Please stand by, we're about to begin. Good day, everyone, and welcome to the CBS Corporation Second Quarter 2015 Earnings Release Teleconference. Today's call is being recorded. At this time I would like to turn the conference over to the Executive Vice President of Investor Relations, Mr. Adam Townsend. Please go ahead, sir.

Thank you, and good afternoon, everyone. Welcome to our second quarter 2015 earnings call. Listening on the phone is Sumner Redstone, our Executive Chairman; and joining us for today's remarks are Leslie Moonves, President and CEO; and Joe Ianniello, Chief Operating Officer. Les and Joe will discuss the strategic and financial results of the company and then we'll open the call up to questions. Please note that during today's conference, the second quarter 2015 results are discussed on an adjusted basis, unless otherwise specified. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website. Also, statements on this conference call relating to matters which are not historical facts are forward-looking statements which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's securities filings. A webcast of this call and the earnings release related to today's presentation can be found on the Investors section of our website at cbscorporation.com. And with that, it's my pleasure to turn the call over to Les. Leslie Moonves - President, Chief Executive Officer & Director: Thank you, Adam, and good afternoon, everybody, and thank you for joining us. I'm pleased to tell you that we posted solid financial results once again including growth in revenue and EPS. Revenue was up 1% to $3.22 billion, and EPS was up 3% to $0.74, marking another record. Much of this is being driven by our core business, which remains strong at CBS and Showtime and our other brands as well. And what's more important is that we achieved these increases now while we continue to build the company for the long-term. The heart of our strategy is to create must-have content and position ourselves for the broadband future.…

Thanks, Les, and good afternoon, everyone. As you've seen, we've delivered solid results while we continue to invest in the content and technology that will lead to even more success in the years ahead. This investment in our strong networks and content brands has uniquely positioned CBS to take advantage of all the shifts underway in our industry. We remain focused on creating the best programming, enhancing our incremental revenue streams and capitalizing on the new ways consumers want their content. As a result, we will continue to benefit while we set ourselves up for future growth. Now let me give you some more details about our second quarter results. Revenue was up 1% to $3.22 billion, and we achieved an even 50%/50% split between our advertising and non-advertising revenue sources, thanks to all the actions we are taking to diversify our revenue mix. For the quarter, affiliate and subscription fees grew 28%. The increase was partly driven by the Mayweather-Pacquiao fight, which, as you heard, was the highest grossing pay-per-view event of all time. Separating out the pay-per-view revenue, underlying affiliate and subscription fees were up 11%, driven by another strong quarter for retrans and reverse comp, which were up 40% in the quarter. Content licensing and distribution was down 10% due to the timing of domestic TV licensing sales, including a large Criminal Minds deal last year. Meanwhile, international continues to be strong and grew 20% during the quarter and advertising was down 3% due to a decline in local ad spending. However, underlying network advertising came in even with last year. Operating income in the second quarter was $641 million compared with $730 million last year due to a higher investment in original programming and our digital distribution initiatives. As Les said, EPS was up 3% to…

Thank you, sir. Also, in the interest of time, please limit yourself to one question and one follow-up. We will take our first question from Ben Swinburne with Morgan Stanley. Benjamin Swinburne - Morgan Stanley & Co. LLC: Yes, can you hear me?

