Paramount Skydance Corporation Class B Common Stock (PSKY) Q1 2013 Earnings Report, Transcript and Summary

Adam Townsend - Executive Vice President of Investor Relations Sumner M. Redstone - Founder and Executive Chairman Leslie Moonves - Chief Executive Officer, President and Director Joseph R. Ianniello - Chief Financial Officer and Executive Vice President

Benjamin Swinburne - Morgan Stanley, Research Division Jessica Reif Cohen - BofA Merrill Lynch, Research Division David Bank - RBC Capital Markets, LLC, Research Division Anthony J. DiClemente - Barclays Capital, Research Division Michael C. Morris - Davenport & Company, LLC, Research Division Douglas D. Mitchelson - Deutsche Bank AG, Research Division Hamilton Faber - Atlantic Equities LLP John Janedis - UBS Investment Bank, Research Division Alexia S. Quadrani - JP Morgan Chase & Co, Research Division David W. Miller - B. Riley Caris, Research Division Alan S. Gould - Evercore Partners Inc., Research Division William G. Bird - Lazard Capital Markets LLC, Research Division Tim Nollen - Macquarie Research Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Good day, everyone, and welcome to the CBS Corporation First Quarter 2013 Earnings Release Teleconference. Today's call is being recorded. And at this time, I'd like to turn the conference over to the Executive Vice President of Investor Relations, Mr. Adam Townsend. Please go ahead, sir.

Okay, thank you. Good afternoon, everyone, and welcome to our first quarter 2013 earnings call. Joining me for today's discussion are Sumner Redstone, our Executive Chairman; Leslie Moonves, President and CEO; and Joe Ianniello, Executive Vice President and CFO. Sumner will have opening remarks, and will turn the call over to Les and Joe, who will then discuss the strategic and financial results. We will then open the call up to questions. Please note that statements on this conference call related to matters which are not historical facts are forward-looking statements, which involve risks and uncertainties which could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's news releases and securities filings. The webcast of this call and the earnings release related to today's presentation can be found on the Investors section of our website at cbscorporation.com. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website. And with that, it's now my pleasure to turn the call over to Sumner.

Thank you, Adam. Good afternoon, everyone. CBS had begun 2013 right where it left off in 2012, and you'll hear today our world-class content is driving our success and is getting more value growth day-by-day. With Les and his talented management team, I'm confident that CBS will continue to grow for many, many years to come. Now to tell you about it is CBS' President and CEO, my good friend and colleague, actually, a superstar, Les Moonves.

