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CBS Corporation (NYSE:CBS)

Morgan Stanley Technology, Media & Telecom Conference

February 26, 2013 2:00 pm ET

Executives

Armando Nunez - President and Chief Executive Officer of the CBS Global Distribution Group

Analysts

Benjamin Swinburne - Morgan Stanley, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

All right. Good morning. So continuing along in our media trend here over the last couple of hours, I wanted to mention that the man to my left is not Les Moonves, but is in fact, Armando Nuñez, the President of CBS Studios and CBS Distribution. Les, unfortunately, is down with the flu suddenly, as of last night, and could not make the trip up to L.A. So we're really fortunate Armando could pitch hit and come rescue us here.

Armando Nunez

Happy to be here. I'm sorry I'm not Les, but I'll do my best.

Benjamin Swinburne - Morgan Stanley, Research Division

Right. And Les, if you're listening, we hope you feel better soon. Armando, thanks for making the trip.

Armando Nunez

My pleasure.

Benjamin Swinburne - Morgan Stanley, Research Division

Just to give you the background, Armando has the relatively newly created position since October of last year of overseeing all of CBS's international and domestic distribution business. The CBS global distribution group includes the international studio business, which licenses CBS programming worldwide, so over 200 markets across multiple media platforms, and CBS Television Distribution, the preeminent domestics indicator and producer of first-run and off-network programming.

And one of the themes over the last 1.5 days has really been monetizing content on multiple devices in and out of the home, multiple markets, multiple business models. We had Netflix yesterday. So this stuff is super relevant, everything we've been talking about for the last couple of days.

Question-and-Answer Session

Benjamin Swinburne - Morgan Stanley, Research Division

Armando, maybe to start us out, can you talk a little bit about the business you manage, so people get a sense for what it is and how it fits into the sort of CBS business model?

Armando Nunez

So on the international side, we manage the distribution of the content outside the United States. We basically have kind of 4 business pods of how we monetize our content: The traditional distribution of our content to traditional broadcasters; the nontraditional new media piece, which, as time goes along obviously, those, the traditional and nontraditional, are coming closer together. We monetize that content by the production of local formats, the rights to shows that we have the rights to produce local versions of around the world; and then, our International Channels business. On the channel side, we have now, at this point, a presence in 87 markets around the world through, I believe it's 22 channels in 20-something languages around the world.

So that's the international piece. And the domestic piece is obviously the syndication piece, the distribution. We have 7 of the top 10 shows in domestic syndication, shows like Dr. Phil, Judge Judy, Wheel of Fortune, Jeopardy. We also, obviously, license our off-net content in the cable universe and then obviously, the digital piece as well. So that's pretty much the landscape of -- that I manage.

Benjamin Swinburne - Morgan Stanley, Research Division

Can you help us think about the relative size of the syndication licensing business at CBS within the total revenue of the company?

Armando Nunez

Well, internationally, we've gone on record as saying that we are about -- we had over $1.1 billion in revenues the last year. And we will exceed that this year as well. And I believe, on the domestic side, we said that our business is roughly around $2-ish billion, $2 billion something.

Benjamin Swinburne - Morgan Stanley, Research Division

Got it. Okay. One of the things that we talked about yesterday with some of the other media companies, News Corp and Discovery in particular, is how the industry is approaching monetizing content online, and that there are different philosophies out there with different approaches to what windows makes sense. How does CBS look at that opportunity, whether it's Netflix, Google, Amazon, given how much the sort of existing ecosystem means to the company? And how do you manage it across the company, because you're global and the windows are different everywhere?

Armando Nunez

Look, obviously, all of these new distribution outlets are just new pipes for us to place our content. So when you take a step back, these are all good things. Technology is our friend. These pipes are new clients to us. And our -- what we spend a lot of time looking at, both domestically and internationally, is how we're going to monetize this content. How are we going to do this in a smart, strategic way that is, at the end of the day, going to be good for our core business? And especially when it comes to CBS content, you take a step back and look at our content, we tend to have content that has a very long shelf life. So much of the monetization of our content is not just from that just one sale, that initial sale. It's the sale of that content on a windowed basis. It's in its first cycle in many places, and then it's that repeat sale over and over and over again. And then in success, after those cycles kind of go through, then this content goes into our library and we continue to sell it. I mean, Leslie has said on many occasions that example about I Love Lucy, that we still monetize. And we do that with so many shows, I mean, so many shows have become successful shows and go into our library. I mean, CSI, CSI is been still, today, the most watched television show in the world. And 30 years from now, somebody else will be sitting here in this chair talking about the monetization of CSI around the world. So I think the biggest thing when it comes to the licensing of our content in the traditional space and nontraditional space, it's about a strategic view of how we're going to monetize it, so that it's incremental and not just taking money from one pocket and putting it in the other.