Yes. Leslie Moonves - President, Chief Executive Officer & Director: Yes. Benjamin Swinburne - Morgan Stanley & Co. LLC: Okay. Yes, my questions are around the NFL and your relationship there, which obviously is quite beneficial, particularly on the retrans side. Can you talk about your appetite and sort of what kind of discipline you may be applying to a long-term Thursday Night deal assuming the NFL looks to do a longer-term deal after this extension with you? And in that fold, can you talk about your expectation to include the NFL games in All Access? I think that would be obviously a really nice addition to the product if you can get those rights as well. Leslie Moonves - President, Chief Executive Officer & Director: Yes, Ben, it's a good question. Obviously, we have a very long-term deal on Sunday. We like that. And we're in the second year of one-year deals, and of course, for the right price, and we feel like we are currently paying the right price, we would like to extend the Thursday Night package, and we have been disciplined and, frankly, they have been a great partner. The discussions about All Access are ongoing. Obviously, the NFL is now experimenting with putting their games online and with digital opportunities, and we talk to them about it maybe once a week, if not more. We were there as recently as a few days ago, and our relationship with the NFL couldn't be stronger. And as I said earlier, it's the first time somebody has had a Thursday package, a Sunday package, along with the Super Bowl. So we are in a lot of discussion with them on a lot of fronts, and all those things that you mentioned are on the table. Benjamin Swinburne - Morgan Stanley & Co. LLC: And just as a follow-up around programming, how are you feeling about the summer strategy going forward? You've had a couple of years now where you have really leaned in with some investments around content that have been helped by some of your SVoD partners, but are you thinking any differently about the go-forward strategy around the summer originals? Leslie Moonves - President, Chief Executive Officer & Director: The strategy still works and Zoo is the highest-rated scripted programming of the summer, and by the way, the strategy of the original programming is based more on the afterlife. In other words, the deals that we have with Amazon and Netflix, plus the huge international appetite for our shows, so as I've said before, we currently have the three dramas on the air. They are profitable before we put them on the air. So you can anticipate us having at least three dramas and continue with Big Brother, which remains very profitable and keeps my wife employed. So it's a very good thing. Benjamin Swinburne - Morgan Stanley & Co. LLC: Everybody wins. Thanks. Leslie Moonves - President, Chief Executive Officer & Director: Everybody wins, exactly.

Great. Thank you, Ben. Let's take the next question.

Our next question comes from Jessica Reif Cohen with BAML.

Thank you. I have two questions, so two topics. On Showtime OTT, it's obviously such exciting potential for CBS. I am not sure I have ever heard you say how many subs you need to breakeven. And can you just talk about, I guess timing of upside and any plans for international, because there's clearly an appetite for this kind of programming overseas.

Yes. Jessica, it's Joe. I will take the first part of it. Certainly, as we said, every 1 million subscribers equals $100 million of profit. So it's not a whole lot of subscribers for us to breakeven. So clearly, that's not a metric we're even looking at. We fully expect it to be incremental margin dollars, and again, we do think we're addressing those 10 million only broadband-only households as we're seeing those subs grow nicely, and there's no erosion to the base business. So we do think it's incremental. Looking at international, international, the upside, I think, is great. It starts with making sure we own the intellectual property. And I think that was a strategy we put in place years ago to make sure we owned our shows and worldwide rights. So obviously, we can certainly export Showtime OTT internationally within certain windows, but we use Bell Canada as another example of working with a local partner to basically have a Showtime over-the-top service and make the money that way. So we're trying to be indifferent and being flexible to what the opportunity is, but basically, the fundamental theory is the content is working, the brand is working, and Showtime we have to think about as a global brand.

Exactly. And then the second topic is advertising. It's great that you guys did so well in the Upfront, but there's so much change in the industry now. So besides the movement towards C7 and hopefully measurement of devices soon, I don't know if you have an opinion on that, how do you see the currency changing and can you talk about your views of how important addressability will be and when? Leslie Moonves - President, Chief Executive Officer & Director: Jessica, obviously what you've asked is the question of the day is how much can we know and how good can Nielsen be? C7 is a step in the right direction. Dynamic Ad Insertion is becoming much more visible to us, which means that we are getting paid now not only for the first seven days or the first three days or whatever it may be, but well beyond that. I think Nielsen's making major strides in that area, and there are other people who are entering the field so we are getting to the point where we're knowing more and more, and data, obviously, becomes more and more important in our selling tools. Our Internet guys and our national sales group are working hand-in-hand. As I mentioned before, it's the first time that most of the ads that are going to be on the Super Bowl are also going to be online at the same time. And we are learning a lot, and as you can see, as you can read, what Comcast is doing, what DISH is doing is the addressability is absolutely becoming clearer and clearer, and that only is good news for us. The more they know, the more we're going to be able to sell.

Thank you.

Great, thank you, Jessica. Let's take the next question.