Thank you very much, Sumner. Good afternoon, everybody, and thanks for joining us once again. I'm extremely pleased to tell you that CBS has delivered the most successful quarter in the history of our company. For the first time ever, in any quarter, revenue exceeded $4 billion, up 6% from a year ago. OIBDA was $916 million, up 15%. Operating income was $800 million, up 18%, and EPS was $0.73, up 24%. Each of these financial metrics is the best we've ever posted in a single quarter, reflecting both the strength of our base businesses and the ongoing success of our strategy to grow the company's steady and recurring revenue. It's very evident that CBS' world-class content is becoming more and more valuable all the time. Advertising grew strongly during the quarter, not only driven by the success of the Super Bowl, but also the entire CBS Television Network, which will end this season #1 across all key demographics. Plus our fast-growing, non-advertising revenue sources were up significantly with double-digit increases in retrans, reverse comp and streaming. And just as we told you would be the case, 2013 is shaping up to be even better than 2012, which was a record year for us. The opportunities to monetize our programming continue to multiply, and the initiatives underway at our Outdoor business will make our company singularly focused on capitalizing on our great future as a content company. To show you how confident we are in that future, we spent nearly $1.3 billion on share buybacks during the first quarter. That puts us on track to repurchase $2.2 billion in 2013, an acceleration of more than $1 billion from last year. Going forward, you can be sure that returning capital to our shareholders will remain a key priority for us. You'll hear more from us on this in the coming months. As usual, I'm going to give you some highlights about each of our businesses before turning it over to Joe to discuss our very healthy financial picture. And after that, we'll be happy to take your questions. Let's start with our largest segment, Entertainment. As you all know, the world of consuming content is changing rapidly. Technology is enhancing the viewer experience, and it's providing us with more and more opportunities to grow our businesses all the time. He who has the best content has the best options. And as you can see from today's results, we're playing our hand very well in this new age. You can continue to count on us to be very strategic in this regard going forward. At the center of all this is the programming in the CBS Television Network, which had an exceptional first quarter. We were led by the phenomenal performance of our primetime schedule, and on top of that, broadcast several of the biggest events in media. These included the Super Bowl, the AFC Championship Game, the GRAMMYs and the NCAA Men's Basketball tournament, which, by the way, was up 10% in viewers, the biggest audience in 8 years. Plus the championship game, which took place in the second quarter, had the best ratings in nearly 2 decades. More recently, our weekend coverage of The Masters Golf Tournament attracted more than 44 million viewers, the second-largest audience in 12 years. And this year's Academy of Country Music Awards posted its largest ratings in 15 years. For the first time, it even topped the competing country music awards show that airs on another network. So clearly, no matter how many other choices are out there, big event television is pulling in audiences like never before. And, of course, the CBS Television Network success is much more broad-based than just its tentpole events. We have strength every night of the week. As I said, CBS is set to end the season as the most-watched network for the 10th time in 11 years. We are winning in households. We are winning in viewers. We are winning in adults 25 to 54, and yes, we are also winning in adults 18 to 49 for the first time since the '91-'92 season. When this season ends, we'll have the #1 show, NCIS; the #1 comedy, Big Bang Theory; the #1 new show, Elementary; and the #1 news program, 60 Minutes. And we'll have finished the season up year-over-year. Besides CBS, there's only one other network can make this claim, and we're happy to say it's the CW, which, of course, we own 50%. CBS' successful run will continue for a long, long time. 40% of our shows on our primetime entertainment schedule are 3 years old or less, and we'll be adding several strong rookies this fall. With so few holes to fill, the bar to get on to our schedule is, once again, set very high, and we can be much more selective than our competitors. Having now personally seen most of our pilots, I can assure you that next season is going to be another terrific year for the CBS Television Network. In fact, we are in such a strong position that as we evaluate our development, we're actually looking beyond the fall and already beginning to program for 2014. In the meantime, we're going to enter this year's Upfront marketplace in a very enviable position. Demand for inventory is even stronger than it was at this same time last year, with scatter pricing up double digits over last year's Upfront pricing. As happens every single year, there's a lot of noise out there. But one thing is for sure, CBS will be coming to market with a schedule that has consistently earned the trust of our advertisers. We'll continue to earn premium pricing for the simple reason that we pull together mass audiences like no one else can. Out of the 5 broadcast networks, we are #1. Out of the 500 cable channels, we're #1. And out of 5 billion websites, we're #1 in viewers. So unless there's a network on Mars we're not aware of, we're the #1 watched network in the entire universe. Because of all of this, we will be very aggressive going into the Upfront. I can say with absolute confidence that we'll once again lead the marketplace in both pricing and volume. The pricing increases will look a lot like they did last year from high-single to low-double digits. Yes, folks. There you have it. The numbers you have been waiting for. Needless to say, given our #1 status, our ongoing track record and the demand we're seeing in scatter right now, I'm extremely bullish about the Upfront marketplace. So we're feeling very good about our ability to grow the company's advertising revenue and, at the same time, our success in growing the company's recurring non-advertising revenue is a terrific story as well. As we told you on our last call, we recently renewed and expanded our agreement with Amazon, and we continue to benefit very nicely from our Netflix deal as well. These 2 deals led to strong double-digit growth in streaming revenues during the quarter. As we look to the future, our relationships with Netflix and Amazon will remain very strong, and we're confident they will continue to be extended beyond their current terms. Plus, in addition to these 2 companies, there are many other online distribution services entering this space. And there's one common thing they all need: the best content. With people consuming more and more video all the time, the key to success is pretty simple, if you keep creating the best content, you'll keep getting paid better and better as technology improves. The power of great content is also fueling our success in the syndication marketplace, which continues to grow and evolve. Our domestic syndication sale of NCIS: Los Angeles will be hitting the books later this year, and we announced an innovative multiplatform distribution deal for The Good Wife, selling it simultaneously to broadcast television, cable television and multiple streaming partners. Looking ahead, we will continue to maximize the value for each of our programming assets, taking into account all possible platforms. As we do, we have Hawaii Five-0 and Blue Bloods coming up for domestic syndication in 2014, plus, we have a steady stream of owned hits from Showtime, including Dexter, Californication and Nurse Jackie. And just today, our daytime lineup received 49 Emmy nominations, the most of any network. We also had a phenomenal quarter in terms of retrans and reverse comp, reflecting the better terms we continue to receive for our content. It certainly helps in negotiations to have the NFL, the NCAA, NCIS, Big Bang Theory and 60 Minutes in our arsenal. And we remain on target to hit our goal of $1 billion in retrans and reverse comp by 2017, if not before. Meanwhile, the performance of CBS Interactive continues to be very strong, its financial results in the first quarter were the best we've seen with 22% overall revenue growth. This includes CNET, which was up 24%; China, which was up 35%; and overall video revenue, which was up 76%. In addition, we launched our new CBS streaming app during the quarter. Within 24 hours, it was the #1 free iPad app and it crossed 1 million downloads in a little more than 2 weeks. As you know, we are windowing the content to be available 8 days after airing, and we are monetizing all of the incremental viewing. In our Cable Network segment, our continued success at original programming is why we are now approaching 23 million Showtime subscribers with plenty of room to grow. We're also very excited about our 2 new Showtime series that are on the way, both of which we have ownership in. First, Ray Donovan will debut this summer after the eighth season premiere of Dexter, and then Masters of Sex will debut in the fall after Homeland. Obviously, the world is waiting with great anticipation for another season of Homeland, and we are as well. In addition, Showtime recently signed a deal to bring Floyd Mayweather, along with some of the most recognized names in boxing, over from HBO. Our first Mayweather fight is this Saturday night in Las Vegas, and we're bringing the full resources of CBS to help promote it. We're looking forward to boxing, and sports in general, helping to drive Showtime's growth going forward. Also during the quarter, we took another strategic step to increase our profile in Cable Entertainment program. We acquired a 50% stake in the TV Guide Network, which we will operate through a joint venture with a great partner in Lionsgate. The TV Guide Network is in 80 million homes, and we've already begun to improve its programming. This partnership represents significant upside for us at an extremely attractive price. And together with CBS Sports Network, the Smithsonian Channel, as well as our minority interest in AXS, we feel very good about our growth prospect in cable television. In Publishing, our run of content success continues. Simon & Schuster had 86 New York Times bestsellers during the quarter, with 8 of them reaching #1. Digital sales now represent 30% of our Publishing revenue with some of our major bestsellers approaching 50%. Once again, the shift to digital publishing has resulted in a more profitable business as we turned in double-digit profit growth during the quarter. In addition, our Publishing business continues to be an important part of our overall content strategy, serving as the impetus for programming across other divisions of our company. For example, this summer CBS will broadcast a miniseries based on the Stephen King novel, Under the Dome, and then Simon & Schuster will rerelease the title once again. In Local Broadcasting, our TV stations are off to a great start this year. Our CBS stations in the top 3 [ph] market, each own the biggest local revenue share we have on record, going back to even before we broadcast the Nagano Olympics in the first quarter of 1998. And during the February sweep, every single one of our CBS-owned stations was #1 in primetime, with WCBS in New York the #1 watched television station in the entire country. The performance of our local news department has been exceptional. I'm particularly proud of the way WBZ in Boston teamed up with CBS News to keep America informed during the horrific events of last month. WBZ's wall-to-wall coverage, once again proved the enduring vitality of local television. In Radio, we continue to build on the terrific debut of the CBS Sports Radio network. We've added 20 affiliates to our roster since our last call. In addition, CBS Radio played a major role in this year's success of the Academy of Country Music Awards. This is a show that perfectly complements our radio audiences, as evidenced by all the artists who mentioned the power of radio in their acceptance speeches. And finally, a brief update on Outdoor. We've taken the first step to convert our Outdoor Americas business into a REIT by making our submission to the IRS. And I'm pleased to tell you that the sale of our operations in Europe and Asia is going very well with a number of significant players making bids. Joe will provide more details on this shortly, but we feel very good about the progress we are making on both of these fronts. So clearly, this is a remarkable quarter. I repeat. In all our key metrics, we turned in the highest numbers in our country -- company's history, and it continues to be a tremendous time to be an investor in CBS. Our base businesses are solid, and as the company focused on making the best content, we're entering an era of opportunity unlike anything we have ever seen. Specifically, there are a number of forces at work that will drive earnings in 2013 and beyond. First, as I mentioned, we are certain it will be a terrific Upfront for CBS with very healthy growth in pricing and volumes. Next, our non-advertising revenue sources are set to grow significantly. No one has more content that is in higher demand than CBS. And with new companies coming into the streaming market all the time, we will continue to generate incremental revenue for our programming. Retrans and reverse comp are also set to grow at a fast clip, and in syndication, we have a robust pipeline. Plus we're moving forward with our strategic initiatives at CBS Outdoor, and of course continuing, through share buybacks and dividends, to return even more value to our shareholders. So I'm sure you can see why we're so excited about our future. And with that, I will turn it over to our terrific CFO, Joe Ianniello.