Benjamin Swinburne - Morgan Stanley, Research Division

Right. You guys have the benefit of having David Poltrack and all of his research at CBS, and what's happening with the consumer as they migrate to more devices and do more. There's more time shifting going on. How does that impact your business on a day to day and how do you think about maximizing profit?

Armando Nunez

Look, I think it's a good thing. At the end of the day, there's more people watching our content, and that's a good thing. The question ends up -- becomes -- it's a question of monetization. As people are consuming this content, both, again, domestically and internationally, in a different way, there's -- the most important thing is that they're consuming it. They're watching it, they're looking at it. And our job is to make sure we get paid for it. So again, technology is our friend here.

Benjamin Swinburne - Morgan Stanley, Research Division

Are there different kinds of content that, from a genre perspective, that work well in distribution? Les has jokingly called Elementary, your new show this year, CSI Sherlock Holmes, and...

Armando Nunez

And we'll take it.

Benjamin Swinburne - Morgan Stanley, Research Division

And sometimes, investors get concerned about the sort of concentration in kind of procedural crime dramas at CBS Network. But I would imagine from a syndication perspective, those shows are perfect for what you're doing.

Armando Nunez

Extremely valuable. I mean, the -- again, the benefit that we've had in the ability to monetize CBS content is that CBS content, globally, now is viewed as mass appeal content. It's not niche. It's not "cable content." It's content that has proven success and has mass appeal. And again, whether you're looking at monetizing that content in the United States or internationally, you want -- that's the kind of content that you want, that has that kind of broad appeal. And Leslie says on many occasions, at the end of the day, we're a broad-caster. And that content, that genre of content has worked extremely well. And as I was alluding to before, when you have that kind of procedural content, it tends to repeat very well as well. So you have the ability to monetize it again, not just that first sale, but over and over and over again, like -- as we do with our existing franchise.

Benjamin Swinburne - Morgan Stanley, Research Division

You have Survivor on CBS for a long time and The Good Wife is a serialized or quasi-serialized show. But you generally have been less focused on those genres than other networks. The Voice, obviously, being a big competition show. Do you think that makes sense to continue down the path you're on? Or do you see opportunity to try to broaden the portfolio?

Armando Nunez

Look, I think that our network colleagues and studio colleagues are always focused. This is one of the biggest benefits. You have Les Moonves as our Chairman, as our CEO, and his focus and his attention to having all the content creators focus on content is second to none. So I don't think that anybody just wakes up one day at CBS and say "You know what, there's a genre that we should try over here that we haven't tried." I think our development process is second to none. I think we lead the industry in many different ways. And I don't think that there is a programming idea or genre that the guys don't go through a process that make a determination of what's the best thing possible to do for our network to attract the biggest audience possible.

Benjamin Swinburne - Morgan Stanley, Research Division

One of the things that's been also a theme over the last 1.5 days has been international growth opportunities and content. And the booming growth of pay TV subs all over the world, South America. How has international syndication and licensing grown for you over the last several years? You mentioned it's a $1 billion plus business. And how does it change the profitability of the broadcast model?

Armando Nunez

Well for us, it's grown significantly as you've alluded to. In 2011, we held that CBS Investor Upfront Day. And we talked about our international growth at that time, I think in 2010, which we use as a base year, we were about $890 million of revenues. As I mentioned earlier, we're $1.1 billion plus now and growing. I think if you go back a few days -- excuse me, a few years before that, there was a 5-year period where we basically doubled our revenue growth. So it's obviously a very significant piece of the puzzle. I think to take one genre out of it, if you look at how the studio business has evolved in terms of producing primetime content, years ago, you would have a model that you'd have basically a fairly significant deficit on a network show and it wasn't all that attractive a model unless it was a successful model. And I think the reality is today, again, because of the strong demand internationally, for the most part, through that strong demand, we are -- we make up any deficit that there is in terms of the development of that primetime content. And in many cases, bring that show, before it's even been broadcast, into profit. So it's changed that production model significantly.

