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ViacomCBS Inc. – ‘10-K’ for 12/31/19

On:  Thursday, 2/20/20, at 5:33pm ET   ·   For:  12/31/19   ·   Accession #:  813828-20-13   ·   File #:  1-09553

Previous ‘10-K’:  ‘10-K’ on 2/15/19 for 12/31/18   ·   Latest ‘10-K’:  This Filing   ·   37 References:   

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  As Of               Filer                 Filing    For·On·As Docs:Size

 2/20/20  ViacomCBS Inc.                    10-K       12/31/19  158:33M

Annual Report   —   Form 10-K   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

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 4: EX-10.CC    Material Contract                                   HTML     49K 
 5: EX-10.GG    Material Contract                                   HTML    187K 
 6: EX-10.HH    Material Contract                                   HTML     58K 
 7: EX-10.JJ    Material Contract                                   HTML    140K 
 8: EX-21       Subsidiaries List                                   HTML    233K 
 9: EX-23.A     Consent of Experts or Counsel                       HTML     43K 
10: EX-24       Power of Attorney                                   HTML     83K 
11: EX-31.A     Certification -- §302 - SOA'02                      HTML     48K 
12: EX-31.B     Certification -- §302 - SOA'02                      HTML     48K 
13: EX-32.A     Certification -- §906 - SOA'02                      HTML     42K 
14: EX-32.B     Certification -- §906 - SOA'02                      HTML     42K 
39: R1          Cover Page                                          HTML    107K 
116: R2          Consolidated Statements of Operations               HTML    163K  
139: R3          Consolidated Statements of Comprehensive Income     HTML     73K  
88: R4          Consolidated Balance Sheets                         HTML    163K 
40: R5          Consolidated Balance Sheets (Parenthetical)         HTML     55K 
117: R6          Consolidated Statements of Cash Flows               HTML    160K  
141: R7          Consolidated Statements of Cash Flows               HTML     49K  
                (Parenthetical)                                                  
91: R8          Consolidated Statements of Stockholders' Equity     HTML    105K 
38: R9          Basis of Presentation and Summary of Significant    HTML    162K 
                Accounting Policies                                              
80: R10         Property and Equipment                              HTML     64K 
29: R11         Programming and Other Inventory                     HTML     62K 
108: R12         Goodwill and Other Intangible Assets                HTML    282K  
129: R13         Restructuring, Programming Charges and Other        HTML    249K  
                Corporate Matters                                                
77: R14         Related Parties                                     HTML     60K 
26: R15         Acquisition and Investments                         HTML     85K 
105: R16         Debt                                                HTML    133K  
126: R17         Leases                                              HTML    297K  
81: R18         Financial Instruments                               HTML     56K 
25: R19         Fair Value Measurements                             HTML     96K 
104: R20         Stockholders' Equity                                HTML    141K  
157: R21         Stock-Based Compensation                            HTML    133K  
70: R22         Income Taxes                                        HTML    164K 
53: R23         Pension and Other Postretirement Benefits           HTML    436K 
101: R24         Redeemable Noncontrolling Interest                  HTML     60K  
154: R25         Segment and Revenue Information                     HTML    232K  
67: R26         Discontinued Operations                             HTML     92K 
50: R27         Commitments and Contingencies                       HTML    108K 
100: R28         Supplemental Financial Information                  HTML     81K  
158: R29         Quarterly Financial Data (Unaudited)                HTML    190K  
131: R30         Schedule II - Valuation and Qualifying Accounts     HTML    128K  
110: R31         Basis of Presentation and Summary of Significant    HTML    181K  
                Accounting Policies (Policies)                                   
21: R32         Basis of Presentation and Summary of Significant    HTML     95K 
                Accounting Policies (Tables)                                     
72: R33         Property and Equipment (Tables)                     HTML     64K 
134: R34         Programming and Other Inventory (Tables)            HTML     84K  
113: R35         Goodwill and Other Intangible Assets (Tables)       HTML    331K  
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                Corporate Matters (Tables)                                       
75: R37         Related Parties (Tables)                            HTML     56K 
130: R38         Acquisition and Investments (Tables)                HTML     60K  
114: R39         Debt (Tables)                                       HTML    119K  
147: R40         Leases (Tables)                                     HTML    167K  
92: R41         Financial Instruments (Tables)                      HTML     50K 
48: R42         Fair Value Measurements (Tables)                    HTML     97K 
64: R43         Stockholders' Equity (Tables)                       HTML    128K 
148: R44         Stock-Based Compensation (Tables)                   HTML    129K  
93: R45         Income Taxes (Tables)                               HTML    161K 
49: R46         Pension and Other Postretirement Benefits (Tables)  HTML    443K 
65: R47         Redeemable Noncontrolling Interest (Tables)         HTML     58K 
146: R48         Segment and Revenue Information (Tables)            HTML    264K  
94: R49         Discontinued Operations (Tables)                    HTML     96K 
119: R50         Commitments and Contingencies (Tables)              HTML     77K  
137: R51         Supplemental Financial Information (Tables)         HTML     82K  
90: R52         Quarterly Financial Data (Unaudited) (Tables)       HTML    190K 
37: R53         Basis of Presentation and Summary of Significant    HTML    126K 
                Accounting Policies (Narrative) (Details)                        
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                Accounting Policies (Change in Reporting Entity)                 