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

Okay. Thank you. Les, you mentioned in your introductory remarks that you had achieved agreements with, I think, 75% of the affiliate base for CBS All Access. And I wanted to know does that base that you have come up with that agreement for, does that translate to being able to kind of negotiate and distribute on their behalf to a third-party, then your OTT service like an Apple as well as just either your first-party All Access? And additionally, can you give us a sub count for All Access? Second, in an unrelated follow-up, historically, I think you needed 80 episodes to 100 episodes of a show to strip and syndicate on a linear basis but Elementary kind of changed that model on linear TV, at closer to probably 60 episodes to 65 episodes. So if we're doing our math right, you should have a similar episode count by fall 2017 for CSI: Cyber, NCIS: New Orleans, Madam Secretary and Scorpion. So is it realistic to think that the backlog for 2017 linear syndication should include those titles? Thanks. Leslie Moonves - President, Chief Executive Officer & Director: All right. In terms of the first – our relations with our affiliates remains very strong, and they are very much a part of All Access and the 75% is actually a rather low number. It should be much higher than that. We are basically going to have the entire country before too long, or most of it. And once again, the thing that they appreciate greatly, it's the first time they've been cut into a deal like this where there's an online deal, there's an online service, and they're going to share in our revenue stream. Once again, I want to reiterate, the national service is available everywhere. It's only the part that's the live linear stream is where we need all of them onboard, and they are onboard. The good news as well is, as we talk about third-party services, our deals with them will include our being able to negotiate directly, and then make deals with our affiliates where they will be able to share in that. And that's built up over a good partnership, and obviously, it's going to be beneficial to us financially, and it's going to be beneficial to them financially. Sub count on All Access, we're not giving that out, as I'm sure you know. But needless to say, we are very pleased with where we are right now. It's going up considerably week-after-week, and as I said, when the fall season begins, which we're really excited about, and it's a month away, we think that number is going to continue to rise and we're very excited about it. And I will let Joe talk about 2017 and all our...

Yes, David, I think you're right. I think, again, we sold Elementary up to three seasons, about 66 episodes; so clearly, there is a trend in the industry that we think it's actually positive for some of our franchises to get it into syndication sooner than four years. So I think you're thinking about it right. I think all the shows Les mentioned, the six hits, now, again, I wouldn't think about it just on CBS, think about CW and Showtime as well. So we are replenishing that pipeline that we can monetize probably in 2017. I think that probably makes the most sense for us, but if you recall a few years ago, we had like five shows going into syndication in one year, and it was all the fruits of the labor that we are planting right now, so that's why we're very optimistic about our future.

Okay. Thanks very much.

Great. Thanks, David. Let's take the next question.

Our next question comes from Alexia Quadrani with JPMorgan.

Hi, thank you. My questions are on the ad market, which, you mentioned is improving in the third quarter. I think one of your peers this morning said the same thing. Could you give us any more color in terms of really what's driving it? Is it the fact that there maybe is a lack of inventory in the marketplace because some of your peers may have been having to give up some make-goods or is it really, does it have legs to it? Is it pricing? Is it demand? I guess any color you could give would be great.

Yes, Alexia, it's Joe. Yes, look, it's definitely demand across the board. Obviously, we have inventory, because, you know, that's why you don't sell out 100% of the Upfront because again, you want to have that scatter available, and we're taking advantage of it. As Les said, the price increases are double digits. If I was just looking at a couple of categories, auto and healthcare are two categories that are really spending here in the scatter. So when you see big categories coming across and putting more dollars, I think their buying habits may be changing over time, but at the end of the day, they're buying franchises, the strength and stability that only a few broadcast companies really offer, and we're the beneficiary of that. Leslie Moonves - President, Chief Executive Officer & Director: And once again, the reason, we're once again confident in our schedule. We're confident that we will get a great percentage of the scatter, and as we said earlier in the call, people want to buy a little closer to the time when it goes on. So that's why the amount of the upfront, the volume was down a little bit. But it's something that truly does not concern us one iota.

All right. Thank you very much.

Thanks, Alexia. Let's take the next question.

Our next question comes from Michael Morris with Guggenheim Securities.

Thank you. Good afternoon, guys. Leslie Moonves - President, Chief Executive Officer & Director: Hi, Mike.

