, the risk of which is allegedly increased by exposure to asbestos; lung cancer, a cancer which may be caused by various factors, one of which is alleged to be asbestos exposure; other cancers, and conditions that are substantially less serious, including claims brought on behalf of individuals who are asymptomatic as to an allegedly asbestos-related disease. The predominant number of claims against the Company are non-cancer claims. The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities. This belief is based upon many factors and assumptions, including the number of outstanding claims, estimated average cost per claim, the breakdown of claims by disease type, historic claim filings, costs per claim of resolution and the filing of new claims. While the number of asbestos claims filed against the Company has remained generally flat in recent years, it is difficult to predict future asbestos liabilities, as events and circumstances may occur including, among others, the number and types of claims and average cost to resolve such claims, which could affect the Company’s estimate of its asbestos liabilities.
Other. The Company from time to time receives claims from federal and state environmental regulatory agencies and other entities asserting that it is or may be liable for environmental cleanup costs and related damages principally relating to historical and predecessor operations of the Company. In addition, the Company from time to time receives personal injury claims including toxic tort and product liability claims (other than asbestos) arising from historical operations of the Company and its predecessors.
Item 4. Mine Safety Disclosures.
Not applicable.
EXECUTIVE OFFICERSOUR BOARD OF THE COMPANYDIRECTORS
Set forth below is certain information concerning the executive officers of the CompanyViacomCBS’ directors as of February 10, 2017.18, 2020 are as follows:
|
| | |
Name | Age | Position |
Shari E. Redstone | 65 | Non-Executive Chair, Director |
Robert M. Bakish | 56 | President and Chief Executive Officer, Director |
Candace K. Beinecke | 73 | Director |
Barbara M. Byrne | 65 | Director |
Brian Goldner | 56 | Director |
Linda M. Griego | 72 | Director |
Robert N. Klieger | 47 | Director |
Judith A. McHale | 73 | Director |
Ronald L. Nelson | 67 | Director |
Charles E. Phillips, Jr. | 60 | Director |
Susan Schuman | 60 | Director |
Nicole Seligman | 63 | Director |
Frederick O. Terrell | 65 | Director |
Shari E. Redstone has been a member of the ViacomCBS Board of Directors (the “Board”) since January 1994. She has served as the Non-Executive Chair of our Board since December 2019 and, prior to that, served as Non-Executive Vice Chair of the Board beginning in 2005 and as Non-Executive Vice Chair of the board of Viacom beginning in 2006. Ms. Redstone is Co-founder and Managing Partner of Advancit Capital, an investment firm launched in 2011 that focuses on early stage companies at the intersection of media, entertainment and technology, with investments in over 75 companies. Ms. Redstone has been President of NAI since 2000, and also serves as a director of NAI. Ms. Redstone brings to the Board her extensive experience in and a deep understanding of the entertainment industry, broad experience and talent managing a large business, extensive legal experience and her experience as President of NAI, including as one of its significant stockholders. Ms. Redstone is actively involved in a variety of charitable, civic, and educational organizations, including serving as a member of the board of trustees of The Paley Center for Media. She sits on the Board of Trustees of the Dana-Farber Cancer Institute. Ms. Redstone earned a BS from Tufts University and a JD and a Masters in Tax Law from Boston University. She practiced corporate law, estate planning and criminal law in the Boston area before joining NAI. Ms. Redstone is the daughter of Sumner M. Redstone.
Robert M. Bakish has been our President and Chief Executive Officer and a member of our Board since December 2019. Mr. Bakish served as President and Chief Executive Officer and a member of the board of Viacom from December 2016 to December 2019, having served as Acting President and Chief Executive Officer beginning earlier in 2016. Mr. Bakish joined Viacom’s predecessor (“Former Viacom”) in 1997 and held positions throughout the organization, including as President and Chief Executive Officer of Viacom International Media Networks and its predecessor company, MTV Networks International (“MTVNI”), from 2007 to 2016; President of MTVNI; Executive Vice President, Operations and Viacom Enterprises; Executive Vice President and Chief Operating Officer, MTV Networks Advertising Sales; and Senior Vice President, Planning, Development and Technology. Before joining Former Viacom, Mr. Bakish was a partner with Booz Allen Hamilton in its Media and Entertainment practice. Mr. Bakish has extensive knowledge and deep understanding of the Viacom business and the entertainment industry through various leadership positions at Viacom spanning approximately 20 years and culminating with President and Chief Executive Officer, and broad expertise overseeing global operations. Mr. Bakish has served as a director of Avid Technology, Inc. since 2009.
Candace K. Beinecke has been a member of our Board since September 2018. Ms. Beinecke is the Senior Partner of Hughes Hubbard & Reed LLP, a New York law firm, and is a practicing partner in Hughes Hubbard’s corporate department. In 1999, Ms. Beinecke became the first woman to Chair a major New York law firm. Ms. Beinecke also serves as the Lead Trustee of Vornado Realty Trust, the Chairperson of the Board of First Eagle Funds (a mutual fund
family), and as a board member of ALSTOM (a public French transport company). As the long-time head of a top-ranked international law firm, Ms. Beinecke is well-recognized in the legal profession for her corporate governance and mergers and acquisitions expertise and brings to the Board extensive legal, governance, business and risk management experience. Ms. Beinecke’s breadth of director experience, which includes service as a lead trustee and chairperson, as well as service on other nominating and governance committees, a remuneration committee and an executive committee, gives her a deep understanding of public company governance.
Barbara M. Byrne has been a member of our Board since September 2018. Ms. Byrne is the former Vice Chairman, Investment Banking at Barclays PLC. During her more than 35 years of financial services experience, Ms. Byrne served as team leader for some of Barclay’s most important multinational corporate clients and was the primary architect of several of Barclays’ marquee transactions. Widely recognized as a leading investment banker and strategic advisor, she is a member of various industry councils and participates as a forum leader on strategic issues and trends facing the financial services sector and global markets. With this experience, Ms. Byrne brings to the Board important business and financial expertise in its deliberations on complex transactions, risk management, strategy and other financial matters.
Brian Goldner has been a member of our Board since September 2018. Mr. Goldner has served as the Chief Executive Officer of Hasbro, Inc. since 2008, and additionally has served as its Chairman of the Board since May 2015. In addition to being Chief Executive Officer, from 2008 to 2016, Mr. Goldner was also the President of Hasbro. Besides being a member of Hasbro’s board, he also served on the boards of The Gap, Inc. from 2016 to 2019 and Molson Coors Brewing Company from 2010 to 2016. Mr. Goldner brings to the Board significant leadership, operational and brand management experience from his executive positions at one of the leading public companies in his industry, where he was instrumental in transforming a traditional toy and game company into a global play and entertainment leader. With his direct experience in executing on strategies to differentiate Hasbro in a competitive global marketplace in response to industry evolution, he is well-positioned to advise on the strategic direction of the Company’s businesses. Further, Mr. Goldner’s service on other boards and board committees gives him a deep understanding of public company governance.
Linda M. Griego has been a member of our Board since March 2007. Ms. Griego has served, since 1986, as President and Chief Executive Officer of Griego Enterprises, Inc., a business management company. For more than 20 years, she oversaw the operations of Engine Co. No. 28, a prominent restaurant in downtown Los Angeles that she founded in 1988. From 1990 to 2000, Ms. Griego held a number of government-related appointments, including Deputy Mayor of the city of Los Angeles, President and Chief Executive Officer of the Los Angeles Community Development Bank, and President and Chief Executive Officer of Rebuild LA, the agency created to jump-start inner-city economic development following the 1992 Los Angeles riots. Over the past two decades, she has also served on a number of government commissions and boards of directors of nonprofit organizations, including current service on the boards of The Ralph M. Parsons Foundation, the MLK Health and Wellness, CDC, and the Charles R. Drew University of Medicine and Science. Ms. Griego has served as a director of publicly traded and private corporations, including serving as director of AECOM and the American Funds (7 funds). With the breadth of her leadership experience as a businesswoman, in the public sector through her multiple government appointments and extensive community-based participation in Los Angeles, an area where the Company has a significant presence, and on multiple not-for-profit boards, Ms. Griego provides the Board with financial and business acumen, as well as public policy expertise as it relates to business practices. Ms. Griego is also an experienced director, including through service on other audit, compensation and organization, and nominating and governance committees, with demonstrated expertise in the application of sound corporate governance principles.
Robert N. Klieger has been a member of our Board since July 2017. Mr. Klieger is a partner in the Los Angeles law firm Hueston Hennigan LLP. Mr. Klieger’s practice focuses on complex civil litigation and counseling in the areas of entertainment and intellectual property. Mr. Klieger represents motion picture studios, broadcast and cable television networks, production companies, video game publishers and high net worth individuals in the media and entertainment space, as well as clients in other industries including apparel, aviation and venture capital. Prior to joining Hueston Hennigan, Mr. Klieger was a partner at Irell & Manella LLP and a founding partner at Kendall Brill & Klieger LLP. Before beginning his career in private practice, Mr. Klieger served as a law clerk to the Honorable
Cynthia Holcomb Hall of the United States Court of Appeals for the Ninth Circuit, and the Honorable William Matthew Byrne, Jr. of the United States District Court for the Central District of California. Mr. Klieger is recognized as one of the most prominent attorneys in the entertainment industry, with a practice focused on complex civil litigation and counseling in the areas of media, entertainment and intellectual property and clients that include leading enterprises in television, film and digital media. With his exceptional legal acumen and distinguished reputation for his trial practice and counsel, Mr. Klieger brings to the Board legal and strategic expertise in matters germane to the Company’s businesses and complex business transactions.
Judith A. McHale has been a member of our Board since December 2019 and, prior to that, served on the board of Viacom from August 2016 to December 2019. Ms. McHale is President and Chief Executive Officer of Cane Investments, LLC, a private investment company. Prior to joining Cane Investments in 2011, Ms. McHale served as the Under Secretary of State for Public Diplomacy and Public Affairs for the U.S. Department of State from 2009 to 2011. From 2004 to 2006, Ms. McHale served as the President and Chief Executive Officer of Discovery Communications, Inc., the parent company of Discovery Channel, and served as its President and Chief Operating Officer from 1995 to 2004. In 2006, Ms. McHale worked with private equity firm Global Environment Fund to launch the GEF/Africa Growth Fund, an investment vehicle focused on supplying expansion capital to small and medium-sized enterprises that provide consumer goods and services in emerging African markets. Ms. McHale has extensive experience leading a major media conglomerate with a background in operations and financial management, expertise in global affairs, experience in government affairs and extensive public company and corporate governance experience. She has served on the board of Ralph Lauren Corporation since 2011 and the board of Hilton Worldwide Holdings Inc. since 2013. She previously served on the boards of SeaWorld Entertainment, Inc., Host Hotel & Resorts, Inc., DigitalGlobe Inc., John Hancock Financial Services, Inc. and Potomac Electric Power Company.