                (Details)                                                        
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                Accounting Policies (Property and Equipment)                     
                (Details)                                                        
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                Accounting Policies (Unrecognized Revenues Under                 
                Contract) (Details)                                              
36: R57         Basis of Presentation and Summary of Significant    HTML     53K 
                Accounting Policies (Net Earnings (Loss) per                     
                Common Share) (Details)                                          
115: R58         Basis of Presentation and Summary of Significant    HTML     43K  
                Accounting Policies (Recently Adopted Accounting                 
                Pronouncements Narrative) (Details)                              
138: R59         Property and Equipment (Details)                    HTML     83K  
60: R60         Programming and Other Inventory (Details)           HTML     82K 
45: R61         Goodwill and Other Intangible Assets (Narrative)    HTML     58K 
                (Details)                                                        
97: R62         Goodwill and Other Intangible Assets (Goodwill)     HTML     86K 
                (Details)                                                        
151: R63         Goodwill and Other Intangible Assets (Intangible    HTML     73K  
                Assets) (Details)                                                
59: R64         Goodwill and Other Intangible Assets (Amortization  HTML     44K 
                Expense) (Details)                                               
44: R65         Goodwill and Other Intangible Assets (Future        HTML     53K 
                Amortization Expense) (Details)                                  
96: R66         Restructuring, Programming Charges and Other        HTML     68K 
                Corporate Matters (Restructuring and Other                       
                Corporate Matters) (Details)                                     
150: R67         Restructuring, Programming Charges and Other        HTML     65K  
                Corporate Matters (Narrative) (Details)                          
62: R68         Restructuring, Programming Charges and Other        HTML     81K 
                Corporate Matters (Rollforward) (Details)                        
41: R69         Related Parties (Narrative) (Details)               HTML     55K 
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                Transactions) (Details)                                          
85: R71         Acquisition and Investments (Acquisitions           HTML     84K 
                Narrative) (Details)                                             
143: R72         Acquisition and Investments (Acquisition Purchase   HTML     71K  
                Price Allocation) (Details)                                      
121: R73         Acquisition and Investments (Investments            HTML     99K  
                Narrative) (Details)                                             
32: R74         Acquisition and Investments (Variable Interest      HTML     56K 
                Entities Narrative) (Details)                                    
86: R75         Debt (Schedule of Debt) (Details)                   HTML    174K 
144: R76         Debt (Narrative) (Details)                          HTML     94K  
122: R77         Debt (Maturities of Long-Term Debt) (Details)       HTML     58K  
35: R78         Debt (Commercial Paper Narrative) (Details)         HTML     55K 
83: R79         Debt (Credit Facility Narrative) (Details)          HTML     64K 
30: R80         Leases (Balance Sheet Amounts) (Details)            HTML     59K 
84: R81         Leases (Weighted Average) (Details)                 HTML     52K 
142: R82         Leases (Lease Cost) (Details)                       HTML     59K  
120: R83         Leases (Operating and Financing Cash Flows)         HTML     48K  
                (Details)                                                        
33: R84         Leases (Future Minimum Payments) (Details)          HTML     81K 
87: R85         Leases (Future Minimum Payments Prior to Adoption)  HTML     84K 
                (Details)                                                        
145: R86         Leases (Narrative) (Details)                        HTML     61K  
123: R87         Leases (Future Lease Income as Lessor) (Details)    HTML     56K  
34: R88         Financial Instruments (Details)                     HTML     65K 
82: R89         Fair Value Measurements (Details)                   HTML     67K 
61: R90         Stockholders' Equity (Narrative) (Details)          HTML     85K 
46: R91         Stockholders' Equity (Accumulated Other             HTML     88K 
                Comprehensive Income) (Details)                                  
98: R92         Stock-Based Compensation (Expense) (Details)        HTML     71K 
152: R93         Stock-Based Compensation (RSUs and PSUs) (Details)  HTML     91K  
58: R94         Stock-Based Compensation (Stock Options,            HTML     80K 
                Narrative) (Details)                                             
43: R95         Stock-Based Compensation (Stock Options,            HTML     57K 
                Black-Scholes Assumptions) (Details)                             
95: R96         Stock-Based Compensation (Stock-Options,            HTML     70K 
                Rollforward) (Details)                                           
149: R97         Stock-Based Compensation (Stock Options, Other      HTML     49K  
                Information) (Details)                                           
63: R98         Income Taxes (Income (Loss) from Continuing         HTML     48K 
                Operations) (Details)                                            
42: R99         Income Taxes (Provision for Income Taxes)           HTML     72K 
                (Details)                                                        
23: R100        Income Taxes (Narrative) (Details)                  HTML     92K 
74: R101        Income Taxes (Effective Income Tax Rate             HTML     85K 
                Reconciliation) (Details)                                        
133: R102        Income Taxes (Deferred Income Tax Assets and        HTML     88K  
                Liabilities) (Details)                                           
112: R103        Income Taxes (Unrecognized Tax Benefits) (Details)  HTML     57K  