Thanks, Les, and good afternoon, everyone. Today, I'll provide some more details about our first quarter results, then I'll discuss what we see ahead for the rest of 2013. Let me start with our first quarter results. As you've heard, we delivered the strongest quarter, ever, for CBS. Advertising posted solid growth, and we had even bigger gains from our key recurring revenue sources. As a result, we are more confident than ever that we have the right strategy in place to continue our transformation and drive earnings growth in the years ahead. As Les highlighted, our total revenue for the quarter was up 6% to $4 billion. Advertising was up a very solid 8%, more on that in a bit. Content, licensing and distribution revenue was down 1%, which can be attributed to the timing of 2 items during last year's first quarter, when we had the theatrical release of The Woman in Black and the syndication sale of CSI: Miami. However, we benefited during the quarter from significantly higher streaming revenue, which continues to grow steadily. And affiliate and subscription fee revenue increased 14% with strong gains in cable, retrans and reverse compensation. These revenue increases led to OIBDA of $916 million, up 15%, and our OIBDA margin expanded nearly 200 basis points to just under 23%. Net income from continuing operations rose 18%, and EPS came in at $0.73, up 24%. Let's turn to our operating segments. At Entertainment, revenue for the first quarter was up 10% to $2.5 billion, driven by advertising as well as higher revenue from retrans, reverse comp and streaming. Network advertising was up 14%, fueled by the Super Bowl. Our underlying base network advertising business remains steady, with low single-digit revenue growth for the quarter. Entertainment OIBDA of $480 million increased 17% for the quarter, and the OIBDA margin expanded 120 basis points to 19%, helped in part by our 2012 restructuring activities. At our Cable segment, revenue for the first quarter was up 6% to $478 million, with increases across all types of distributors: traditional cable, DBS and telco. Cable OIBDA of $231 million increased 11%, and our cable OIBDA margin expanded 210 basis points to 48%. Turning to Publishing. The story remains very consistent from prior quarters. We continue to achieve higher profits from the shift to digital. Ebooks now represents nearly 1/3 of our total sales. For the first quarter, Publishing OIBDA was up 20%. In Local Broadcasting, first quarter revenue of $638 million was up 3%. TV stations revenue rose 5%, helped by the strong Super Bowl sales, which were partially offset by one less major market sports contract. And Radio revenue was comparable to last year with the top 10 markets up 2%. Local Broadcasting OIBDA of $199 million was up 16%, demonstrating our continued focus on cost controls, and the OIBDA margin expanded 370 basis points to 31%. That number is especially impressive given that this is a non-political year. In Outdoor Americas, revenue for the quarter was down $7 million to $281 million, primarily due to the non-renewal of several low-margin contracts. U.S. billboards continued to post steady gains, up 2% for the quarter. And Outdoor OIBDA was down $2 million to $74 million. Turning to cash flow and the balance sheet. Free cash flow for the quarter came in at $576 million, representing a 63% flow-through from OIBDA. During the quarter, we retired 24 million shares of our stock. This includes 6 million shares that we repurchased in the open market for $262 million and 18 million shares that were delivered as part of our $1 billion ASR. As we indicated in today's earnings release, we expect another 4-plus million shares to be delivered during the second quarter, which will complete our current ASR transaction. So we started the second quarter with 627 million diluted shares, which is 12 million lower than the weighted average shares for Q1. We plan to continue with our ongoing share repurchase program with our target of $2.2 billion for the year. We exited the quarter with $409 million of cash on hand. We also extended our $2 billion credit facility through March of 2018 at more favorable rates. In addition, during early April, we made a $150 million discretionary contribution to our pension plan, and we will receive a full tax deduction on that amount this year. Now let me give you a few observations of what's ahead for the rest of 2013. For the second quarter, all of our local businesses, TV, Radio and Outdoor, are pacing to be up low-single digits. On national level, as Les said, the scatter demand going into the Upfront is very strong, and you'll start to see the benefit of our Upfront pricing gains in Q4 of this year. I'd like to give you a quick update on our Outdoor transactions as well. The REIT convergence of our Americas business is on track. As you've heard, we submitted our private letter ruling request with the IRS during the first quarter. We are now completing the standalone audit of the business and plan to file a registration statement with the SEC this quarter. Turning to Outdoor. In Europe, as Les said, we received a number of bids, and we are currently negotiating with several parties. The sale process is moving along as planned, and we expect to announce a definitive agreement in the coming weeks. In summary, 2013 is off to a great start, and we are on our way to an even better year than 2012, which everyone knows was a record year for us. Our first quarter results prove that the strategic steps we've been taking continue to pay off. As we pursue our content-driven focus, the opportunities to monetize our programming will grow even further, resulting in an even more predictable earnings base. So we have a very bright future ahead, and we look forward to discussing our results with you on our next call. And with that, Tom, we can open the line for questions.