Two topics. Hi, Les. First, my question is on programming spending in light of your earlier comments about growth in broadband, just the growth in broadband-based demand, right. So I guess my question is this. Showtime is at the higher price point and it seems like there is more flexibility on Showtime in terms of the type of content and the ability to give a show some time to grow. When you think about fueling that business, do you think about that as being sort of incremental spend that you want to put behind that? Or over time, do you maybe start to reallocate budget between CBS and Showtime? And then I have a second question about pay-per-view. Leslie Moonves - President, Chief Executive Officer & Director: I wouldn't say that. You know what, they are, frankly in terms of programming, what's changed about the marketplace is, and we've mentioned it, is that the back end is becoming as important as the front end. So investing in more original programming for both CBS and Showtime offers so many more possibilities, which is why that we have increased the number of originals we have on CBS, and we are also increasing what's available on Showtime, because we are able to monetize it. Every time we order a new show, we have an entire game plan, so there is very little risk, and the upside is pretty tremendous when you can – when I put on a show like NCIS: New Orleans, three years from now, I know I'm going to be talking about hundreds and hundreds and hundreds of millions of dollars in profit. And for us, the amount of original content is more important than the movies.

Okay. That's helpful. And then on pay-per-view, I'm curious about the economics of the fight. It feels like Showtime does so much of the heavy lifting in terms of the production and securing the rights, and yet obviously you share a lot of the economics with the traditional distribution ecosystem. What would it take to get to a point where you can distribute that directly, kind of eliminate the middleman and maybe participate more in the economics there? Leslie Moonves - President, Chief Executive Officer & Director: Well, on this fight, Floyd Mayweather did better than CBS did. That's all I got to say. But you bring up a valid point. And look, for this fight, since it was such a huge fight, the economics with our traditional partners did change quite a bit. Looking forward, as you have digital assets that you own yourself, you could look even further out at putting it directly to the consumer, and we keep 100 cents of the dollar. That is something that obviously is coming. But we did fine on the Mayweather fight. We made a sizable amount of money. As I said, not nearly what Floyd or Manny made, but we did fine. And the system, the future looks better. And you bring up a very good point.

Great. Thanks, guys.

Great, thanks, Mike. Let's take another question, please.

Our next question comes from Anthony DiClemente with Nomura.

Thanks. I have one for Les and one for Joe. Les, a lot of anxiety today in the marketplace around the bundle, around the breaking apart of the traditional bundle. You guys have the least exposure to the bundle. So a subscriber leaves a traditional ecosystem, and maybe you're agnostic. Maybe you could pick them up on All Access, as you mentioned in your remarks. So just how do you feel about the bundle at this point as it relates to CBS? Is there a way you can sort of exploit that advantage given how nimble you are relative to your peers, even more so or more creatively than you've done up until this point? Leslie Moonves - President, Chief Executive Officer & Director: Yes, I mean, look, you've made a valid point, one that we've been saying for a long time. As the world proceeds into the skinnier bundles, the smaller bundles, it does leave anxiety out there for a lot of companies. We are a big proponent, because guess what, every skinny bundle deal that's out there, and obviously we've made a few of them already, the ecosystem gets validated towards he who has the most viewers gets paid the most money. I know it's an odd concept for some of the cable companies, but that's the way it should be. We're sort of re-regulating what the system should be. So anytime there's a new bundle that you hear out there, you can assume that CBS is applauding it, because we are going to get paid more than we get paid by the traditional MVPDs. So we are one of the few companies that is very much in favor of it. Our major brands are CBS and Showtime. And as this world evolves and it is evolving, we are ready for it. We are ready for it, so it should be greeted well.

Okay. Thanks, Les. And then, Joe, I just wanted to talk about syndication within the Entertainment segment. So you called out the tough comp on Criminal Minds in the 2Q.

Right.

Can you just give us anything on the back half on the licensing comps? And then broadly over the course of your annual budget, the 2015 budget, if you took CBS syndication and broke it up into SVoD versus traditional syndication, can you just help us with, can either or both of those grow versus last year given the tough comp quarters that we've seen so far? Thanks.

Yes, look, again, obviously, you guys know this and that it's all timing of when those shows are available. So if I'm just looking at the back half of this year, Elementary, as we just heard on a previous question, will be made available. That deal is done, so that will happen in the back half of this year. So I mean, last year we had it more going in into first cycle availabilities than we did this year. That being said, international is growing faster as well. There's more players out there. We continue to re-up our library portion. And we never make excuses, and we never budget or forecast to make less money than we did the previous year. So our sales guys, we think, have a lot of content to sell, and we expect them to do that and maximize the value. But I can't predict when a deal happens and when it doesn't happen. It'll be all timing of when the marketplace is. But the good news is it's a very competitive marketplace, and that bodes well when you have beachfront property.