22: R104        Pension and Other Postretirement Benefits (Change   HTML     87K 
                in Benefit Obligation) (Details)                                 
73: R105        Pension and Other Postretirement Benefits (Change   HTML     65K 
                In Plan Assets) (Details)                                        
132: R106        Pension and Other Postretirement Benefits (Funded   HTML     69K  
                Status of Pension and Postretirement Benefit                     
                Obligations) (Details)                                           
111: R107        Pension and Other Postretirement Benefits (Funded   HTML     65K  
                Status and Amounts Recognized in Accumulated Other               
                Comprehensive Income (Loss) on the Consolidated                  
                Balance Sheets) (Details)                                        
20: R108        Pension and Other Postretirement Benefits           HTML     50K 
                (Accumulated Benefit Obligation in Excess of Plan                
                Assets) (Details)                                                
76: R109        Pension and Other Postretirement Benefits           HTML    112K 
                (Components of Net Periodic Benefit Cost and                     
                Amounts Recognized in Other Comprehensive Income                 
                (Loss) (Details)                                                 
68: R110        Pension and Other Postretirement Benefits           HTML     77K 
                (Assumptions) (Details)                                          
51: R111        Pension and Other Postretirement Benefits           HTML     52K 
                (Sensitivity) (Details)                                          
102: R112        Pension and Other Postretirement Benefits (Plan     HTML     68K  
                Asset Allocations) (Details)                                     
155: R113        Pension and Other Postretirement Benefits (Fair     HTML    113K  
                Value Measurements) (Details)                                    
69: R114        Pension and Other Postretirement Benefits (Future   HTML     82K 
                Benefit Payments) (Details)                                      
52: R115        Pension and Other Postretirement Benefits           HTML     81K 
                (Multiemployer Pension and Postretirement Benefit                
                Plans) (Details)                                                 
103: R116        Pension and Other Postretirement Benefits (Defined  HTML     43K  
                Contribution Plans) (Details)                                    
156: R117        Redeemable Noncontrolling Interest (Details)        HTML     54K  
66: R118        Segment and Revenue Information (Revenues)          HTML    113K 
                (Details)                                                        
56: R119        Segment and Revenue Information (Operating Income   HTML    140K 
                (Loss)) (Details)                                                
106: R120        Segment and Revenue Information (Depreciation and   HTML     56K  
                Amortization) (Details)                                          
127: R121        Segment and Revenue Information (Capital            HTML     56K  
                Expenditures) (Details)                                          
78: R122        Segment and Revenue Information (Assets) (Details)  HTML     62K 
27: R123        Segment and Revenue Information (Revenue by Type)   HTML     70K 
                (Details)                                                        
107: R124        Segment and Revenue Information (Long-lived         HTML     47K  
                Assets) (Details)                                                
128: R125        Discontinued Operations (Narrative) (Details)       HTML     50K  
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                (Details)                                                        
28: R127        Commitments and Contingencies (Narrative)           HTML     62K 
                (Details)                                                        
109: R128        Commitments and Contingencies (Commitments)         HTML     93K  
                (Details)                                                        
125: R129        Commitments and Contingencies (Legal Matters        HTML     59K  
                Narrative) (Details)                                             
153: R130        Supplemental Financial Information (Components of   HTML     55K  
                Other Items, Net) (Details)                                      
99: R131        Supplemental Financial Information (Supplemental    HTML     59K 
                Cash Flow Information) (Details)                                 
57: R132        Quarterly Financial Data (Unaudited) (Details)      HTML    118K 
71: R133        Schedule II - Valuation and Qualifying Accounts     HTML     60K 
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‘10-K’   —   Annual Report
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Business
"Risk Factors
"Unresolved Staff Comments
"Properties
"Legal Proceedings
"Mine Safety Disclosures
"Our Board of Directors
"Information About Our Executive Officers
"Market for ViacomCBS Inc.'s Common Equity, Related Stockholder Matters and Purchases of Equity Securities
"Selected Financial Data
"Management's Discussion and Analysis of Results of Operations and Financial Condition
"Financial Statements and Supplementary Data
"Management's Report on Internal Control Over Financial Reporting
"Report of Independent Registered Public Accounting Firm
"Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
"Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
"Consolidated Balance Sheets at December 31, 2019 and 2018
"Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
"Consolidated Statements of Stockholders' Equity for the years ended December 31, 2019, 2018 and 2017
"Notes to Consolidated Financial Statements
"Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"113
"Controls and Procedures
"Other Information
"Directors, Executive Officers and Corporate Governance
"Executive Compensation
"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
"Certain Relationships and Related Transactions, and Director Independence
"Principal Accounting Fees and Services
"Exhibits, Financial Statement Schedules
"Form 10-K Summary
"II. Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018 and 2017
"Signatures