[Operator Instructions] We'll take our first question from Ben Swinburne with Morgan Stanley.

Joe, can I ask 2 questions just on timing on the Outdoor front? You have an expectation for when you think you can actually move forward with an IPO? Is that a 2013 or 2014 event? I know you said you are in the process of pulling the proxy together. And also, second, what's your expectation on when you'll hear back from the IRS on your filing? And then I have a follow up for Les.

Sure. Okay, Ben. Look, on the timing, we said we would file with the IRS in the first quarter, and we did that, I believe, March 15. So traditionally, the IRS takes 6 or so months. So obviously, they have to go through their process, and we'll respond to any questions they have during that process. On the SEC front, we'll file that registration statement this quarter, and we'll go through rounds of questioning that they have on our filing. So again, the anticipation is by the end of the year we're through and clear that, and we're ready for the IPO. Could it happen a little sooner or little later, I guess. Sure. That's a little bit of out of our control. But we're staying on track for that, and we're very optimistic about that.

Great. And Les, could you talk a little bit about your plans for the network this summer? I know your -- obviously, have the big show you've co-financed or co-produced with Amazon. There's a lot of focus on sort of fragmentation and time shifting and how that's impacting programming decisions. Are you looking to put more hours of content on the air, particularly over the summer? And do you think that more serialized makes more sense just given what we've seen about the SVOD players or am I over extrapolating on Under the Dome there?