Ronald L. Nelson has been a member of our Board since December 2019 and served on the board of Viacom from August 2016 to December 2019. Mr. Nelson served as a consultant to Avis Budget Group, Inc. until May 2019. Prior to that, he served as Executive Chairman of the Board of Avis Budget Group from 2016 to 2018 and as its Chairman and Chief Executive Officer from 2006 to 2015, and also served as Chief Operating Officer from 2010 to 2015. Prior to that, Mr. Nelson held several executive finance and operating roles, beginning in 2003 with Cendant Corporation, including as its Chief Financial Officer and President and a member of its board from 2003 to 2006. From 1994 to 2003, Mr. Nelson served as Co-Chief Operating Officer of DreamWorks SKG. Prior to that, he was Executive Vice President, Chief Financial Officer and a director at Paramount Communications, Inc., formerly Gulf + Western Industries, Inc. Mr. Nelson has extensive experience as a chief executive officer, chief financial officer and chief operating officer of major global companies, significant financial expertise, international business experience, public company and corporate governance experience and a long-standing background in the media industry. Mr. Nelson has served on the board of Hanesbrands Inc. since 2008 and as its Non-Executive Chairman since 2019, and on the board of Wyndham Hotels & Resorts, Inc. since 2019. He previously served on the board of Convergys.
Charles E. Phillips, Jr. has been a member of our Board since December 2019 and served on the board of Viacom from January 2006 to December 2019 and, prior to that, on the board of Former Viacom beginning in 2004. Mr. Phillips is Chairman of Infor, Inc., a multi-billion dollar enterprise software company and served as its Chief Executive Officer from 2010 to 2019. He was a President of Oracle Corporation from 2003 to 2010 and served as a member of its Board of Directors and Executive Management Committee from 2004 to 2010. Prior to Oracle, Mr. Phillips was a managing director at Morgan Stanley in the Technology Group and served on its Board of Directors. Mr. Phillips has extensive experience as a senior executive in a large, multinational corporation, financial industry background and financial and analytical expertise, significant public company and corporate governance experience, expertise in technology issues and familiarity with issues facing media, new media and intellectual property-driven companies and a deep knowledge of the Viacom business. He is a member of the Board of Directors of the Federal Reserve Bank of New York, the Apollo Theater, Business Executives for National Security and the New York Police Foundation. He served on President Obama’s Economic Recovery Board, led by Paul Volcker, and is a member of the Council on Foreign Relations.
Susan Schumanhas been a member of our Board since September 2018. Ms. Schuman is the Chief Executive Officer and Co-Founder of SYPartners LLC, a consultancy firm that partners with chief executive officers and their
leadership teams undergoing business and cultural transformation. Over the past 20 years, Ms. Schuman has built and led SYPartners, working with executives at many high-profile companies and organizations. This experience in advising on business, organization and cultural transformation, including new value creation strategies, positions Ms. Schuman as a skilled advisor to the Board on the strategic and transformational direction of the Company.
Nicole Seligman has been a member of our Board since December 2019 and, prior to that, served on the board of Viacom from August 2016 to December 2019. Until March 2016, Ms. Seligman served as the President of Sony Entertainment, Inc. (beginning in 2014) and of Sony Corporation of America (beginning in 2012), and as Senior Legal Counsel of Sony Group (beginning in 2014). Ms. Seligman previously served as Executive Vice President and General Counsel of Sony Corporation from 2005 to 2014. She joined Sony in 2001 and served in a variety of other capacities during her tenure, including as a Corporate Executive Officer and Group Deputy General Counsel of Sony Corporation, and as General Counsel and an Executive Vice President at Sony Corporation of America, a subsidiary of Sony Corporation. Prior to joining Sony Corporation of America, Ms. Seligman was a partner in the litigation practice at Williams & Connolly LLP in Washington, D.C., where she worked on a broad range of complex civil and criminal matters and counseled a wide range of clients, including President William Jefferson Clinton and Lt. Col. Oliver North. Ms. Seligman joined Williams & Connolly in 1985. Ms. Seligman served as law clerk to Justice Thurgood Marshall on the Supreme Court of the United States from 1984 to 1985 and as law clerk to Judge Harry T. Edwards at the U.S. Court of Appeals for the District of Columbia Circuit from 1983 to 1984. Ms. Seligman has extensive media industry experience with various leadership roles at a major media conglomerate, public company and corporate governance experience, and exceptional achievements in the legal profession. Ms. Seligman has served on the board of Far Point Acquisition Corporation since 2018 and the board of MeiraGTx Holdings plc since 2019, and has been a Non-Executive Director of WPP plc since 2014 and its Senior Independent Director since 2016.
Frederick O. Terrell has been a member of our Board since December 2018. Mr. Terrell served as Executive Vice Chairman of Investment Banking and Capital Markets at Credit Suisse and later Senior Advisor from January 2018 to November 2018. From 2010 to 2017 he was Vice Chairman of Investment Banking and Capital Markets at Credit Suisse. His investment banking career began in 1983 as an Associate with The First Boston Corporation. During his accomplished career in the financial services sector spanning more than 25 years, Mr. Terrell was responsible for Credit Suisse’s global banking relationships with some of its most high-profile clients. From 2000 to 2008 he was the Managing Partner of Provender Capital Group, LLC a private equity firm focusing on investments in emerging companies. He has served as a member of the Board of Directors of the New York Life Insurance Company, Wellchoice Inc. (formerly Empire Blue Cross Blue Shield) and Carver Bancorp, Inc. His experience also includes past and present service on multiple not-for-profit boards, including the Yale School of Management, The Partnership for New York City, The Partnership Fund for New York City, Coro New York Leadership Center, Big Brothers Big Sisters of New York City and the Center for a New American Security. He is a member of the Council on Foreign Relations, The Economic Club of New York and the Investment Committee of the Rockefeller Foundation. Based on his extensive banking and corporate advisory experience, Mr. Terrell brings significant business and financial expertise to the Board in its deliberations on corporate strategy, complex transactions and other financial matters.
OUR EXECUTIVE OFFICERS
ViacomCBS’ executive officers as of February 18, 2020 are as follows:
|
| | |
Name | | Age | | TitlePosition |
Leslie MoonvesRobert M. Bakish | 56 | 67 | | Chairman of the Board, President and Chief Executive Officer, Director |
Anthony G. AmbrosioChrista A. D’Alimonte | | 56 | | Senior Executive Vice President, Chief Administrative Officer and
Chief Human Resources Officer
|
Jonathan H. Anschell | | 48 | 51 | Executive Vice President, Deputy General Counsel and Secretary |
Joseph R. IannielloKatherine Gill-Charest | | 49 | | Chief Operating Officer |
Richard M. Jones | | 51 | | Executive Vice President and General Tax Counsel |
Lawrence Liding | | 48 | 55 | Executive Vice President, Controller and Chief Accounting Officer |
Gil SchwartzRichard M. Jones | 54 | 65 | | Senior Executive Vice President, General Tax Counsel and Chief CommunicationsVeteran Officer |
Lawrence P. TuDoretha (DeDe) Lea | 55 | 62 | | Senior Executive Vice President, Global Public Policy and Government Relations |
Julia Phelps | 42 | Executive Vice President, Chief LegalCommunications and Corporate Marketing Officer |
Nancy Phillips | 52 | Executive Vice President, Chief People Officer |
Christina Spade | 50 | Executive Vice President, Chief Financial Officer |
None
See “Our Board of the executive officers of the Company is related to any other executive officer or director by blood, marriage or adoption.Directors” for Mr. Bakish’s biography.
Mr. MoonvesChrista A. D’Alimonte has been Chairman of the Board, President and Chief Executive Officer of the Company since February 3, 2016. Prior to that, Mr. Moonves served as President and Chief Executive Officer and a Director of the Company since January 1, 2006. Previously, Mr. Moonves served as Co-President and Co-Chief Operating Officer of Former Viacom since June 2004, Chairman and Chief Executive Officer of CBS since 2003 and as its President and Chief Executive Officer since 1998. Mr. Moonves joined former CBS Corporation in 1995 as President, CBS Entertainment. Prior to that, Mr. Moonves was President of Warner Bros. Television since July 1993.
Mr. Ambrosio has been Seniorour Executive Vice President, Chief Administrative OfficerGeneral Counsel and Chief Human Resources Officer of the CompanySecretary since June 2013.December 2019. Prior to that, Mr. Ambrosioshe served as Executive Vice President, Human ResourcesGeneral Counsel and AdministrationSecretary of the Company since January 1, 2006. Previously, heViacom beginning in 2017, having previously served as Co‑Executive Vice President, Human Resources of Former Viacom since September 2005 and as Senior Vice President, Human Resources and Administration of the CBS, Infinity and Viacom Outdoor businesses since 2000. Prior to that, Mr. Ambrosio served as Vice President, Corporate Human Resources of the former CBS Corporation from 1999 to 2000, as Vice President, Benefits of the former CBS Corporation from 1995 to November 1999 and as Director, Personnel of the former CBS Corporation in 1995. He joined the former CBS Corporation in 1985 and held various positions in the human resources area since that time.
Mr. Anschell has been Executive Vice President, Deputy General Counsel and Assistant Secretary of Viacom beginning in 2012. Prior to joining Viacom, Ms. D’Alimonte was a partner of Shearman & Sterling LLP, where she was Deputy Practice Group Leader of the Company since January 1, 2016. Mr. Anschell also serves asFirm’s Global Mergers & Acquisitions group. She first joined Shearman & Sterling in 1993 and became a partner in 2001.
Katherine Gill-Charesthas been our Executive Vice President, Controller and General Counsel of CBS Broadcasting Inc., a position he has heldChief Accounting Officer since joining the Company in 2004. Mr. Anschell previously was a partner with the law firm, White O’Connor Curry in Los Angeles, California.
Mr. Ianniello has been Chief Operating Officer of the Company since June 2013.December 2019. Prior to that, Mr. Iannielloshe served as Executive Vice President and Chief Financial Officer of the Company since August 2009. Previously, he served as Deputy Chief Financial Officer of the Company since November 2008, as Senior Vice President, Controller and Chief DevelopmentAccounting Officer and Treasurer of the Company since September 2007,Viacom beginning in 2010, having previously served as Senior Vice President, FinanceDeputy Controller of Viacom during 2010 and TreasurerVice President, Controller beginning in 2007. Prior to that, Ms. Gill-Charest was the Chief Accounting Officer of WPP Group from 2001 to 2007 and was the Company since January 1, 2006, as Senior Vice President and TreasurerWorldwide Controller of Former Viacom since July 2005Young & Rubicam Inc. from 1998 to 2000. Ms. Gill-Charest also held roles in financial reporting and as Vice President, Corporate Developmentaccounting policy at Time Warner Inc. from 1991 to 1998 and at NYNEX Corporation from 1988 to 1991 and served in the audit practice of Former Viacom from 2000 to 2005.Price Waterhouse for two years.
Mr.Richard M. Jones has been our Executive Vice President, and General Tax Counsel and Chief Veteran Officer since August 2014. Previously,Prior to that, he served as Senior Vice President and General Tax Counsel of the Company since January 1,CBS Corporation beginning in 2006 and for FormerViacom beginning in December 2005. Prior to that, he served as Vice President of Tax, Assistant Treasurer and Tax Counsel for NBC Universal, Inc. sincebeginning in 2003 and he spentserved 13 years with Ernst & Young in theirits media & entertainment and transaction advisory services practices. Mr. Jones also serves as the Company’s Chief Veteran Officer and served honorably as a non-commissioned officer in the U.S. Army’s 75th Ranger Regiment and 10th Mountain Division.