Okay. Thanks very much.

Great, thanks, Anthony. Let's go to the next question.

We'll go next to Doug Mitchelson with UBS.

Oh, thanks so much. So, look, I think, one was on the new $1 billion guide. Does that include the benefit of potential new OTT services like Apple TV or is that based on what's signed so far?

No, Doug. It's Joe. It's just, it's straight retrans, reverse comp.

Forgot about that one. I know you didn't want to give a number, but CBS All Access seems from the data that I've seen to be doing surprisingly well. I mean, it seems like you're headed to reach 1 million subs within the first year. I mean, is that rational or is it too early?

Why do you say surprisingly? We're not surprised. No, no, Doug, look, again – well that's why we're – look, again, we're obviously, you know, we're playing to get millions of subscribers, not hundreds of thousands. I think again the good news for us is we're seeing that each and every day and we're doing that without the NFL content at $6 a month. So again, back to the skinny bundle, back to the price point where we are. We're looking at the marketplace saying our broadband offering was clearly consumers have an appetite for growing rapidly at the highest price point we have in the marketplace. So you should assume we want to lean into that and continue to push on that, but clearly we're not going to get into, we hit 1 million this month or next month or whatever month, it doesn't really matter. I think the key is each and every day it's growing.

Yes, I remember that when you put out the press release saying you hit 1 million subs. So that leads to the big question; are the OTT services doing well enough? Even though it's early days that you're thinking about investing in more content specifically for those services? I know you mentioned more originals of course, your bread and butter, but short-form library, super-fan content, HBO talked about ramping its content and marketing investment for HBO NOW given how well that's doing so far. How do you balance investing versus your desire to deliver earnings in the short-term to medium-term... Leslie Moonves - President, Chief Executive Officer & Director: You know what? It's early days with these services, as you know. I mean Showtime OTT is a month old or, you know, so we're looking at everything. And how do you distinguish yourselves, how do you make it special as special as you can? So we're looking at those things, as long as we remain contained and conservative about what we spend, but we are a content company and we know how to do content.

And, Doug, I would just add to this, look, there's low-hanging fruit. I think, again, our thesis is there's a demand out there that we don't have to invest more in content. It's there, the price point for the subs was such that they couldn't have access to Showtime and/or CBS. So we're clearly as we both said on our remarks, we're investing in the future that we spend $11 billion of cost each year, and we do pullback on other areas and lean into other areas. I mean, obviously you saw us take out $70 million of cost in there. That allows us to reinvest for growth, and I think that's the key. It's what we understand how to allocate capital and where to lean in and where to lean out.

Right. Okay. Thanks so much.

Good. Thank you, Doug. Let's go to the next question.

Next question comes from David Miller with Topeka Capital.

Yes, hey, guys. Les, just a question on the Super Bowl, if I might; the general rap that I think the sell side and the buy side has on the Super Bowl every year, no matter which network has it, is that – it just looks great on your revenue line but just the sheer production cost of the game plus the incremental sports rights make it tough to make money. Do you agree with that? And with these rates approaching $5 million per spot as you mentioned in your prepared remarks, what opportunities are there for operating leverage in the game? And then I have a follow-up. Thanks. Leslie Moonves - President, Chief Executive Officer & Director: Yes, David, if there's a rap on it, tell them we will take the Super Bowl every single year, year in, year out forever. So, you know what, if the incremental doesn't outweigh the amount of money you get per spot, what NBC got last year, it is very, very worth it. You are going to see it in revenue and in profit in 2016 and we love having it. We're very excited about having it. There's no downside.

Okay. And then just a quick follow-up; just during the Upfront season, a lot of our media buyer guys seem to be pretty high on Code Black, Limitless and Supergirl. Those seem to be the three new series that everyone seems to be excited about in general. Any others you want to call out in terms of what you're excited about once the fall season starts and any other expectations you're willing to share would be great. Thanks. Leslie Moonves - President, Chief Executive Officer & Director: Well, we have five new shows and you mentioned the three dramas. Those are the three dramas and they are all extraordinarily good, and they're all extraordinarily different. We have two comedies of which I'm excited about as well, Life in Pieces and Angel from Hell. So they've acknowledged the three, and frankly, the media buyers generally are attracted more to drama initially and there haven't been a lot of big comedies recently, but we think we have a real good shot. Once again, we're not going to bat 1,000 but our batting average has been better than anybody's over the last decade, so we're feeling pretty good but thank you, buyers, for the compliments.