Number one, it's not a co-production with Amazon. We have the deal where they're going to air it 3 or 4 days after it's on the air at the network. So it is a -- something that we have never done before. And during the summer months, we were looking for the ability to put on more original programming because things were getting a little quieter in the summer, and we had to look for new models to do that. And because of the Amazon deal and, obviously, the strong international syndication marketplace, we're able to put on a big budgeted, 12-episode miniseries like Under the Dome on there. In addition, we have some more reality programming than we normally do, and Big Brother comes back every year, which it's done extremely well for 10 years. So there will be more activity during the summer and perhaps, even during the year. I think what's happened with the SVOD partners, we've had a lot more freedom to put on more original program. Under the Dome is serialized in nature, and that sort of lends itself to more of the SVOD, and I think that becomes a part of it. But certainly not at the exclusion of the close-ended shows which still sell better in syndication.

The next question comes from Jessica Reif-Cohen with Bank of America Merrill Lynch.

I guess these are for Les, 2 questions. One, on your new schedule, how much of the content would you expect to own given the amazing continuing rise in content values?

Right now, we own about 70% of our schedule. Right now, it's too early to tell. As I said, we're still in the pilot process, and we're beginning our scheduling meetings in a few days. So I don't know which of our shows is going to get on the air. I can tell you over 50% of our pilots are wholly-owned. So it will be a combination of some of the outside stuff but also some of the things we own, and I anticipate there'll be some of both.

And I guess a follow up and then my other question. Of the other 50% of the pilots, do you have a partial interest? And then my other question is really the timing of the syndicated shows from Showtime, would that be 2015?

In terms of the other -- the ones that are outside, some we do own an interest in and a couple of them we don't. Warner Bros. obviously, we don't -- they don't share, in terms of the ownership. But some of the other studios do. So it's a mixed bag, as it always is. But rest assured when the schedule's announced in a few weeks, there'll be a large, large percentage of CBS-owned shows. In terms of Showtime, obviously, Dexter is going to finish its final year. It's been announced and it begins in a few weeks. And that can go into syndication soon after that, and the other 2 are in '14 and '15.

Our next question comes from David Bank with RBC Capital Markets.

Two questions. The first is could you talk a little bit about the investment in Syncbak and how that fits into CBS and how you think about how you could use the technology. And the second question is, Les, I think, at the Milken Institute, you kind of made some commentary about the potential with which you or any other broadcast network, presumably, could kind of transform into a cable network. Do you really think, on a practical level, would it be executable on a fairly rapid timeframe?

Joe, why don't you do Syncbak.

Okay, David, on Syncbak, I think, what we like about the investment, A, it preserves the current ecosystem and it protects the affiliates very well, can be Nielsen measured, and so we're very flexible with that. So if consumers want to consume the content that way, we want to make sure that we have an ability to deliver it that way. So I think, again, it was a very smart and strategic investment.

And, David, on the cable thing, number one, I don't think it'll ever come to that, because I think we're going to win the case legally and the moving to cable is a secondary resort. Once again, 85% of our viewers are receiving the CBS signal through cable or satellite, or any other MVPD. So we're only talking about that final 10% or 15%, and it would only be in markets where that -- let's say, the court said, aerial could exist. And so it's nothing we think that is going to happen. But if it does, it's fairly easy to do it, and frankly, it wouldn't change the affiliation agreements because what we would put on would be our local stations, just as they are now. We would just exclude broadcast, and as I said, I am very doubtful that, that happens.

Our next question comes from Anthony DiClemente with Barclays.

I have 2 questions. First, if could you could please provide a little more detail on your agreement with Netflix, just in terms of where does it stand now? There's talk they're shifting their strategy more to exclusive shows, and just wondering if -- what is the nature of your deal? Has the nature of the content that you have on Netflix changed? Do you have the opportunity to re-up, renegotiate or exercise a put option for '13 or for '14? Just want to kind of clarify that. And then my second question is, it does sound, Les, like you have a few more pilots this year than last year. You're talking about owned episodes on the network. Just wondering how that impacts programming expenses through the model? Should we expect a bit of a bump in terms of programming in the 2Q? And then how should we think about just general trajectory of programming expenses going into next year as well?

I'll do the second one first, and then Joe, why don't you talk about Netflix. Yes, you know what, Anthony, we did a few more comedy pilots. The dramas were about the same. We did a few extra comedy pilots next year. And as I said, where the good news about the situation with our schedule is, right now there's only one apparent opening for a comedy. But knowing that a year from now, How I Met Your Mother, this is its final year, it's good to be able to be -- plan for that and put on a few more mid-season shows. And I can tell you right now, we certainly have the goods to do that. In terms of programming costs going up, obviously, Under the Dome is something we didn't do a year ago. But we wouldn't have done Under the Dome unless we knew we had it backed up 100% by the Amazon deal and combining Amazon with the international syndication deal makes Under the Dome profitable immediately. So you may see more original programming on during the schedule, during the year. But only if it's backed up by the ability to monetize it elsewhere. So there may be a higher programming cost, but on top of that there'll be significantly more revenue and more profits.