Mr. LidingDoretha (DeDe) Lea has been our Executive Vice President, ControllerGlobal Public Policy and Government Relations since December 2019. Prior to that, she served as Executive Vice President, Global Government Affairs of Viacom beginning in 2013, having previously served as Executive Vice President, Government Relations of Former Viacom beginning in 2005. Prior to that, she was Senior Vice President, Government Relations of Former Viacom beginning earlier in 2005. Prior to that, she served as Vice President of Government Affairs at Belo Corp. from 2004 to 2005 and as Vice President, Government Affairs of Former Viacom from 1997 to 2004.
Julia Phelps has been our Executive Vice President, Chief AccountingCommunications and Corporate Marketing Officer since December 2019. Prior to that, she served as Executive Vice President, Communications, Culture and Marketing of the Company since August 2014. Previously, heViacom beginning in 2017, having previously served as Senior Vice President, ControllerCommunications and Chief Accounting OfficerCulture of the Company since October 2011,Viacom beginning earlier in 2017. Prior to that, she served as Executive Vice President Deputy Controller of the Company since March 2010 and Vice President, Assistant Controller since January 1, 2006. Prior to that, Mr. Liding joined FormerCommunications for Viacom
International Media Networks beginning in 1995 and2012, after having served as Vice President of Financial ReportingCorporate Communications for Viacom. Ms. Phelps joined Viacom in 2005 from 2002 through 2005.DeVries Public Relations, a New York-based communications agency.
Mr. SchwartzNancy Phillips has been Seniorour Executive Vice President, and Chief CommunicationsPeople Officer of the Company since June 2013.December 2019. Prior to that, heshe served as Executive Vice President and Chief CommunicationsHuman Resources Officer of the Company since January 1, 2006. Previously, he served as Executive Vice President of CBS Communications Group from 2004 until January 1, 2006, as Senior Vice President, Communications of CBS from 2000 to 2004 and as Senior Vice President, Communications of the former CBS Corporation from 1996 to 2000. Prior to that, Mr. Schwartz served as Vice President, Corporate Communications of Westinghouse Broadcasting from 1995 to 1996 and as Vice President, Communications for Westinghouse Broadcasting’s Group W Television Stations from 1989 to 1995. Mr. Schwartz joined Westinghouse BroadcastingNielsen Holdings PLC beginning in 1981.
Mr. Tu has been Senior Executive Vice President and Chief Legal Officer of the Company since January 1, 2014. Previously, Mr. Tu served as Senior Vice President, General Counsel and Secretary of Dell Inc. since July 2004. Prior to that, Mr. Tu2017, having served as Executive Vice President and General CounselChief Human Resources Officer of NBC Universal since 2001. He previouslyBroadcom Corporation from 2014 to 2016. From 2010 to 2014, Ms. Phillips was a partner with the law firm, O’Melveny & Myers LLP, and also served five years as managing partner of the firm’s Hong Kong office. Mr. Tu’s prior experience also includes serving as General Counsel Asia-Pacific for Goldman Sachs, attorneySenior Vice President, Human Resources for the U.S. State Department,Imaging and Printing Group at Hewlett-Packard Company, and previously served as Senior Vice President, Human Resources, Enterprise Services. From 2008 to 2010, Ms. Phillips served as Executive Vice President and Chief Human Resources Officer at Fifth Third Bancorp. Prior to that, Ms. Phillips spent 11 years at General Electric Company, holding various human resources positions. Ms. Phillips practiced law clerkfrom 1993 to 1997.
Christina Spade has been our Executive Vice President, Chief Financial Officer since October 2018. Prior to that, she served as Executive Vice President, Chief Financial Officer and Strategy for U.S. Supreme Court Justice Thurgood Marshall.Showtime Networks Inc. (“Showtime”) beginning in 2013. Previously, Ms. Spade served as Senior Vice President, Affiliate Finance and Business Operations for Showtime beginning in 2003. Prior to joining Showtime in 1997, Ms. Spade was an Audit Manager with PricewaterhouseCoopers LLP in its Entertainment, Media and Communications practice.
Part II
|
| |
Item 5. | Market for CBS Corporation’sViacomCBS Inc.’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities. |
CBS Corporation (the “Company” or “CBS Corp.”)Our voting Class A Common Stock and CBS Corporation non-voting Class B Common Stock are listed and traded on the New YorkNasdaq Stock Exchange (“NYSE”)Market LLC under the symbols “CBS.A”“VIACA” and “CBS”“VIAC”, respectively.
The following table sets forth, for the calendar periods indicated, the
On December 19, 2019, we declared a quarterly cash dividend of $.24 per share range of high and low sales prices for CBS Corporation’son our Class A and Class B Common Stock, as reportedresulting in total dividends of $150 million, which were paid on January 10, 2020. Prior to the NYSE.Merger, Viacom and CBS each declared a quarterly cash dividend during each of the first three quarters of 2019 and during each of the four quarters of 2018 and 2017. During 2019, CBS declared total per share dividends of $.54, resulting in total dividends of $205 million. For each of the years ended December 31, 2018 and 2017, CBS declared total per share dividends of $.72, resulting in total annual dividends of $274 million and $289 million, respectively. During 2019, Viacom declared total per share dividends of $.60, resulting in total dividends of $245 million. For each of the years ended December 31, 2018 and 2017, Viacom declared total per share dividends of $.80, resulting in total annual dividends of $325 million and $323 million, respectively.
|
| | | | | | | | | | | | | | | |
| Voting Class A | | Non-Voting Class B |
| Common Stock | | Common Stock |
| High | | Low | | High | | Low |
| | | | | | | |
2016 | | | | | | | |
1st quarter | $ | 59.99 |
| | $ | 46.86 |
| | $ | 55.38 |
| | $ | 41.36 |
|
2nd quarter | $ | 61.77 |
| | $ | 53.13 |
| | $ | 57.89 |
| | $ | 50.53 |
|
3rd quarter | $ | 61.51 |
| | $ | 49.92 |
| | $ | 58.22 |
| | $ | 48.88 |
|
4th quarter | $ | 66.99 |
| | $ | 55.27 |
| | $ | 65.09 |
| | $ | 54.35 |
|
2015 | | | | | | | |
1st quarter | $ | 64.63 |
| | $ | 53.93 |
| | $ | 63.71 |
| | $ | 52.94 |
|
2nd quarter | $ | 72.50 |
| | $ | 57.02 |
| | $ | 63.95 |
| | $ | 55.21 |
|
3rd quarter | $ | 58.44 |
| | $ | 42.54 |
| | $ | 56.39 |
| | $ | 38.51 |
|
4th quarter | $ | 57.90 |
| | $ | 43.28 |
| | $ | 52.18 |
| | $ | 38.76 |
|
On January 26, 2017, the CompanyFebruary 12, 2020, we announced a quarterly cash dividend of $.18$.24 per share on itsour Class A and Class B Common Stock, payable on April 1, 2017. The Company declared a quarterly cash dividend on its Class A and Class B Common Stock during each of the four quarters of 2016 and 2015, resulting in total annual dividends of $294 million, or $.66 per share for 2016 and $293 million, or $.60 per share for 2015. CBS Corp.2020. We currently expectsexpect to continue to pay a regular cash dividend to itsour stockholders.
In November 2010, the Companywe announced that itsour Board of Directors approved a program to repurchase $1.5 billion of the Company’sour common stock in open market purchases or other types of transactions (including accelerated stock repurchases or privately negotiated transactions). Since then, various increases totaling $16.4 billion have been approved and announced, including most recently, an increase to the share repurchase program to a total availability of $6.0 billion on July 28, 2016. Below is a summary of CBS Corp.’sour purchases of itsour Class B Common Stock during the three months ended December 31, 2016 under this publicly announced share repurchase program.2019.
|
| | | | | | | | | | | | | | | | | | | |
(in millions, except per share amounts) | Total Number of Shares Purchased | | Average Price Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Programs | | Remaining Authorization |
October 1, 2016 - October 31, 2016 | | 7.3 |
| | | $ | 56.18 |
| | | 7.3 |
| | | | $ | 5,193 |
| |
November 1, 2016 - November 30, 2016 | | 11.4 |
| | | $ | 58.68 |
| | | 11.4 |
| | | | $ | 4,527 |
| |
December 1, 2016 - December 31, 2016 | | 6.7 |
| | | $ | 62.72 |
| | | 6.7 |
| | | | $ | 4,107 |
| |
Total | | 25.4 |
| | | | | | 25.4 |
| | | | $ | 4,107 |
| |
|
| | | | | | | | | | | | | | | | | | | |
(in millions, except per share amounts) | Total Number of Shares Purchased | | Average Price Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Programs | | Remaining Authorization |
October 1, 2019 - October 31, 2019 | | — |
| | | $ | — |
| | | — |
| | | | $ | 2,457 |
| |
November 1, 2019 - November 30, 2019 | | — |
| | | $ | — |
| | | — |
| | | | $ | 2,457 |
| |
December 1, 2019 - December 31, 2019 | | 1.2 |
| | | $ | 40.78 |
| | | 1.2 |
| | | | $ | 2,408 |
| |
Total | | 1.2 |
| | | | | | 1.2 |
| | | | $ | 2,408 |
| |
As of February 14, 2017,2020, there were approximately 1,5252,227 record holders of CBS Corp.our Class A Common Stock and approximately 21,25531,784 record holders of CBS Corp.our Class B Common Stock.
Additional information required by this item is contained in the CBS Corp. Proxy Statement for the Company’s 2017 Annual Meeting of Stockholders under the heading “Equity Compensation Plan Information,” which information is incorporated herein by reference.
Performance Graph
The following graph compares the cumulative total stockholder return on CBS Corp.of our Class A and Class B Common Stock with the cumulative total return on the companies listed in the Standard & Poor’s 500 Stock Index (“S&P 500”) and a Peer Group of companies identified below.
On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. Accordingly, the performance graph also includes Viacom Class B Common Stock.
The performance graph assumes $100 invested on December 31, 20112014 in each of theour Class A and Class B Common Stock, of CBS Corp.,Viacom’s Class B Common Stock, the S&P 500 and the Peer Group identified below, including reinvestment of dividends, through the calendar year ended December 31, 2016.2019.