Appreciate it. Thanks very much.

Thank you, David, and next question, please.

Next question comes from Jason Bazinet with Citi.

Just a question for Mr. Moonves. Leslie Moonves - President, Chief Executive Officer & Director: Yes.

In the past, you've been very vocal about your belief that broadcast will fare better than cable net advertising as more dollars go digitally. And I suspect that's influenced in part by what happened over the last few decades as cable network advertising grew and broadcast held its own. But I was just wondering if you could comment on the sort of the synthetic ability of these Internet properties to deliver massive reach? How do you think CBS stacks up against that? Leslie Moonves - President, Chief Executive Officer & Director: Well, as I said in my thesis, which I think has been borne out, is that broadcast reaches a mass audience, and there are certain niche cable networks that are replaced by the Internet. So it might be more effective in reaching them. Once again, the proof of purchase from the Internet is not yet there as strongly as it is on broadcast. We fairly well know the results of it, and you won't see a major advertiser. You won't see in a major car company or a Procter & Gamble; most industries will not veer away from broadcast. Digital obviously is the brave new world, and we're part of it, but most digital advertising is actually off network product that you find digitally. So that is a big, big part of it. And we still feel very bullish. There's a reason year-after-year our CPMs go up and the broadcast business is in better shape than basic cable.

Okay. Thank you.

Thank you, Jason. And let's take another question, please?

We'll go next to Marci Ryvicker with Wells Fargo.

Thanks.

Marcie, we lost you there. Are you still there? Marcie?

She has disconnected.

Okay. Leslie Moonves - President, Chief Executive Officer & Director: Okay.

Why don't we take one more? Let's go to the last question here and close it out.

We will take our last question from Omar Sheikh with Credit Suisse. Omar F. Sheikh - Credit Suisse Securities (Europe) Ltd.: Hi and thanks. So, I've just got a question about your content licensing business. I wonder if you could just give us a sense of unit pricing trends in your content licensing business amongst your SVoD customers? So one of the arguments you're going to hear quite a lot is that some of your SVoD customers are trying to drive down pricing for the bundles of content that they buy from you and others. So I'm just trying to get a sense of how you think about that and how we should think about the dynamics of your SVoD business growing over time? Thanks. Leslie Moonves - President, Chief Executive Officer & Director: Yes, initially or obviously, our initial deals with the SVoD companies incorporated a huge amount of library product. And there were a huge amounts of money that took place, exchanged hands over it; hundreds and hundreds of millions of dollars, and as the model evolved, obviously, they went into wanting more recent series on the air, and they have put on a certain amount of original content, but once again, as I mentioned, regarding our summer programming, we have deals with Netflix and with Amazon to put them on a few days after we're on the air. Our franchises also, of which we have just sold CSI, we've sold NCIS to the SVoD services, bring in a huge amount of content. Remember, these are shows that had literally 200 episodes, 300 episodes at a time, plus the international SVoD marketplace is expanding all the time, as I mentioned. The big players are there, and now the local players are there, so our business with the SVoD services has evolved, and it's different than it was before, but it is still lucrative, and it's still beneficial to us. Omar F. Sheikh - Credit Suisse Securities (Europe) Ltd.: And are there any particular markets internationally that you'd highlight as being particularly attractive? Leslie Moonves - President, Chief Executive Officer & Director: The marketplace – look, the general marketplace in terms of Western Europe obviously is our biggest place; it's our biggest source. The U.K., Germany, France; those companies do extraordinarily well and Canada remains, obviously, a major, major place for us to do business. So those are the major highlights. Omar F. Sheikh - Credit Suisse Securities (Europe) Ltd.: Thanks. Leslie Moonves - President, Chief Executive Officer & Director: Thank you.

Thank you, Omar, and thank you, everyone, for joining us. This concludes today's call. Have a great evening.

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