That's helpful.

And Anthony, on Netflix, look, our Netflix relationship is very, very strong. We're in constant dialogue with them all the time. So our agreement today currently provide -- we have some flexibility, obviously, going out through this year and next year. So again, I think, it's again, it's a relationship. We continue to build it, they're quite happy with the content we're providing them. And as they evolve, we're going to kind of continue to be by their side.

Are your dollars from Netflix higher this year than last year? And will it be higher next year than this year? Or is that something you don't feel comfortable talking about?

Well, I don't think we give any sort of guidance on that, and specifically with an individual distributor. But I think what we did say was 2013 streaming revenue will exceed 2012. That we can say today, for sure. And I think Les said in his remarks, there's a lot of other providers talking about how to distribute content and, again, I think as the marketplace evolves, we're right there.

Yes, and just to amplify on that, the relationship with Netflix, yes, we have a big overall deal with them, and now those results come in, they see some of our content is working better than others, and there's some shift. In other words, we're giving them stuff and replacing stuff, and there are certain things that will come off our schedule that we do have the ability to make a put towards. But once again, as long as there is a consistent dialogue about this deal and ongoing deals, the relationship remains strong, and we anticipate that it will remain strong for many years to come.

We'll take our next question from Michael Morris with Davenport & Company. Michael C. Morris - Davenport & Company, LLC, Research Division: Two questions. First, is on the relationship between ratings and advertising revenue. You said that your base ad biz was up low-single digits, ratings kind of across-the-board are down. So my question is, not just for you, but for broadcast and some cable networks as well, but my question is, it's clearly a pricing strength issue. Are you seeing the pricing strength across-the-board for all of your different products or different dayparts? Or are events becoming increasingly important? Is primetime increasingly important? Where's the strength there? And then I have a follow up.

I think the answer is, all of the above. Obviously, because we are the leading network in all demographics, our scatter pricing and our demand is significantly higher than anybody else's. So there is, as I said, more demand than there was exactly a year ago in the scatter marketplace. At the same time, the pricing for the big events has gone up substantially. The GRAMMYs pricing went up a lot. The ACM's pricing went up a lot. The football pricing went up a lot and it will remain that way. As much as people continue to want to say "network is failing," it isn't. It isn't. The Super Bowl prices keep going up, a couple of hundred thousand dollars for a 30-second spot. The pricing for the GRAMMYs goes up, and the pricing for all of our primetime shows continues to go up and scatter, and it'll be up, as I've said, quite a bit in the next Upfront. Michael C. Morris - Davenport & Company, LLC, Research Division: Does the pricing for the events, the growth there, is that exceeding the pricing in your primetime lineup?

Is exceeding, oh, that's...they're both up a lot.

Yes, it's close. It's close. It really just depends, Mike. There's no trend there. It's -- the audience and the masses, it's going to deserve that premium. Michael C. Morris - Davenport & Company, LLC, Research Division: Okay, okay. And then just on the television studio, I mean, it's a great asset and growing in value. You look at the ability to perhaps start populating TV Guide Network and some other things. How much more capacity do you have with your existing television production business before you perhaps need to make a more significant expenditure acquisition to grow your capacity there?

Our executive team, I'm sure, could do 10 more series, if they needed to. We're doing a series for Turner for the first time, a 13-episode series for Turner Network. So they have a great deal of capacity. It's not about the studio being able to do it, it's about getting the right producers and their staffs to be able to do it. So I think that there's a great upside in the CBS production group. People talk about Netflix doing original programming. We're talking to them about producing for them. So the great news is, we can produce for anybody, and we've got a lot more capacity.

We'll go next to Doug Mitchelson with Deutsche Bank.

So, some of your broadcast peers have been seeing scatter pricing spiking higher in recent weeks. Have you seen that? And is that driven by a lack of inventory, due to make goods, or due to increased advertising demand in the broadcast ad marketplace do you think?

Look, there clearly is -- some of the other networks that are a little bit more ratings challenged than we are, are having a bit more trouble. So when that happens obviously, people want to be with us, and I think there's definite demand. And I think there's more visibility than now than there was a few months ago. So it's good to be in first place and having -- as we end the season, people coming onboard to join us.

Would you look at sort of 2Q scatter pricing, and you look at 1Q scatter pricing, have you seen an improvement or did it just stay at that strong level?

I would say it's fairly stable from Q1 to Q2.

Yes, I calculated up double digits to low teens, Doug, and again that's pretty steady. And the good news is, the demand is broad-based. It's not one category driving it. So it's coming pretty much across-the-board. So that's a real positive sign for us.

Well Les, I think I could almost hear the collective groan of the entire agency industry when you indicated an expectation for high-single to low-double digit upfront price increases.