Total Cumulative Stockholder Return
For Five-Year Period EndingEnded December 31, 20162019 |
| | | | | | |
December 31, | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
CBS Corp. Class A Common Stock | $100 | $139 | $235 | $210 | $196 | $247 |
CBS Corp. Class B Common Stock | $100 | $142 | $240 | $210 | $181 | $248 |
S&P 500 | $100 | $116 | $154 | $175 | $177 | $198 |
Peer Group (a) | $100 | $138 | $210 | $251 | $237 | $263 |
|
| | | | | | |
December 31, | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Class A Common Stock | $100 | $94 | $118 | $110 | $82 | $85 |
Class B Common Stock | $100 | $86 | $118 | $110 | $83 | $81 |
Viacom Class B Common Stock (a) | $100 | $56 | $50 | $45 | $38 | $38 |
S&P 500 | $100 | $101 | $114 | $138 | $132 | $174 |
Peer Group (b) | $100 | $98 | $99 | $108 | $123 | $154 |
(a) At the effective time of the Merger, each share of Viacom Class B Common Stock was converted into 0.59625 shares of ViacomCBS Class B Common Stock. Accordingly, the performance graph reflects the performance of Viacom Class B Common Stock through December 4, 2019, the date of the Merger, and the performance of ViacomCBS Class B Common Stock from December 4, 2019 through December 31, 2019.
(b) The Peer Group consists of the following companies: The Walt Disney Company (“Disney”), Fox Corporation and Discovery Inc. In March 2019, Disney acquired Twenty-First Century Fox Inc. and Time Warner Inc. CBS Radio is presented as a discontinued operation as(“21st Century Fox”) following the spin-off of December 31, 2016 and as a result, Cumulus Media Inc., which was previously included inFox Corporation from 21st Century Fox. The performance graph reflects the peer group, has been excluded.performance of 21st Century Fox stock through the date of such transactions.
|
| |
Item 6. | Selected Financial Data. |
CBS CORPORATIONVIACOMCBS INC. AND SUBSIDIARIES
(In millions, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, (a) |
| 2016 (b) (c) | | 2015 (b) (d) | | 2014 (b) (e) | | 2013 | | 2012 |
Revenues | $ | 13,166 |
| | $ | 12,671 |
| | $ | 12,519 |
| | $ | 12,713 |
| | $ | 11,514 |
|
Operating income | $ | 2,621 |
| | $ | 2,658 |
| | $ | 2,590 |
| | $ | 2,663 |
| | $ | 2,415 |
|
Net earnings from continuing operations | $ | 1,552 |
| | $ | 1,554 |
| | $ | 1,151 |
| | $ | 1,520 |
| | $ | 1,288 |
|
Net earnings (loss) from discontinued operations, net of tax | $ | (291 | ) | | $ | (141 | ) | | $ | 1,808 |
| | $ | 359 |
| | $ | 286 |
|
Net earnings | $ | 1,261 |
| | $ | 1,413 |
| | $ | 2,959 |
| | $ | 1,879 |
| | $ | 1,574 |
|
| | | | | | | | | |
Basic net earnings (loss) per common share: | | | | | | | | | |
Net earnings from continuing operations | $ | 3.50 |
| | $ | 3.21 |
| | $ | 2.09 |
| | $ | 2.50 |
| | $ | 2.01 |
|
Net earnings (loss) from discontinued operations, net of tax | $ | (.66 | ) | | $ | (.29 | ) | | $ | 3.29 |
| | $ | .59 |
| | $ | .45 |
|
Net earnings | $ | 2.84 |
| | $ | 2.92 |
| | $ | 5.38 |
| | $ | 3.09 |
| | $ | 2.45 |
|
| | | | | | | | | |
Diluted net earnings (loss) per common share: | | | | | | | | | |
Net earnings from continuing operations | $ | 3.46 |
| | $ | 3.18 |
| | $ | 2.05 |
| | $ | 2.44 |
| | $ | 1.95 |
|
Net earnings (loss) from discontinued operations, net of tax | $ | (.65 | ) | | $ | (.29 | ) | | $ | 3.22 |
| | $ | .58 |
| | $ | .43 |
|
Net earnings | $ | 2.81 |
| | $ | 2.89 |
| | $ | 5.27 |
| | $ | 3.01 |
| | $ | 2.39 |
|
| | | | | | | | | |
Dividends per common share | $ | .66 |
| | $ | .60 |
| | $ | .54 |
| | $ | .48 |
| | $ | .44 |
|
| | | | | | | | | |
At Year End: | | | | | | | | | |
Total assets: | | | | | | | | | |
Continuing operations | $ | 19,642 |
| | $ | 18,695 |
| | $ | 18,372 |
| | $ | 17,191 |
| | $ | 17,072 |
|
Discontinued operations | 4,596 |
| | 5,070 |
| | 5,563 |
| | 9,014 |
| | 9,121 |
|
Total assets | $ | 24,238 |
| | $ | 23,765 |
| | $ | 23,935 |
| | $ | 26,205 |
| | $ | 26,193 |
|
Total debt: | | | | | | | | | |
Continuing operations | $ | 9,375 |
| | $ | 8,448 |
| | $ | 7,112 |
| | $ | 6,403 |
| | $ | 5,886 |
|
Discontinued operations | 1,345 |
| | — |
| | — |
| | 14 |
| | 14 |
|
Total debt | $ | 10,720 |
| | $ | 8,448 |
| | $ | 7,112 |
| | $ | 6,417 |
| | $ | 5,900 |
|
Total Stockholders’ Equity | $ | 3,689 |
| | $ | 5,563 |
| | $ | 6,970 |
| | $ | 9,966 |
| | $ | 10,213 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, (a) |
| 2019 (c) | | 2018 (d) | | 2017 (e) (h) | | 2016 (f) (h) | | 2015 (g) (h) |
Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 26,535 |
| | $ | 25,685 |
| | $ | 25,559 |
|
Operating income | $ | 4,273 |
| | $ | 5,204 |
| | $ | 5,341 |
| | $ | 5,297 |
| | $ | 5,708 |
|
Net earnings from continuing operations (ViacomCBS and noncontrolling interests) | $ | 3,301 |
| | $ | 3,460 |
| | $ | 3,320 |
| | $ | 2,970 |
| | $ | 3,506 |
|
Net earnings from continuing operations attributable to ViacomCBS | $ | 3,270 |
| | $ | 3,423 |
| | $ | 3,268 |
| | $ | 2,935 |
| | $ | 3,427 |
|
| | | | | | | | | |
Net earnings from continuing operations per common share attributable to ViacomCBS | | | | | | | | | |
Basic | $ | 5.32 |
| | $ | 5.55 |
| | $ | 5.11 |
| | $ | 4.32 |
| | $ | 4.75 |
|
Diluted | $ | 5.30 |
| | $ | 5.51 |
| | $ | 5.05 |
| | $ | 4.28 |
| | $ | 4.71 |
|
| | | | | | | | | |
Dividends per common share: | | | | | | | | | |
ViacomCBS Inc. (formerly CBS Corporation) | $ | .78 |
| | $ | .72 |
| | $ | .72 |
| | $ | .66 |
| | $ | .60 |
|
Viacom Inc. (b) | $ | .60 |
| | $ | .80 |
| | $ | .80 |
| | $ | 1.20 |
| | $ | 1.53 |
|
| | | | | | | | | |
At Year End: | | | | | | | | | |
Total assets | $ | 49,519 |
| | $ | 44,497 |
| | $ | 43,503 |
| | $ | 47,383 |
| | $ | 45,922 |
|
Total debt | $ | 18,719 |
| | $ | 19,113 |
| | $ | 20,351 |
| | $ | 21,675 |
| | $ | 21,015 |
|
Total ViacomCBS stockholders’ equity | $ | 13,207 |
| | $ | 10,449 |
| | $ | 8,519 |
| | $ | 8,235 |
| | $ | 9,311 |
|
Total equity | $ | 13,289 |
| | $ | 10,503 |
| | $ | 8,600 |
| | $ | 8,286 |
| | $ | 9,369 |
|
(a) During the fourth quarter of 2016,On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Company” or “CBS Corp.”“Merger”) classified. At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. The Merger has been accounted for as a transaction between entities under common control and therefore, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.
(b) Amounts reflect the historical dividends of Viacom Inc. and have not been adjusted for the conversion to ViacomCBS shares in connection with the Merger.
(c) For 2019, the following items affected the comparability of results: costs for restructuring and other corporate matters, including costs related to the Merger, of $775 million ($641 million, net of tax); programming charges of $589 million ($447 million, net of tax); a gain on sale of assets of $549 million($386 million, net of tax); and discrete tax benefits of $827 million.
(d) For 2018, the following items affected the comparability of results: costs for restructuring and other corporate matters of $490 million ($374 million, net of tax); programming charges of $162 million ($123 million, net of tax); and discrete tax benefits of $297 million.
(e) For 2017, the following items affected the comparability of results: restructuring charges of $258 million ($163 million, net of tax); programming charges of $144 million ($94 million, net of tax); a gain on sale of assets of $146 million ($130 million, net of tax); a gain on the sale of EPIX of $285 million ($189 million, net of tax); a pension settlement charge of $352 million ($237 million, net of tax); and discrete tax benefits of $321 million.
(f) Results for 2016 included costs for restructuring and other corporate matters of $286 million ($182 million, net of tax) and a pension settlement charge of $211 million ($130 million, net of tax).
(g) Results for 2015 included programming charges of $578 million ($383 million, net of tax); costs for restructuring and other corporate matters of $287 million ($186 million, net of tax); and a gain on sale of assets of $139 million ($131 million, net of tax).
(h) On November 16, 2017, we completed the disposition of CBS Radio as held for sale and asInc. (“CBS Radio”) through a result,tax-free split-off. CBS Radio has been presented as a discontinued operation in the Company’s consolidated financial statements for all periods presented. Also included in discontinued operations is CBS Outdoor Americas Inc., which was disposed of in 2014, and Outdoor Europe, which was sold in 2013.
(b) Included in net earnings (loss) from discontinued operations, net of tax, are noncash impairment charges of $444 million ($427 million, net of tax), or $.95 per diluted share, in 2016, and $484 million ($297 million, net of tax), or $.61 per diluted share, in 2015, in each case to reduce the carrying value of CBS Radio’s intangible assets. For 2014, net earnings from discontinued operations, net of tax, included a gain on the disposal of Outdoor Americas of $1.56 billion, or $2.78 per diluted share.
(c) In 2016, the Company recorded a one-time pension settlement charge of $211 million in operating income ($130 million, net of tax), or $.29 per diluted share, for the settlement of pension obligations resulting from the completion of the Company’s offer to eligible former employees to receive lump-sum distributions of their pension benefits.(d) In 2015, the Company recorded gains from the sales of internet businesses in China of $139 million in operating income ($131 million, net of tax), or $.27 per diluted share.(e) In 2014, in connection with the early redemption of $1.07 billion of its debt, the Company recorded a pretax loss on early extinguishment of debt of $352 million ($219 million, net of tax), or $.39 per diluted share.
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Item 7. | Management’s Discussion and Analysis of Results of Operations and Financial Condition. (Tabular dollars in millions, except per share amounts) |
Management’s discussion and analysis of the results of operations and financial condition of CBS Corporation (together with its consolidated subsidiaries, unless the context otherwise requires, the “Company” or “CBS Corp.”)ViacomCBS Inc. should be read in conjunction with the consolidated financial statements and related notes. References in this document to “ViacomCBS,” the “Company,” “we,” “us” and “our” refer to ViacomCBS Inc. and its consolidated subsidiaries, unless the context otherwise requires.