Benjamin Swinburne - Morgan Stanley, Research Division

Does it help with the derisking of CBS's earnings model that Les and Joe [indiscernible]

Armando Nunez

Absolutely. I think that's specifically what they refer to in that, you're not producing a show and then having a $1 million per episode deficit. In many cases, in different places around the world, we have volume arrangements or quasi-output arrangements where we have broadcasters, again, because of the successful track record of CBS, who've committed to this programming before we've even produced an episode, before they've even seen anything. So knowing before we even get into the production process that we have x amount of revenue already locked in is a good thing.

Benjamin Swinburne - Morgan Stanley, Research Division

Has the demand and pricing environment for licensing internationally changed at all with the economic pullback between Europe that we've seen?

Armando Nunez

No, surprisingly, the market has held up incredibly well. And I think there's a number of different reasons for that. First off, we sell -- our commodity, if you will, is in great demand and limited supply. What we do is difficult to duplicate on a local basis. It's difficult to do a CSI, if not impossible, or an NCIS or a Hawaii Five-0 or I could go through the whole list of our content. Not to say that there isn't local production. Of course, there's local production. It's not an either-or scenario. Most broadcasters around the world do both, they produce their own local shows and they acquire American content. But when they're acquiring American content, they know what they're getting. And comparatively speaking, versus local production, it's relatively cost-efficient as well for broadcasters. We're trying to make it less cost-efficient. But it's relatively cost-efficient for broadcasters to acquire our content versus the -- what they have to try to do locally to produce their own content.

Benjamin Swinburne - Morgan Stanley, Research Division

I think the way shows are sold in domestic syndication is perhaps more straightforward for us in the audience as we think about the business model. You've lived the international business for many years. Can you just sort of take us through how you go about selling a show across the globe, given the fragmented nature of your customer base?

Armando Nunez

Yes. Well, I mean, we have 13 offices around the world. Our headquarters is in Los Angeles. There are a number of different international conventions and markets that we attend throughout the year. Really, what kind of the sales process for the new season -- so if we say now starting with the 2013, '14 broadcast season, content that will air on our networks in September, our studio right now is in pilot season. Our network will choose what shows and obviously, we have a -- there's a good portion of our schedule that we own outright and therefore, we control the rights to. You have the Upfront presentations in New York in May. And the week after that, there's an event called the Los Angeles Screenings. And we host about 1,500 different buyers of content for a variety of different platforms from all over the world that week in Los Angeles. And that's the week where they all come to LA and basically, see the new shows that have been picked up for the new broadcast season. As I was alluding to before, in some cases, there's coming to LA to see what they've already bought. And in some cases, they're coming to Los Angeles to buy on the spot new content. And in some cases, it begins a process of discussion, depending on the performance of the show on the network, at some later on -- point later on down the road that they'll then acquire the show. That's basically how it works with new content. But don't forget, we also distribute the content from Showtime. As time goes on, again, we have been controlling more and more of the rights of the shows on Showtime. The CW as well, our syndicated content. So it's a large diverse portfolio of content that we're focused on monetizing around the world constantly.

Benjamin Swinburne - Morgan Stanley, Research Division

Is there a way to give us a sense for how much of that business is done through output deals where you already know sort of what the revenue's going to look like for this spot?

Armando Nunez

Yes, it's kind of hard to say because it depends on the flow of content, how many new shows, how many returning shows. But it's a good percentage that's locked in.

Benjamin Swinburne - Morgan Stanley, Research Division

And you mentioned, I think you said earlier that you did about -- under $900 million of revenue, I think that was back in 2010, internationally, now you're north of $1 billion. Is that pricing or volume or both?

Armando Nunez

I'm sorry. What did I say in 2010?

Benjamin Swinburne - Morgan Stanley, Research Division

I thought it was $880 million --

Armando Nunez

$880 million, correct, yes.

Benjamin Swinburne - Morgan Stanley, Research Division

How much of that's pricing versus volume and...