Well, Doug, if you've been reading, everybody's complaining that I haven't come out with my double-digit projections yet. I didn't -- because I've done it 2 years in a row. I've read at least 3 stories which are saying the networks aren't bullish because Moonves hasn't said double digits. So I have said double digits the last 2 years. Two years ago, we were up 12% to 13%. Last year, we were up around 9%. So I was slightly off. But if you average the 2, I certainly was right and I'm confident again. Look, as I said, there's a lot of noise this time of year, but we are pretty confident in the hand we're playing.

Are you including the 3% or so benefit of switching to C7 from C3 in that number?

No, not yet. Look, right now, we're going to be upfront, assuming most of it's could be C3 but I can tell you within a year, I think it's going to be all converted to C7.

I think it's fair to say. So 7% isn't in your high-single to low-double digit range, right?

Correct.

Our next question comes from John Janedis with UBS.

Les, you mentioned new streaming entrants. Do you expect those to be a 2013 event? And then separately, the TV Guide Network deal seems like a bit of a steal for you, can you talk about how you're going to position the programming, and over time is the expectation that that's going to be maybe like a top 25 network?

The first question, I would think some of it may be '13. It's '13 or '14. Do you agree, Joe?

Yes, it's not an immediate launch, but again, John, if you're looking for just driving of the numbers, just think '14, '15, really, but obviously, there are partners out there talking about a fall launch.

Yes. And the TV Guide Network, you're absolutely right. We felt we've got an unbelievable value with this thing and we consider Lionsgate a terrific partner there. A great content company, as are we in different areas, and we have a very close relationship with them. And when they came to us and said, "Look, this is the ballpark that the other half is going to be going in, we would love you to be our partner." There are, obviously, very simple things that CBS automatically can do. Like place some of our library product there, add our marketing team to what's going on, do extended original programming, as part of Entertainment Tonight or OMG! Insider, doing the red carpets on all these award shows. So there's a lot of low hanging fruit that we are already taking advantage of, and having a base of 80 million subs makes us a very, very attractive place to be. So we're having a lot of fun, and we really excited about the future of it.

And we'll go next to Alexia Quadrani with JPMorgan. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: Just to circle back on your comments on the network advertising revenue. I think you said up low-single digits without -- was it without all the tentpole events or is it without the -- just the Super Bowl? I'm just trying to get a good sense of...

That's underlying. Basically stripping out kind of all of the onetime changes. We have the Super Bowl, but the NCAA Final Four went into the second quarter. So really, Alexia, what we tried to give you is kind of like the underlying base business. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: And then any color on how daypart -- you mentioned the Emmy nominations are great. I guess any color on how we should think about the growth in daypart?

Obviously, the biggest strength is primetime, but daytime is growing also. We have 5 good shows and, once again, it's a much more profitable daypart than it was even 2 or 3 years ago because we've replaced the high-priced soap operas with, obviously, a talk show and a game show. In addition, our ratings in news have gone up substantially. The morning, which is the main revenue place, we're up over 20% year-to-year in the morning, and that's adding revenue quite a bit. The evening news also is up substantially. So it's a growth area. And I would say late night is sort of flat with a year ago and, obviously, interesting things going on in that daypart. But may I say, I think, we've got the best guy in late night, and stability is a good thing here.

David Miller with B. Riley.

Following up on David Bank's question. Obviously, Aereo is getting a lot of press of late, probably more press than it deserves, considering that they are, in fact, pirating your signal, which I'm sure you guys would agree with that. But Les or Joe, if, for any reason, you guys were able to come up with an agreement with them, or retransmission, and they were willing to pay, does that at all change the scope of your deal with Syncbak because, correct me if I'm wrong, the Syncbak deal is a defensive mechanism, of course, against Aereo, but it's more or less the same thing as Aereo, functionally, is it not?

David, I'll start and I'll let Joe finish. Aereo really has gotten way too much attention. As I said yesterday at Milken, we're not losing sleep over it. It's sort of an insignificant player that has a couple of thousand subs, and we think, ultimately, that it goes away. And we agree with what you just said. They are pirating our signal. Would we look at it differently if they came to us as a system, an online system, that wanted to take our signal and pay for it? Perhaps. And Syncbak, Joe, is...

David, here's what I'd tell you, Syncbak was not in response to Aereo. We've been talking with Syncbak for quite a number of years, actually. So this technology wasn't developed overnight. So we're working there. If the consumer demand is -- this is the way consumers want it, obviously, we're going to have a business model that satisfies that demand. So it was really just that simple.

We'll go next to Alan Gould with Evercore Partners.

I've got 2 questions. One, I hate to beat up -- beat on Aereo again, but is there any timing for a lawsuit on Aereo? And the second one is, there seem to be measurement issues with TV. The industry and CBS, excluding the Super Bowl, are down in the teens in terms of Nielsen 18 to 49 ratings. So even if you're up high-single digits, low-double digits, I mean, how are the advertisers going to work through the Nielsen measurement issues?