Significant components of management’s discussion and analysis of results of operations and financial condition include:
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• | Overview—The overview section provides a summary of ViacomCBS and our business and operational highlights. |
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• | Consolidated Results of Operations—The consolidated results of operations section provides an analysis of our results on a consolidated basis for the three years ended December 31, 2019. |
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• | Segment Results of Operations—The segment results of operations section provides an analysis of our results on a reportable segment basis for the three years ended December 31, 2019. |
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• | Liquidity and Capital Resources—The liquidity and capital resources section provides a discussion of our cash flows for the three years ended December 31, 2019, and of our outstanding debt, commitments and contingencies existing as of December 31, 2019. |
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• | Critical Accounting Policies—The critical accounting policies section provides detail with respect to accounting policies that are considered by management to require significant judgment and use of estimates and that could have a significant impact on our financial statements. |
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• | Legal Matters—The legal matters section discusses our legal matters and other litigation to which we are a party. |
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• | Market Risk—The market risk section discusses how we manage exposure to market and interest rate risks. |
Overview
Business overview and strategy
The Company operates businesses which span theViacomCBS is a leading global media and entertainment industries, including the CBS Television Network, cable networks,company that creates content production and distribution, television stations, internet-based businesses, and consumer publishing. The Company’s principal strategy is to create and acquire premium content that is widely accepted byexperiences for audiences and generate both advertising and non-advertising revenues from the distribution of this content on multiple media platforms and to various geographic locations. The Company continues to increase its investment in both Company-owned and acquired premium content to enhance its opportunities for revenue growth, which include exhibiting the Company’s content on multiple digital platforms, including the Company’s owned digital streaming services as well as third-party live television streaming offerings; expanding the distribution of its content internationally; and securing compensation from multichannel video programming distributors (“MVPDs”) and television stations affiliatedworldwide.
Merger with the CBS Television Network. The Company also seeks to grow its advertising revenues by monetizing all content viewership as industry measurements evolve to reflect viewers’ changing habits. The Company’s continued ability to capitalize on these and other emerging opportunities will provide it with incremental advertising and non-advertising revenues.
CBS Radio SeparationViacom Inc.
On February 2, 2017,December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the Company enteredsurviving company (the “Merger”). At the effective time of the Merger (the “Effective Time”), the combined company changed its name to ViacomCBS Inc. (“ViacomCBS”).
At the Effective Time, (1) each share of Viacom Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into an agreement with Entercom Communications Corp. to combine the Company’s radio business, CBS Radio, with Entercom in a merger to be effected through a Reverse Morris Trust transaction, which is expected to be tax-free to CBS Corp. and its stockholders. In connection with this transaction, the Company intends to split-off CBS Radio through an exchange offer, in which the Company’s stockholders may elect to exchange0.59625 shares of the Company’sViacomCBS Class A Common Stock, and (2) each share of Viacom Class B Common Stock forissued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBS Class B Common Stock (together with ViacomCBS Class A Common Stock, the “ViacomCBS Common Stock”). At the Effective Time, each share of CBS Radio, which will then beClass A Common Stock and each share of CBS Class B Common Stock (together with CBS Class A Common Stock, the “CBS Common Stock”) issued and outstanding immediately converted into sharesprior to the Effective Time, remained an issued and outstanding share of Entercom common stock atViacomCBS Class A Common Stock and ViacomCBS Class B Common Stock, respectively, and was not affected by the time ofMerger.
Following the merger. This transaction is subject to customary approvalsMerger, the CBS Common Stock was delisted from the New York Stock Exchange and closing conditions. The Company expects to complete the transaction duringViacom Common Stock ceased trading on the second half of 2017. CBS Radio has been presented as a discontinued operation in the consolidated financial statements for all periods presented.Nasdaq Stock Market LLC (“Nasdaq”). On December 5, 2019, ViacomCBS
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Class A Common Stock and ViacomCBS Class B Common Stock were listed on Nasdaq and began trading under the ticker symbols VIACA and VIAC, respectively.
The Merger is being accounted for as a transaction between entities under common control as National Amusements, Inc. (“NAI”) was the controlling stockholder of each of CBS and Viacom (and remains the controlling stockholder of ViacomCBS). The net assets of Viacom have been combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.
Operational highlights 2016Highlights 2019 vs. 20152018
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| | | | | | | | | | | | | | | |
Consolidated results of operations | | | | | Increase/(Decrease) | |
Year Ended December 31, | 2016 | | 2015 | | $ | | % | |
GAAP: | | | | | | | | |
Revenues | $ | 13,166 |
| | $ | 12,671 |
| | $ | 495 |
| | 4 | % | |
Operating income | $ | 2,621 |
| | $ | 2,658 |
| | $ | (37 | ) | | (1 | )% | |
Net earnings from continuing operations | $ | 1,552 |
| | $ | 1,554 |
| | $ | (2 | ) | | — | % | |
Net earnings | $ | 1,261 |
| | $ | 1,413 |
| | $ | (152 | ) |
| (11 | )% | |
Diluted EPS from continuing operations | $ | 3.46 |
| | $ | 3.18 |
| | $ | .28 |
| | 9 | % | |
Diluted EPS | $ | 2.81 |
| | $ | 2.89 |
| | $ | (.08 | ) | | (3 | )% | |
| | | | | | | | |
Non-GAAP: (a) | | | | | | | | |
Adjusted operating income | $ | 2,861 |
| | $ | 2,564 |
| | $ | 297 |
| | 12 | % | |
Adjusted net earnings | $ | 1,840 |
| | $ | 1,618 |
| | $ | 222 |
| | 14 | % | |
Adjusted diluted EPS | $ | 4.11 |
| | $ | 3.31 |
| | $ | .80 |
| | 24 | % | |
|
| | | | | | | | | | | | | | | |
Consolidated results of operations | | | | | Increase/(Decrease) | |
Year Ended December 31, | 2019 | | 2018 | | $ | | % | |
GAAP: | | | | | | | | |
Revenues | $ | 27,812 |
| | $ | 27,250 |
| | $ | 562 |
| | 2 | % | |
Operating income | $ | 4,273 |
| | $ | 5,204 |
| | $ | (931 | ) | | (18 | )% | |
Net earnings from continuing operations attributable to ViacomCBS | $ | 3,270 |
| | $ | 3,423 |
| | $ | (153 | ) |
| (4 | )% | |
Diluted EPS from continuing operations attributable to ViacomCBS | $ | 5.30 |
| | $ | 5.51 |
| | $ | (.21 | ) | | (4 | )% | |
Net cash flow provided by operating activities | $ | 1,230 |
| | $ | 3,464 |
| | $ | (2,234 | ) | | (64 | )% | |
| | | | | | | | |
Non-GAAP: (a) | | | | | | | | |
Adjusted OIBDA | $ | 5,531 |
| | $ | 6,289 |
| | $ | (758 | ) | | (12 | )% | |
Adjusted net earnings from continuing operations attributable to ViacomCBS | $ | 3,090 |
| | $ | 3,646 |
| | $ | (556 | ) | | (15 | )% | |
Adjusted diluted EPS from continuing operations attributable to ViacomCBS | $ | 5.01 |
| | $ | 5.87 |
| | $ | (.86 | ) | | (15 | )% | |
Free cash flow | $ | 877 |
| | $ | 3,111 |
| | $ | (2,234 | ) | | (72 | )% | |
(a) See pages II-6 - II-8 and II-7II-33 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with accounting principles generally accepted in the United States (“GAAP”).
For 2016,2019, revenues increased 4%2% to $13.17$27.81 billion ledfrom $27.25 billion in 2018, driven by CBS’ broadcast of Super Bowl LIII in 2019, growth from our streaming services, which include CBS All Access, Pluto TVand the Showtime streaming subscription offering (“Showtime OTT”), and higher content licensing revenues driven by the broadcastproduction of Super Bowl 50 on CBS, growth in affiliate and subscription fees and higher political advertising sales.programming for third parties. These increases were partially offset by lower theatrical revenues, primarily due to the benefit to 2015 from Showtime Networks’ distributiondifficult comparison against Mission: Impossible - Fallout in 2018, and lower political advertising sales as a result of the Floyd Mayweather/Manny Pacquiao boxing event, and lower content licensing and distribution revenues compared with 2015, which included significant licensing sales of NCIS and Elementary.midterm elections in 2018. Foreign exchange rate changes had a 1-percentage point unfavorable impact on the revenue comparison.
Operating income decreased 1%18% to $4.27 billion from 2015. Comparability of operating income$5.20 billion in 2018. This comparison was impacted by discrete items which for 2016 includedidentified as affecting comparability, including restructuring charges, for a pension settlementcosts related to the Merger and restructuring activities,other corporate matters, programming charges and for 2015 included gains fromon the salessale of internet businesses in China and restructuring charges. On an adjusted basis,assets. Adjusted operating income before depreciation and amortization (“Adjusted OIBDA”) decreased 12%, primarily reflecting an increased investment in content, including a higher number of series produced for exhibition on our properties as well as for third parties. Net earnings from continuing operations attributable to ViacomCBS for 2019 were $3.27 billion, or $5.30 per diluted share, compared with $3.42 billion, or $5.51 per diluted share, for 2018. This comparison was up 12% drivenimpacted by the increaseaforementioned items as well as other items identified as affecting comparability set forth in revenues. Dilutedthe section “Reconciliation of Non-GAAP Measures” below. Adjusted net earnings from continuing operations attributable to ViacomCBS decreased 15% and adjusted diluted earnings per share (“EPS”), which included the previously mentioned discrete items as well as impairment charges at CBS Radio, which have been presented in discontinued from continuing operations was $2.81decreased 15%to $5.01 for 2016 compared with $2.89 for 2015. On an adjusted basis, EPS was $4.11, up 24% from $3.31 for 2015,2019, driven by the higherlower Adjusted OIBDA. Adjusted OIBDA, adjusted operating incomenet earnings from continuing operations attributable to ViacomCBS and lower weighted average shares outstanding as a result of the Company’s $3.0 billion of share repurchases during 2016. The Company believes that presenting its financial results adjusted for the impact of discrete items is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management and provides a clearer perspective on the underlying performance of the Company. These adjusted resultsdiluted EPS from continuing operations are non-GAAP financial measures. See pages II-6
Management’s Discussion and II-7Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
- II-8 for details of the discrete items excluded from adjustedfinancial results, along withand reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.
The CompanyWe generated operating cash flow from continuing operations of $1.45$1.23 billion in 2016 and $1.192019 compared with $3.46 billion in 2015.2018. Free cash flow was $877 million for 2016 was $1.26 billion2019 compared with $1.02$3.11 billion for 2015.2018. These increases were driven by growth in affiliate and subscription fees and higher advertising revenues, including fromdecreases primarily reflected the broadcast of Super Bowl 50 on CBS, partially offset byaforementioned increased investment in content. The Company generatedcontent, higher payments for income taxes and payments of $132 million in 2019 for costs related to the Merger. In addition, operating cash flow from discontinued operationsand free cash flow included payments for restructuring activities of $231$234 million in 20162019 and $205$219 million in 2015.2018. Free cash flow is a non-GAAP financial measure. See “Free“Free Cash Flow”Flow” on pages II-30 and II-31II-33 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable financial measure in accordance with GAAP, to free cash flow.