Armando Nunez

It's both. I mean, again, there -- I go -- I'm sorry if I keep repeating myself, but a lot of what we do isn't just selling it one time to one broadcaster. So much of what we do is windowing our content, whether it's pay TV, free TV. Now, obviously, with the expansion of companies like Netflix and Amazon into the international marketplace and -- and not only them, but the local SVOD players. SVOD is not a new window internationally, it's existed for many years. Companies like BT and Telefonica and -- I mean, there have been a lot of local players in SVOD. But kind of the U.S. companies that have expanded internationally has kind of woken up the whole, all the players to that window. But anyway, going back to what I was saying, it's more about that, again, coordinated monetization through windowing of our content.

Benjamin Swinburne - Morgan Stanley, Research Division

I was going to ask next about SVOD, so it's a good segue.

Armando Nunez

I teed it up pretty good.

Benjamin Swinburne - Morgan Stanley, Research Division

Thank you. In the U.S. market, CBS has taken a fairly cautious approach as you've gotten into selling content and SVOD windows to Netflix and Hulu. But you've tended to not sell in-the-season stuff and even stuff that's still on the network today, even prior seasons. What's the approach internationally? How much does it vary by market and is -- are the rules completely different in how you think about windowing?

Armando Nunez

No, look, I think it's similar in that you want to do it in a coordinated way. You want to protect your core business, which are these traditional platforms. Still today and for the foreseeable future, you need those traditional platforms to create the value of that content for you by establishing those brands on a market-by-market basis. When they're successful, we're successful. So we help them become successful with our content. And then that creates the follow-on value, again, whether it is windowing it to an SVOD platform in that territory or to cable channels or DVD sales or whatever. When our broadcast clients are successful with our content, that creates value for us. Now where then SVOD sits to your question in terms of that windowing really becomes a function of pricing.

Benjamin Swinburne - Morgan Stanley, Research Division

So if we were to go to, say, the U.K. and look at the Lovefilm, for example, or another major European SVOD player, would we see CBS content that's either already on the air on, say, Sky or maybe prior seasons of current shows that we would not see in the U.S.?

Armando Nunez

Again, we've been very careful about that. On some of our more established shows that have -- or our longer running shows, we have some early seasons. But we are not up to a point where we're doing kind of post-broadcast SVOD, not quite yet. But again, it's tough to generalize about this because every market is different. And don't forget as well, most of our broadcast clients have digital platforms themselves. So they all are trying to, much as we're doing in the United States, trying to figure out what digital extensions they're going to have of their primary channels and networks.

Benjamin Swinburne - Morgan Stanley, Research Division

Sort of the TV Everywhere, as we were just talking about with Comcast. That's a global...

Benjamin Swinburne - Morgan Stanley, Research Division

It's all over the place, yes.

Benjamin Swinburne - Morgan Stanley, Research Division

Got it. Are you seeing significantly different growth rates by geography? One of the things we heard yesterday from James Murdoch, particularly with some of the growth they're seeing in Latin America. Can you sort of take us around between maybe the 3 big regions, Europe, Asia and Latin America, for your business?

Armando Nunez

Yes, look, let me -- first off, when you're talking about a global business, the great thing about a global business, it's like a big hedge fund. So when there's a market that's down, there's usually, someplace in the world, something else that's going on to offset that and actually grow the business. Obviously, a good chunk, a good percentage of our business comes from Western Europe. And I think that the percentage will hold through for the foreseeable future. But that's the good news. The good news is that there are other regions of the world with very significant population sizes and evolving and expanding economies that have great growth potential as we look down the road to the future. Latin America being a region that, again, you look at the growth of countries like Brazil and Mexico and the growth of the middle class in those territories. The statistics about India and -- fastest -- one of the fastest-growing economies in the world, fastest-growing middle class in the world, largest English-speaking country in the world. You know, we -- while we're -- a lot of our focus goes to those mature markets that pay us a lot of money for our content, a lot of our focus is also on these emerging markets that there's no question are going to evolve and grow with time. And where there already exists a demand for American content.

Benjamin Swinburne - Morgan Stanley, Research Division

Great. Let's come back now to the U.S. market a bit and -- which is actually still the bigger business of the 2 and growing nicely. I think if you listen to the typical cable network manager, you'd think everyone is doing original programming and that syndication is a dying business, and yet, we can see from your numbers, that's not the case. So let's talk about off-net cable first. We actually have Time Warner presenting tomorrow, who is a big customer of yours. Why is that business continuing to show the kind of price increases that we see, given everything else we're seeing in the media landscape?