Number one, regarding Aereo, if they put up another signal, we'll sue them again. We won in California. We lost in New York. They say they're going to go to Boston, and we'll be in Boston, and we'll follow it. Once again, it's not a major concern for us. In terms of the advertising, number one, the season started off in a very odd way and the reason some of these numbers are off, and by the way, your numbers are somewhat different than ours, is the fact that we don't think that it's -- that online viewing is being counted properly. And DVR viewing is not being counted properly. So we think when all is said and done, and the appropriate numbers are put into place, you're going to find that the numbers are not down nearly as much as that. And in fact, they might surprise you how much they are up. One of the things that we would love to do in an ideal world is cancel overnight ratings. Because everybody reports on overnight ratings, and they don't attribute the fact that we have over 10 shows that get a lift of over 2 million viewers every single week. So the numbers that are reported are semi-inaccurate, and also, Nielsen is trying new methods to account for all the online viewing. It's not there yet. So broadcast television, cable television, it's all in pretty good shape.

What numbers are the advertisers going to use this year, though, Les, it's still got to be the Nielsen numbers, no?

They can use C3, there's a lot more multiplatforming going on. And when you're dealing with an Upfront -- an Upfront buys [ph], Alan, it's not as clean cut as all that. Rest assured, volume -- our volume's going to be up and our CPM's going to be up considerably.

Next question comes from William Bird with Lazard.

I was wondering if you could talk a little bit about just how soon you're likely to begin monetizing C4-plus through ad insertion?

As I said, we anticipate being able to go from C3 to C7. Some of the deals will be made this year, because there are some of the advertisers who get that C4 through 7 is a valuable commodity. And they get that C8, past C8, like we're doing with our iPad app. We're putting advertising in there, and so it's beginning to happen right away. Would it be robust within a year? Absolutely. The thing that's going to be significant is, there are going to be a lot of advertisers who advertise C -- live through C7, who are going to still want to be on past that. And then you'll have ad insertion on different advertisers and there will be further monetization. I think the good news is, the further we do go down the road, the more every single viewer will count in some way or another.

Could you also talk about your current thoughts on targeted financial leverage?

Yes, look, I think that, Bill, that evolves. Because as this Outdoor transaction is pretty significant, we're looking at our mix of revenue and how much is advertising related, how much is non-advertising. So again, we don't have a set target that it has to be this target ratio. Obviously, our investment grade rating is important to us, but again, I think we've shown our priority is to buy back our stock, and we're going to continue to do that.

Next question comes from Tim Nollen with Macquarie.

A couple of things, please. More on ratings actually. Isn't moving to tablet measurement and C7 and C8 and beyond, whatever, doesn't it raise more than just having a single ratings point? Doesn't it make the whole rating system that much more complicated and the whole advertising pricing model that much more complicated? And a second question back on the advertising growth figure. You mentioned I guess, low-single digits, excluding the onetime items, is that a number that you're happy with? Because it seems it's been at that level for quite a while and yet, I don't know, I feel like it could be better than that, given the success that you're having with viewership, et cetera?

Tim, on your first question, does it make it more complicated? Undoubtedly. Undoubtedly, however, once again, we understand much more now than we did before about ad insertion, about conversion from live to C3 to C7. And you know what? The further we get down the road, the further we're going to be able to identify every single viewer, every single demographic and what product they're buying. It is complicated, but it's going to be much more valuable in the future.

And, Tim, as far as the underlying growth, I mean, I call it steady. So we're not disappointed with steady. Obviously, with a stronger economic backdrop we expect that to grow, but again, that's stripping out all of those events, but network advertising for the first quarter was up 14%.

Okay, can I ask another question as well? It's about retrans. Have you given -- or can you give some updates on what the most recent pricing is looking like?

Well, we don't give that out. As we said, it's growing. The value of our channels and our content is considerable -- going up considerably. We're sort of been consistent, it's been a steady rise until '17 where we're going to have $1 billion, if not before.

That question comes from Marci Ryvicker with Wells Fargo.

I have 2 questions. Joe, first, just a clarification. Your comment that SVOD in 2013 will exceed 2012, does this assume that Netflix is renewed? Or will you be able to exceed 2012 without a new Netflix deal? And then the second...

There's no -- Marci, let me just answer that question. There's no assumption of a new Netflix deal in that statement.

Okay, perfect. And then I believe in your newsletter, you disclosed the number of digital billboards, I think, for the first time. That 275 number?

Yes.

Can you give us any targets for digital, either this year or in total? And maybe the revenue contribution, or anything around digital?

No, here's what I'd say, Marci. The digital billboard component is still low-single digits revenue to us. I mean, that's -- it's such an upside, really, for us as the capital costs have continued to come down for those digital signs. So we've been a lot slower than some of our peers to rolling that stuff out. So again, we're quite optimistic that we have a top 50 list and we're going to continue to deploy our capital that way, but -- so there's a lot of room to grow. But again, at this point, today, it's again, single digits.

Do you think you can get to where like LMR [ph] is at 15% to 16% of revenue?

I see no reason why we can't.

Great. Thank you Marci. And that concludes today's call. Thank you, everyone, for joining us. Have a great evening.

Ladies and gentlemen, this does conclude today's conference. We appreciate your participation.