Reconciliation of Non-GAAP Measures
Results for the years ended December 31, 2019, 2018 and 2017 included certain items identified as affecting comparability. Adjusted OIBDA, adjusted earnings from continuing operations before income taxes, adjusted provision for income taxes, adjusted net earnings from continuing operations attributable to ViacomCBS and adjusted diluted EPS from continuing operations (together, the “adjusted measures”) exclude the impact of these items and are measures of performance not calculated in accordance with GAAP. We use these measures to, among other things, evaluate our operating performance. These measures are among the primary measures used by management for planning and forecasting of future periods, and they are important indicators of our operational strength and business performance. In addition, we use Adjusted OIBDA to, among other things, value prospective acquisitions. We believe these measures are relevant and useful for investors because they allow investors to view performance in a manner similar to the method used by our management; provide a clearer perspective on our underlying performance; and make it easier for investors, analysts and peers to compare our operating performance to other companies in our industry and to compare our year-over-year results.
Because the adjusted measures are measures of performance not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, operating income, earnings from continuing operations before income taxes, benefit (provision) for income taxes, net earnings from continuing operations attributable to ViacomCBS or diluted EPS from continuing operations, as applicable, as indicators of operating performance. These measures, as we calculate them, may not be comparable to similarly titled measures employed by other companies.
The following tables reconcile the adjusted measures to their most directly comparable financial measures in accordance with GAAP.
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| | | | | | | | | | | |
Year Ended December 31, | 2019 | | 2018 | | 2017 |
Operating Income (GAAP) | $ | 4,273 |
| | $ | 5,204 |
| | $ | 5,341 |
|
Depreciation and amortization (a) | 443 |
| | 433 |
| | 443 |
|
Restructuring and other corporate matters (b) | 775 |
| | 490 |
| | 258 |
|
Programming charges (b) | 589 |
| | 162 |
| | 144 |
|
Gain on sale of assets (b) | (549 | ) | | — |
| | (146 | ) |
Adjusted OIBDA (Non-GAAP) | $ | 5,531 |
| | $ | 6,289 |
| | $ | 6,040 |
|
(a) 2019 includes an impairment charge of $20 million to reduce the carrying value of intangible assets.
(b) See notes on the following tables for additional information on items affecting comparability.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Pension Settlement
In September 2016, the Company offered eligible former employees who had not yet initiated pension benefit payments the option to make a one-time election to receive the present value of their pension benefits as a lump-sum distribution or to commence an immediate monthly annuity benefit. As a result, the Company recorded a one-time pension settlement charge of $211 million in 2016.
Share repurchases
Following is a summary of the Company’s purchases of its Class B Common Stock during the year ended December 31, 2016:
|
| | | | | | | | | | | | | | | | | | | | | |
Total Number of Shares Purchased (in millions) | | Average Price Per Share | | Dollar Value of Shares Repurchased | | Remaining Authorization |
| 54.3 |
| | | | $ | 55.15 |
| | | | $ | 3,000 |
| | | | $ | 4,107 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Earnings from Continuing Operations Before Income Taxes | | Benefit (Provision) for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations |
Reported (GAAP) | | $ | 3,345 |
| | | | $ | 9 |
| | | | $ | 3,270 |
| | | | $ | 5.30 |
| |
Items affecting comparability: | | | | | | | | | | | | | | | |
Restructuring and other corporate matters (a) | | 775 |
| | | | (134 | ) | | | | 641 |
| | | | 1.04 |
| |
Impairment charge (b) | | 20 |
| | | | (6 | ) | | | | 14 |
| | | | .02 |
| |
Programming charges (c) | | 589 |
| | | | (142 | ) | | | | 447 |
| | | | .73 |
| |
Gain on sale of assets (d) | | (549 | ) | | | | 163 |
| | | | (386 | ) | | | | (.63 | ) | |
Net gain from investments (e) | | (85 | ) | | | | 16 |
| | | | (69 | ) | | | | (.11 | ) | |
Discrete tax items (f) | | — |
| | | | (827 | ) | | | | (827 | ) | | | | (1.34 | ) | |
Adjusted (Non-GAAP) | | $ | 4,095 |
| | | | $ | (921 | ) | | | | $ | 3,090 |
| | | | $ | 5.01 |
| |
Dividends
|
| | | | | | | | | | | | | | | | |
| | | | | | Increase/(Decrease) | |
Year Ended December 31, | | 2016 | | 2015 | | $ | | % | |
Dividends per share | | $ | .66 |
| | $ | .60 |
| | $ | .06 |
| | 10 | % | |
Total dividends | | $ | 294 |
| | $ | 293 |
| | $ | 1 |
| | — | % | |
On July 28, 2016,(a) Reflects severance and exit costs relating to restructuring activities and costs incurred in connection with the Merger, legal proceedings involving the Company announced thatand other corporate matters.
(b) Reflects a charge to reduce the carrying value of our international broadcast licenses in Australia to their fair value.
(c) Programming charges principally reflect accelerated amortization associated with changes in the expected monetization of certain programs, and decisions to cease airing, alter future airing patterns or not renew certain programs, in connection with management changes implemented as a result of the Merger.
(d) Reflects a gain on the sale of the CBS Television City property and sound stage operation (“CBS Television City”).
(e) Reflects a gain on marketable securities of $113 million; gains of $22 million on the sale and acquisition of joint ventures; and an impairment charge of $50 million to write-down an investment to its Boardfair value.
(f) Primarily reflects a deferred tax benefit of Directors approved$768 million resulting from the transfer of intangible assets between our subsidiaries in connection with a 20% increasereorganization of our international operations; tax benefits of $44 million realized in connection with the preparation of the 2018 federal tax return, based on further clarity provided by the United States government on tax positions relating to federal tax legislation enacted in December 2017 (the “Tax Reform Act”); and a tax benefit of $39 million triggered by the quarterly cash dividend on its Class A Common Stock and Class B Common Stock to $.18 from $.15 per share.bankruptcy of an investee.
Reconciliation of Non-GAAP Measures
The following tables present adjusted operating income, adjusted net earnings, and adjusted diluted EPS, which exclude the impact of discrete items. These adjusted results are non-GAAP financial measures, which are reconciled below to the most directly comparable financial measures in accordance with GAAP.
|
| | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
Year Ended December 31, | 2016 | | 2015 | | $ | | % | |
Operating income | $ | 2,621 |
| | $ | 2,658 |
| | $ | (37 | ) | | (1 | )% | |
Discrete items: | | | | | | | | |
Pension settlement charge | 211 |
| | — |
| | | | | |
Restructuring and merger and acquisition-related costs | 38 |
| | 45 |
| | | | | |
Other operating items, net (a) | (9 | ) | | (139 | ) | | | | | |
Adjusted operating income | $ | 2,861 |
|
| $ | 2,564 |
|
| $ | 297 |
|
| 12 | % | |
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
|
| | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
Year Ended December 31, | 2016 |
| 2015 | | $ | | % | |
Net earnings | $ | 1,261 |
| | $ | 1,413 |
| | $ | (152 | ) | | (11 | )% | |
Discrete items: | | | | | | | | |
Pension settlement charge (net of tax benefit of $81 million) | 130 |
| | — |
| | | | | |
Restructuring and merger and acquisition-related costs (net of tax benefit of $18 million in 2016 and $32 million in 2015) (b) | 28 |
| | 49 |
| | | | | |
Other operating items, net (net of tax benefit of $4 million in 2016 and $8 million in 2015) (a) | (5 | ) | | (131 | ) | | | | | |
Write-down of equity investment | 10 |
| | — |
| | | | | |
Discrete tax items (c) | (11 | ) | | — |
| | | | | |
CBS Radio impairment charges (net of tax benefit of $17 million in 2016 and $187 million in 2015) | 427 |
| | 297 |
| | | | | |
Other adjustments for discontinued operations (d) | — |
| | (10 | ) | | | | | |
Adjusted net earnings | $ | 1,840 |
|
| $ | 1,618 |
|
| $ | 222 |
|
| 14 | % | |
|
| | | | | | | | | | | | | | | |
| | | | | Increase/(Decrease) | |
Year Ended December 31, | 2016 | | 2015 | | $ | | % | |
Diluted EPS | $ | 2.81 |
| | $ | 2.89 |
| | $ | (.08 | ) | | (3 | )% | |
Discrete items: | | | | | | | | |
Pension settlement charge | .29 |
| | — |
| | | | | |
Restructuring and merger and acquisition-related costs (b) | .06 |
| | .10 |
| | | | | |
Other operating items, net (a) | (.01 | ) | | (.27 | ) | | | | | |
Write-down of equity investment | .02 |
| | — |
| | | | | |
Discrete tax items (c) | (.02 | ) | | — |
| | | | | |
CBS Radio impairment charges | .95 |
| | .61 |
| | | | | |
Other adjustments for discontinued operations (d) | — |
| | (.02 | ) | | | | | |
Adjusted diluted EPS (e) | $ | 4.11 |
|
| $ | 3.31 |
|
| $ | .80 |
|
| 24 | % | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| Earnings from Continuing Operations Before Income Taxes | | Provision for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations |
Reported (GAAP) | | $ | 4,124 |
| | | | $ | (617 | ) | | | | $ | 3,423 |
| | | | $ | 5.51 |
| |
Items affecting comparability: | | | | | | | | | | | | | | | |
Restructuring and other corporate matters (a) | | 490 |
| | | | (116 | ) | | | | 374 |
| | | | .60 |
| |
Programming charges (b) | | 162 |
| | | | (39 | ) | | | | 123 |
| | | | .20 |
| |
Gain on early extinguishment of debt | | (18 | ) | | | | 4 |
| | | | (14 | ) | | | | (.02 | ) | |
Net loss from investments (c) | | 53 |
| | | | (16 | ) | | | | 37 |
| | | | .06 |
| |
Discrete tax items (d) | | — |
| | | | (297 | ) | | | | (297 | ) | | | | (.48 | ) | |
Adjusted (Non-GAAP) | | $ | 4,811 |
| | | | $ | (1,081 | ) | | | | $ | 3,646 |
| | | | $ | 5.87 |
| |
(a) Other operating items, net for 2016Primarily reflects severance and 2015 includes gainsexit costs relating to restructuring activities as well as professional fees related to legal proceedings, cost transformation initiatives, investigations at our Company and the evaluation of potential merger activity.
(b) Reflects programming charges resulting from the sales of internet businesseschanges to our programming strategy, including at CBS Films and our Cable Networks segment, in China, and for 2016, also includes a multiyear, retroactive impact of a new operating tax.
(b) Adjustments to net earnings and diluted EPS include CBS Radio restructuring charges of $8 million ($5 million, net of tax) in 2016 and $36 million ($21 million, net of tax) in 2015, which are included in net loss from discontinued operations.connection with management changes.
(c) Reflects a one-time tax benefitloss on marketable securities of $47$23 million; an impairment charge of $46 million associated with a multiyear adjustment to a tax deduction, which was approved by the IRS during the third quarter of 2016,write-down an investment to its fair value; and a chargegain of $36$16 million fromon the resolutionsale of a tax matter1% equity interest in a foreign jurisdiction relatingViacom18 to a previously disposed business, which is included in net loss from discontinued operations.our joint venture partner.