Armando Nunez

I think it goes back to what we said before. What we're selling is in great demand and limited quantity. And I don't think that the question of programming original content for cable networks and acquiring high-profile, successful, off-network shows are mutually exclusive. I think again, going back to the international example about producing local content and acquiring content, you can do both. And our content is -- look, again, take a step back from it. We, as a network, have put the time and effort -- they're known brands, they're known commodities. We've spent the money to market their produce, both from an industry perspective and a consumer perspective. So the attractive thing for a cable network about acquiring our content is that it's relatively easy to program and it's a market -- it's -- the brand awareness is already there. And again, it's in somewhat limited quantity. So acquiring that content, I think, actually in some ways helps the model to then be able to produce more original content for each individual channel.

Benjamin Swinburne - Morgan Stanley, Research Division

One of the questions that has been interesting over the last couple of days has been how you window content digitally versus on the traditional platforms. And from a couple of the companies we heard that there's -- there are inconsistencies and in some cases, there is some concerns about how aggressive and close to air date people are or willing to -- what's your take on that? When you look at your peers in the media industry, and it does have an impact on you potentially, how do you think the industry is behaving with respect to putting content online outside of the traditional platforms?

Armando Nunez

Well, I'll start with CBS first. I don't think that there's any just clear-cut model to say, "Okay, this is way to do it." I think it's very dependent on the specific genre and type of show and show itself that you're talking about. So we kind of look at it on a, really, a case-by-case basis. As to how the industry is doing it, obviously, there's a lot of different, as you alluded to, kind of thoughts about how to do it and how to monetize it. I can tell you that, again, from our perspective, our thinking about how we monetize our content in the digital space, we're not doing it in a silo. We are, in a very coordinated fashion, are always in discussions with our studio, with our network about the implications of how we monetize the content, what knock-on effect, if any, it has across the board. So it's all done in a very coordinated fashion within CBS.

Benjamin Swinburne - Morgan Stanley, Research Division

You mentioned different genres probably have different -- a different conclusion. I'm guessing you're talking about reserialized versus procedurals and things like that. Have you seen any impact on your broadcast viewership from shows that have been available on SVOD platform as [indiscernible]?

Armando Nunez

No.

Benjamin Swinburne - Morgan Stanley, Research Division

No. Neither good nor bad, sort of immaterial at this point. And how about on the Amazon front...

Armando Nunez

Look, there was a lot of research and again, we sit in a -- and discuss a lot of the data from a research perspective. But no, I don't think so. Short answer.

Benjamin Swinburne - Morgan Stanley, Research Division

You guys are -- CBS is going to be broadcasting a new show and it's going to be making its way to Amazon. This is sort of a different tack than you've taken in the past, this summer. Can you talk about that decision and why you think it makes sense, that show?

Armando Nunez

Sure. Under the Dome, it's a CBS Studios production together with Steven Spielberg's Amblin Entertainment. It's based on the best-selling Stephen King book. It's a relatively new model for us, but it's a model that again, with Amazon being involved in a post -- we'll have a post-broadcast window for streaming. But it's a model that when you couple all this together through Amazon, through our traditional international distribution, and just because we've done this Amazon deal, there's been an enhanced level of interest in this project from international streaming companies, it's put us in a position to be able to put all this together and have a tent-pole summer series for the CBS Television Network. And it's been a very interesting project. It's -- and I think at the end of the day, it's been a very attractive model that we've been able to put together for a unique summer telecast of the show.

Benjamin Swinburne - Morgan Stanley, Research Division

Going back to the sort of traditional syndication business. Historically, I think you needed to store 4 or 5 seasons before you put a show out there for syndication. That seems to have compressed over the last couple years, probably a function of demand. But what do you think's driving the sort of increased pace of first cycle syndication in the U.S. market?

Armando Nunez

The demand. I mean, it's very simple. I mean, the more demand there is, the more -- the quicker that sales process kind of consolidates.

Benjamin Swinburne - Morgan Stanley, Research Division

How do you feel about Elementary's syndication potential?

Armando Nunez

Look, it's early, it's only the first season. But obviously, it's the #1 new show of the season on any of the networks. And it's looking pretty positive. But again, it's -- we're just barely halfway through the first season.