(d) Primarily reflects a decreasenet discrete tax benefit of $80 million related to the guarantee liabilityTax Reform Act and other tax law changes; a net tax benefit of $71 million relating to a tax accounting method change granted by the Internal Revenue Service (“IRS”); and the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| Earnings from Continuing Operations Before Income Taxes | | Provision for Income Taxes | | Net Earnings from Continuing Operations Attributable to ViacomCBS | | Diluted EPS from Continuing Operations |
Reported (GAAP) | | $ | 4,120 |
| | | | $ | (804 | ) | | | | $ | 3,268 |
| | | | $ | 5.05 |
| |
Items affecting comparability: | | | | | | | | | | | | | | | |
Restructuring charges | | 258 |
| | | | (95 | ) | | | | 163 |
| | | | .25 |
| |
Programming charges (a) | | 144 |
| | | | (50 | ) | | | | 94 |
| | | | .14 |
| |
Gain on sale of assets (b) | | (146 | ) | | | | 16 |
| | | | (130 | ) | | | | (.20 | ) | |
Loss on early extinguishment of debt | | 38 |
| | | | (17 | ) | | | | 21 |
| | | | .03 |
| |
Gain on sale of EPIX | | (285 | ) | | | | 96 |
| | | | (189 | ) | | | | (.29 | ) | |
Pension settlement charge | | 352 |
| | | | (115 | ) | | | | 237 |
| | | | .37 |
| |
Impairment of investments (c) | | 18 |
| | | | (7 | ) | | | | 11 |
| | | | .02 |
| |
Discrete tax items (d) | | — |
| | | | (321 | ) | | | | (321 | ) | | | | (.50 | ) | |
Adjusted (Non-GAAP) | | $ | 4,499 |
| | | | $ | (1,297 | ) | | | | $ | 3,154 |
| | | | $ | 4.87 |
| |
(a) Reflects programming charges associated with the 2013execution of a strategy for certain of our flagship brands, as well as strategic initiatives at Paramount.
(b) Reflects a gain of $127 million, with $11 million attributable to the noncontrolling interest, on the sale of broadcast spectrum in connection with the FCC’s broadcast spectrum auction and a net gain of $19 million relating to the disposition of Outdoor Europe.property and equipment.
(e) Amounts may not sum as(c) Reflects the write-down of certain investments to their fair value.
(d) Primarily reflects a resulttax benefit of rounding.$279 million reflecting the recognition of foreign tax credits on the distribution of securities to the United States (“U.S”).
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
SegmentsConsolidated Results of Operations—2019 vs. 2018
Revenues
CBS Corp. operates in the following four segments: |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues by Type | | | % of Total | | | | % of Total | | Increase/(Decrease) | |
Year Ended December 31, | 2019 | | Revenues | | 2018 | | Revenues | | $ | | % | |
Advertising | $ | 11,074 |
| | | 40 | % | | | $ | 10,841 |
| | | 40 | % | | | $ | 233 |
| | 2 | % | |
Affiliate | 8,602 |
| | | 31 |
| | | 8,376 |
| | | 31 |
| | | 226 |
| | 3 |
| |
Content licensing | 6,483 |
| | | 23 |
| | | 6,163 |
| | | 22 |
| | | 320 |
| | 5 |
| |
Theatrical | 547 |
| | | 2 |
| | | 744 |
| | | 3 |
| | | (197 | ) | | (26 | ) | |
Publishing | 814 |
| | | 3 |
| | | 825 |
| | | 3 |
| | | (11 | ) | | (1 | ) | |
Other | 292 |
| | | 1 |
| | | 301 |
| | | 1 |
| | | (9 | ) | | (3 | ) | |
Total Revenues | $ | 27,812 |
| | | 100 | % | | | $ | 27,250 |
| | | 100 | % | | | $ | 562 |
| | 2 | % | |
ENTERTAINMENT: The Entertainment segment consists of the CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive and CBS Films as well as the Company’s digital streaming services, CBS All Access and CBSN. Entertainment’sAdvertising
Advertising revenues are generated primarily from the sale of advertising sales,spots on the licensingCBS Television Network, our basic cable networks and distribution of itsour television stations, as well as on our ad-supported streaming services, including CBS All Access and Pluto TV, and on our websites. Our advertising revenues include integrated marketing services, which provide unique branded content and affiliatecustom sponsorship opportunities to our advertisers, as well as advanced marketing solutions (“AMS”), including addressable video and subscription fees. The Entertainment segment contributed 67% to consolidated revenues in each ofbrand solutions. For 2019, the years 2016 and 2015, and 66% in 2014, and 53%, 51% and 50% to total segment operating income in 2016, 2015 and 2014, respectively.
CABLE NETWORKS: The Cable Networks segment consists of Showtime Networks, CBS Sports Network and Smithsonian Networks. Cable Networks’ revenues are generated primarily from affiliate and subscription fees and the licensing and distribution of its content. The Cable Networks segment contributed 16%, 18% and 17% to consolidated revenues in 2016, 2015, and 2014, respectively, and 33% to total segment operating income in 2016 and 37% in each of the years 2015 and 2014.
PUBLISHING: The Publishing segment consists of Simon & Schuster’s consumer book publishing business with imprints such as Simon & Schuster, Pocket Books, Scribner and Atria Books. Publishing generates revenues from the distribution of consumer books in print, digital and audio formats. The Publishing segment contributed 6% to consolidated revenues in each of the years 2016, 2015, and 2014, and 4% to total segment operating income in each of the years 2016, 2015, and 2014.
LOCAL MEDIA: The Local Media segment consists of CBS Television Stations and CBS Local Digital Media, with revenues generated primarily from advertising sales and retransmission fees. The Local Media segment contributed 14%, 12% and 13% to consolidated revenues in 2016, 2015, and 2014, respectively, and 22%, 19%, and 20% to total segment operating income in 2016, 2015, and 2014, respectively.
Consolidated Results of Operations—2016 vs. 2015
Revenues
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues by Type | | | % of Total | | | | % of Total | | Increase/(Decrease) | |
Year Ended December 31, | 2016 | | Revenues | | 2015 | | Revenues | | $ | | % | |
Advertising | $ | 6,288 |
| | | 48 | % | | | $ | 5,824 |
| | | 46 | % | | | $ | 464 |
| | 8 | % | |
Content licensing and distribution | 3,673 |
| | | 28 |
| | | 3,903 |
| | | 31 |
| | | (230 | ) | | (6 | ) | |
Affiliate and subscription fees | 2,978 |
| | | 22 |
| | | 2,724 |
| | | 21 |
| | | 254 |
| | 9 |
| |
Other | 227 |
| | | 2 |
| | | 220 |
| | | 2 |
| | | 7 |
| | 3 |
| |
Total Revenues | $ | 13,166 |
| | | 100 | % | | | $ | 12,671 |
| | | 100 | % | | | $ | 495 |
| | 4 | % | |
Advertising
For 2016, the 8%2% increase in advertising revenues was driven by CBS’s5% growth in domestic advertising revenues, reflecting CBS’ broadcast of the tent-pole sporting events in 2019, mainly Super Bowl LIII and the national semifinals and championship game of the NCAA Division I Men’s Basketball Tournament (“NCAA Tournament”), as well as higher revenues from AMS, which includes Pluto TV. These increases were partially offset by lower political advertising sales at our owned television stations, as a result of the benefit to last year from the 2018 midterm elections. International advertising revenues decreased 14%, reflecting the unfavorable impact of foreign exchange rate changes, as well as softness in the Australian and UK markets, partially offset by increases in pricing and political advertising in Argentina. Foreign exchange rate changes had an unfavorable impact of 1-percentage point on the total advertising revenues comparison and 9-percentage points on the international advertising revenues comparison.
The Super Bowl is broadcast on the CBS Television Network once every three yearson a rotating basis with other networks through the 2022 season under the current contract; higher political advertising sales;contract with the National Football League (“NFL”), and 3% growth in underlying network advertising. The increase in network advertising reflects higher pricing, including from increased demand, partially offset by lower ratings, including from the national semifinals and championship games of the NCAA Tournament are broadcast of NFL games.
on the CBS Television Network every other year through 2032 under the current agreement with the NCAA and Turner Broadcasting System, Inc. (“Turner”). In 2017,2020, the advertising revenue comparison will be negatively affected by the benefit in 20162019 from the broadcastCBS’ broadcasts of the Super Bowl onand the national semifinals and championship game of the NCAA Tournament. These events will not be broadcast by CBS and strong political advertising spending. However, advertisingin 2020. Advertising revenues in 20172020 will benefit from higher political advertising sales, mainly in the second half of the year, associated with the U.S. Presidential election.
Affiliate
Affiliate revenues are principally comprised of fees received from multichannel video programming distributors (“MVPDs”) and virtual MVPDs for carriage of our cable networks (“cable affiliate fees”), fees received from television stations affiliated with the CBS Television Network’s broadcastNetwork (“station affiliation fees”); fees for authorizing the MVPDs’ and virtual MVPDs’ carriage of our owned television stations (“retransmission fees”); and subscription fees for our streaming services. For 2019, the National Semifinals3% increase in affiliate revenues reflects 20% growth in station affiliation fees and National Championship gamesretransmission fees, driven by annual contractual increases and contract renewals with MVPDs and virtual MVPDs, as well as 45% growth from our streaming services, including CBS All Accessand Showtime OTT, driven by subscriber growth. These increases were partially offset by 5% lower cable affiliate fees, mainly resulting from subscriber declines. Domestic affiliate revenues increased 4%, while international affiliate revenues decreased 6% from the prior
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
year driven by the unfavorable impact of the NCAA Division I Men’s Basketball Championship (“NCAA Tournament”), which are broadcastforeign exchange rate changes. Foreign exchange rate changes had an unfavorable impact of 1-percentage point on the CBS Television Network every other year through 2032 undertotal affiliate revenues comparison and 6-percentage points on the current agreements with the NCAA and Turner Broadcasting System, Inc. (“Turner”). The CBS Television Network’s upfront advertising sales (“Upfront”) for the 2016/2017 television broadcast season, which runs from the middle of September 2016 through the middle of September 2017, resulted in pricing increases compared with the prior broadcast season, which is expected to benefit advertisinginternational affiliate revenues during the 2016/2017 broadcast season (See page I-2 for a description of the Upfront market). However, overall advertising revenues for the Company will be dependent on ratings for its programming and market conditions, including demand in the scatter advertising market, which is when advertisers purchase the remaining advertising spots closer to the broadcast of the related programming.comparison.