Benjamin Swinburne - Morgan Stanley, Research Division

The other show I wanted to ask you about was The Good Wife, which is going to be syndicated, I believe, this year, this fall. It's a serialized or quasi-serialized show. What are your expectations for how you might structure or look to monetize that business?

Armando Nunez

We're working on that right now. We will have -- that show will unveil this year and more to come on that.

Benjamin Swinburne - Morgan Stanley, Research Division

Stay tuned.

Armando Nunez

Yes, stay tuned.

Benjamin Swinburne - Morgan Stanley, Research Division

The other business within the U.S. business, which is a highly profitable business, as you mentioned before, is your first-run syndication business. And with Oprah moving off of television, off of broadcast television to, as we heard from Discovery yesterday, her own cable network, there's been a lot written in the press about sort of the end of that business. But it's still a nice profit stream for you guys. Can you talk about first-run and how you manage it and what the growth outlook is?

Armando Nunez

Yes. Look, again, we're blessed that we have 7 of the top 10 shows in syndication. I mentioned some of them before. Like any business model in success, it's a very attractive model to us. It's -- again, with those industry-leading brands that we have, what we're focused on obviously is to continue to try to grow those brands, but at the same time, focusing on how to expand our presence in that space. And in daytime, obviously, it's a very crowded daytime universe. There were 5 new shows that were launched this past '12, '13 broadcast season. And again, from a core business perspective, we have the biggest and best brands in that space. And what we're now looking at, like the rest of CBS, is that focus on content, the focus of developing new content for that space. But in success, it's a very attractive model and continues to be an attractive model.

Benjamin Swinburne - Morgan Stanley, Research Division

I wanted to talk a little bit about the demand equation for cable networks. First-run's a bit more of a TV station customer base. What's the demand like with on the station side? Is that the business -- it's a little bit more of a challenged outlook in...

Armando Nunez

Here's the thing with stations. They only want the successful shows. So fortunately, we have most of the successful shows. So it's -- again, it really is -- again, when you're talking about the first-run syndicated content model, it's hard to -- like anything else, it's hard to launch a brand-new show. But when you establish brand-new shows and you're in a good place from a ratings perspective, like many of our shows, it's a very good place to be.

Benjamin Swinburne - Morgan Stanley, Research Division

Got it. Great. Let me ask you -- ask one more question and then we'll see if the audience has got any. Around the studio and the network relationship and how much -- we're seeing across industry, networks want to own their own shows as much as possible. And that's true at CBS. How are you guys thinking about optimizing the network programming so that you own the most in the way of back-end for your business?

Armando Nunez

Well, as you mentioned, we own a significant portion of our schedule. But Leslie has been very clear about that and has said -- but we're open to business to any other studio. Ultimately, you don't want to let your schedule be impacted by just having the network buy your own studio shows. Ultimately, you want to have as many people viewing our network and driving our ratings as possible. But Leslie has also been very clear in saying, in case of a tie, the tie goes to our own studio. But ultimately, you've got a network that you've got to program. And it's the same thing not only for CBS, but for Showtime, you've got to program. Then you've got to drive viewers to that network. So if it happens to come from another studio, certainly our networks are in business with all the other studios, as well as CBS Studios. From my own personal point of view, as they monetize through all this content, the more content we have, obviously, the more we get to monetize it. But Leslie's kind of view on that, he's made it very clear that it's -- you've got to drive the network business.

Benjamin Swinburne - Morgan Stanley, Research Division

So the best show wins?

Armando Nunez

Best show wins. Which is usually from our studio.

Benjamin Swinburne - Morgan Stanley, Research Division

Right. Let's see if we have any questions from the audience. And I'll ask if you could wait for a microphone. There's one right over there. I don't know, Armando, if you can see. Right there.

Unknown Analyst

Bloomberg News is reporting that CBS is seeking $1 billion in bond financing from Barclays. Any comment?

Benjamin Swinburne - Morgan Stanley, Research Division

Adam, you want a question on -- answer a question on bond financing? I think we're going to punt on that one. Let's see what other questions we have for Armando.

Unknown Analyst

So I guess, yesterday, TV Everywhere was kind of the theme that Ben mentioned that News Corp and Discovery both mentioned. I mean, how involved are you in those negotiations and -- because I would think that the amount of content that you provide to the distributors would have an impact on how much you can send -- sell into the digital windows as well.