Content Licensing
Content licensing and distribution
Content licensing and distribution revenues are principally comprised of fees from the licensing of internally producedexhibition rights for our internally-produced television programming;and film programming to television stations, cable networks, and subscription video-on-demand (“SVOD”) and free video-on-demand services; home entertainment revenues, which are derived from the sale and distribution of our content through DVDs and Blu-ray discs to wholesale and retail partners, as well as from the viewing of our content on a transactional basis through transactional video-on-demand (“TVOD”) and electronic sell-through services; fees from the use of our trademarks and brands for consumer products, recreation and live events; and fees from the distribution of third party programming; andthird-party programming. For 2019, content licensing revenues increased 5%, primarily reflecting higher revenues from the publishingdomestic licensing of our content, driven by the production of programming for third parties and distributionthe licensing of consumer books. For 2016, the 6% decreaseprogramming to SVOD providers. These increases were partially offset by a decline in content licensing and distribution revenues primarily reflected lower domestic television licensing revenues compared with 2015, which included the sales of NCIS,Elementary and CSI. A significant contributor to television licensing revenues in 2016 was the international licensing of five Star Trek series.revenues.
Content licensing and distribution revenue comparisons are impacted by fluctuations resultingRevenues from the timinglicensing of the availability of Company-owned television series for multiyear licensing agreements. Television license fee revenuesexhibition rights are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition. Unrecognized revenues attributable to license agreements for produced programming that is not yet available for exhibition, were $749 million and $847 million at December 31, 2016 and 2015, respectively. Astherefore, content licensing revenue comparisons are impacted by fluctuations resulting from the timing of the endavailability of 2016, the Company had approximately 500 episodes of scripted originalour programming that had not yet been made available in the secondary domestic marketplace (See page II-51 for a descriptionmultiyear licensing agreements.
Theatrical
Theatrical revenues are principally comprised of the secondary marketplace).
Total outstanding receivables attributable toworldwide theatrical distribution of films through audience ticket sales. For 2019, theatrical revenues recognized under licensing agreements at December 31, 2016decreased 26%, principally reflecting a difficult comparison against the prior year, as a result of the 2018 releases of Mission: Impossible - Fallout and 2015 were $3.82 billion and $3.83 billion, respectively. At December 31, 2016, the total amount due from these receivables was $1.63 billion in 2017, $1.03 billion in 2018, $595 millionA Quiet Place. Theatrical revenues in 2019 $349 millionbenefited from the releases of Rocketman, Gemini Man and Dora and the Lost City of Gold, as well as the continued success of the 2018 release, Bumblebee. Domestic theatrical revenues decreased 31% and international theatrical revenues decreased 23%.
Theatrical revenues may be affected by many factors, including domestic and international audience response, the number, timing and mix of releases and competitive offerings in 2020,any given period, consumer tastes and $216 millionconsumption habits and overall economic conditions, including discretionary spending. Revenues from theatrical film releases tend to be cyclical with increases during the summer.
Publishing
Publishing revenues are principally comprised of the domestic and international publishing and distribution of consumer books in 2021printed, digital and thereafter.audio formats. For 2019, publishing revenues decreased 1%, driven by lower print book sales, which were partially offset by higher sales from digital audio books.
Affiliate and subscription feesOther
Affiliate and subscription feesOther revenues are principally comprised of revenues received from MVPDs for carriagethe rental of the Company’s cable networks (“cable affiliate fees”)production facilities and digital revenues from search and e-commerce partners. For 2019, other revenues decreased 3%, as well as for authorizing the MVPDs’ carriage of the Company’s owned television stations (“retransmission fees”); fees received from television stations affiliated with the CBS Television Network (“station affiliation fees”); subscription fees for digital streaming services; and revenues received for the distribution of pay-per-view boxing events. For 2016, the 9% increase in affiliate and subscription fees reflects 35% growth in station affiliation fees and retransmission fees, andmainly reflecting lower revenues from the Company’s streaming subscription services, including CBS All Access and the Showtime digital streaming subscription offering. These increases were partially offset by the benefit to 2015 from Showtime Networks’ distributionrental of our production facilities as a result of the Floyd Mayweather/Manny Pacquiao boxing event, which was the highest grossing pay-per-view eventsale of all time.CBS Television City in January 2019.
Over the next few years, the Company expects to benefit from the renewal of several of its agreements with station affiliates and MVPDs as well as from agreements with new distributors of live television streaming offerings. In addition, the Company’s existing agreements with station affiliates and MVPDs include annual contractual increases. Together, these factors are expected to result in continued growth in affiliate and subscription fees over the next several years.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
International Revenues
International revenues primarily consist of television licensing revenues. The Company generated approximately 14% and 16% of its total revenues from international regions in 2016 and 2015, respectively.
|
| | | | | | | | | | | | | | | | | | | |
| | | | % of | | | | % of | |
Year Ended December 31, | | 2016 | | International | | 2015 | | International | |
United Kingdom | | $ | 279 |
| | | 15 | % | | | $ | 345 |
| | | 17 | % | | |
Other Europe | | 717 |
| | | 39 |
| | | 691 |
| | | 35 |
| | |
Canada | | 256 |
| | | 14 |
| | | 286 |
| | | 14 |
| | |
Asia | | 190 |
| | | 10 |
| | | 236 |
| | | 12 |
| | |
Other | | 407 |
| | | 22 |
| | | 446 |
| | | 22 |
| | |
Total International Revenues | | $ | 1,849 |
| | | 100 | % | | | $ | 2,004 |
| | | 100 | % | | |
Operating Expenses
| | | | | % of | | | | % of | | | | | | % of | | | | % of | | | |
Operating Expenses by Type | | | Operating | | | | Operating | | Increase/(Decrease) | | | | Operating | | | | Operating | | Increase/(Decrease) | |
Year Ended December 31, | 2016 | | Expenses | | 2015 | | Expenses | | $ | | % | | 2019 | | Expenses | | 2018 | | Expenses | | $ | | % | |
Production | | $ | 6,797 |
| | 39 | % | | $ | 6,483 |
| | 41 | % | | $ | 314 |
| | 5 | % | |
Programming | $ | 2,941 |
| | | 37 | % | | | $ | 2,892 |
| | | 37 | % | | | $ | 49 |
| | 2 | % | | 4,287 |
| | 25 |
| | 3,965 |
| | 25 |
| | 322 |
| | 8 |
| |
Production | 2,658 |
| | 34 |
| | 2,604 |
| | 33 |
| | 54 |
| | 2 |
| | |
Participation, distribution and royalty | 1,058 |
| | 13 |
| | 1,109 |
| | 14 |
| | (51 | ) | | (5 | ) | | 3,369 |
| | 20 |
| | 3,295 |
| | 21 |
| | 74 |
| | 2 |
| |
Programming charges | | 589 |
| | 3 |
| | 162 |
| | 1 |
| | 427 |
| | n/m |
| |
Other | 1,299 |
| | 16 |
| | 1,306 |
| | 16 |
| | (7 | ) | | (1 | ) | | 2,181 |
| | 13 |
| | 2,012 |
| | 12 |
| | 169 |
| | 8 |
| |
Total Operating Expenses | $ | 7,956 |
| | | 100 | % | | | $ | 7,911 |
| | 100 | % | | $ | 45 |
| | 1 | % | | $ | 17,223 |
| | | 100 | % | | | $ | 15,917 |
| | 100 | % | | $ | 1,306 |
| | 8 | % | |
Programming expenses reflect the amortization of acquired rights of programs exhibited on the television broadcast and cable networks, and television stations. For 2016, the 2% increase in programming expenses was primarily driven by increased sports programming costs associated with the broadcast of NFL games, including Super Bowl 50, which was broadcast by CBS in 2016, partially offset by three fewer Thursday Night Football games than 2015. This increase was partially offset by costs in 2015 associated with Showtime Networks’ distribution of the Floyd Mayweather/Manny Pacquiao pay-per-view boxing event and lower costs for acquired television series as a result of a shift to a higher mix of internally developed television series.n/m - not meaningful
Production
Production expenses reflect the amortization of direct costs of internally developedinternally-produced television and theatrical film content as well as other television production costs, including on-air talent. For 2016,2019, the 2%5% increase in production expenses reflected an increased investment in internally developedcontent, including a higher number of series produced for distribution on multiple platforms, including our streaming services and cable networks, as well as higher amortization of television series,production costs associated with the increase in content licensing revenues. These increases were partially offset by lower expensesamortization of feature film costs, driven by costs in 2018 associated with Mission: Impossible - Fallout.
Programming
Programming expenses reflect the decreaseamortization of acquired programs exhibited on our television broadcast networks, cable networks and television stations. For 2019, the 8% increase in television licensing revenues.programming expenses was driven by higher sports programming costs, mainly from CBS’ broadcasts of Super Bowl LIII and the national semifinals and championship game of the NCAA Tournament in 2019, which were not broadcast by CBS in 2018, and programming for Pluto TV, which we acquired in March 2019. These increases were partially offset by lower amortization of acquired programming for our cable networks.
Participation, Distribution and Royalty
Participation, distribution and royalty costs primarily include participation and residual expenses for television and film programming, royalty costs for Publishingpublishing content and other distribution expenses incurred with respect to film and television content, such as print and advertising. For 2016,2019, the 5%decrease2%increase in participation, distribution and royalty costs primarily reflected lower participations associated with lower licensing sales of the CSI franchise.
Other operating expenses primarily include compensation andwas driven by higher participation costs associated with book sales,the increase in content licensing revenues.
Programming Charges
During 2019, in connection with the Merger, we implemented management changes across the organization. In connection with these changes, we performed an evaluation of our programming portfolio across all of our businesses, including printingan assessment of the optimal use of our programming in the marketplace, which resulted in the identification of programs not aligned with management’s strategy. As a result, we recorded programming charges of $589 million principally reflecting accelerated amortization associated with changes in the expected monetization of certain programs, and warehousing. decisions to cease airing, alter future airing patterns or not renew certain programs.
In addition, during 2018, in connection with management changes, we recorded programming charges of $162 million relating to changes to our programming strategy, including at CBS Films, which shifted its focus from theatrical films to developing content for our streaming services, as well as at our Cable Networks segment where we ceased the use of certain programming.
Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)
Other
Other operating expenses primarily include compensation and costs associated with book sales, including printing and warehousing. For 2019, the 8% increase in other operating expenses mainly reflected higher costs associated with growth and expansion of our streaming services.
Selling, General and Administrative Expenses
| | | | | % of | | | | % of | | Increase/(Decrease) | | | | | | Increase/(Decrease) | |
Year Ended December 31, | 2016 | | Revenues | | 2015 | | Revenues | | $ | | % | | 2019 | | 2018 | | $ | | % | |
Selling, general and administrative expenses | $ | 2,124 |
| | | 16 | % | | | $ | 1,961 |
| | | 15 | % | | | $ | 163 |
| | 8 | % | | $ | 5,647 |
| | $ | 5,206 |
| | $ | 441 |
| | 8 | % | |
Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy, professional service fees and back office support.support, including employee compensation. The 8% increase in SG&A primarily reflects incrementalexpenses was driven by higher advertising and marketing costs, reflecting an increase in the number of series premieres and employee-related costs to supportassociated with our streaming services, as well as the Company’s growth initiatives,inclusion of Pluto TV and higher pensionPop TV since their acquisitions in the first quarter of 2019. These increases were partially offset by cost savings associated with restructuring activities and incentive compensation costs.cost savings resulting from changes in senior management at CBS in 2018.