Benjamin Swinburne - Morgan Stanley, Research Division

I'm sorry, what was the question?

Unknown Analyst

I guess, how involved are you with the network negotiations on that side of it?

Armando Nunez

Not -- me, personally, I'm not. Sorry.

Unknown Analyst

Can you talk a little bit about your agreement with Chellomedia? And then more broadly, sort of the total opportunity for CBS-branded channels internationally and maybe where you are on that trajectory?

Armando Nunez

Yes. So about 3 years ago, we entered into our first agreement with Chellomedia. Chellomedia is a division of Liberty Global. We entered into a partnership with Chello to rebrand a bouquet of 6 existing channels that they had in the United Kingdom. They were rebranded as CBS Drama, CBS Action, CBS Reality and Horror, and then there's 2 plus-1 channels. We've had a very good and successful run in rebranding those channels. Those channels are primarily driven on CBS library content. And then we recently, last year, announced an expansion of that venture into Eastern Europe and Africa. Again, we were taking a bouquet of existing channels and rebranding them under the CBS brand, primarily utilizing our library content. For CBS, our business in the channel business is basically another way of monetizing our content and also using our content as leverage to get into this -- into the channel business. We're not in the channel business. We're not utilizing a lot of cash in terms of acquiring channel assets or starting channel assets. We've been partnering with local partners who have local expertise and then looking to basically program these channels with a significant amount of our library content.

Benjamin Swinburne - Morgan Stanley, Research Division

Armando, can you see CBS producing shows directly or syndications directly at the studio level for SVOD players, sort of like a House of Cards model but CBS is the studio, down the road?

Armando Nunez

Yes, I think Leslie has said that before that, that model is not beyond possibility. Again, I think we view Netflix, Amazon, all of these SVOD platforms as -- they're a new player, they're a new platform. And if you can get the right model to work, I could see us doing that, yes.

Benjamin Swinburne - Morgan Stanley, Research Division

Great. I've got one in the front row.

Unknown Analyst

Well, how does -- I mean, Armando, how does House of Cards and this non-linear discussion, this non-linear type of programming, how does the production of House of Cards, and consumers' desire or maybe appetite to take this content non-linear, how does it change the discussion? You've been very clear the multiple screens have been -- the demand has been good for your business, I get it. But how does that change the discussion? How does that change what CBS does looking in the future or doesn't?

Armando Nunez

I don't think it does. I think that, again, it's not an either-or. Netflix or any SVOD platform clearly is not going to program or fill their pipeline of content just with original content. They can't. House of Cards, I think, has succeeded for Netflix because it's been a high-profile show that has gotten people to talk about Netflix. It's another version of how people talk about Homeland with Showtime. But that said, you still need to fill the pipeline with other content to drive the service. It's never just going to be obviously just one show. And I don't think it really changes the dynamic. I view what Netflix has done with House of Cards no different from the evolution, in a lot of ways, of many cable channels where many of these cable channels had a lot of library programming and then, with time, started to produce their own programming. So I don't really think it changes the model that much.

Benjamin Swinburne - Morgan Stanley, Research Division

I don't know if that's where you were headed with the question, but one of the things I get a lot asked about, and I think the press has gone bananas over the fact that this show is available. And it's -- it's basically binge view all at once. You talk about linear versus non-linear. And do you have a perspective on putting a show all on-demand all in one shot versus staggering?

Armando Nunez

Here's the thing. We're all -- we all think we're programming geniuses. So I'm sure there was healthy debate about putting 13 episodes all up at once versus rolling them out. All I can say, it seems that the way they've done it, it seems to accomplish their goals. But again, I don't know that there's any clear-cut right or wrong answer to that question about how to program that service.

Benjamin Swinburne - Morgan Stanley, Research Division

It's safe to say that Season 3 of Homeland is probably not all going on-demand right away?

Armando Nunez

No, it's -- no, I don't think so. Not yet.

Benjamin Swinburne - Morgan Stanley, Research Division

Got it. Okay. We probably have time for one more question, if there's one in the audience. All right. Well, I think we covered everything, Armando. Thanks so much.

Armando Nunez

Thanks, Ben. Thank you.

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