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM  i 10-K
 
 i 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended  i December 31, 2019
 
OR
 
 i 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from                                         to                                        
Commission File Number  i 001-09553
 i ViacomCBS Inc.
(Exact name of registrant as specified in its charter)
 i Delaware
 
 i 04-2949533
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 i 1515 Broadway
 
 
 i New York,
 i New York
 i 10036
 
( i 212)  i 258-6000
(Address, including zip code, and telephone numbers, including
area code, of registrant’s principal executive offices)
 
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbols
 
Name of Each Exchange on
Which Registered
 
 i Class A Common Stock, $0.001 par value
 i VIACA
 
 i The Nasdaq Stock Market LLC
 
 i Class B Common Stock, $0.001 par value
 i VIAC
 
 i The Nasdaq Stock Market LLC
 
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act of 1933).  i Yes     No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes      i No  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  i Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that registrant was required to submit such files).  i Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
 i Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 i 
 
Emerging growth company
 i 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes  i     No 
As of June 28, 2019, which was the last business day of the registrant’s most recently completed second fiscal quarter, the market value of the shares of the registrant’s Class A Common Stock, $0.001 par value (“Class A Common Stock”), held by non-affiliates was approximately $243,415,727 (based upon the closing price of $50.04 per share as reported by the New York Stock Exchange on that date) and the market value of the shares of the registrant’s Class B Common Stock, $0.001 par value (“Class B Common Stock”), held by non-affiliates was approximately $16,424,348,923 (based upon the closing price of $49.90 per share as reported by the New York Stock Exchange on that date); and the aggregate market value of the shares of both Class A Common Stock and Class B Common Stock held by non-affiliates was $ i 16,667,764,650.
As of February 14, 2020,  i 52,268,438 shares of Class A Common Stock and  i 561,471,552 shares of Class B Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of ViacomCBS Inc.’s Notice of 2020 Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 (Part III).
 
 
 
 
 




VIACOMCBS INC.

 
 
 
 
Page
 
 
 
 
 
 
 
PART I
 
 
Item 1.
 
 
I-2
 
 
 
 
 
Item 1A.
 
 
I-25
 
 
 
 
 
Item 1B.
 
 
I-39
 
 
 
 
 
Item 2.
 
 
I-39
 
 
 
 
 
Item 3.
 
 
I-40
 
 
 
 
 
Item 4.
 
 
I-40
 
 
 
 
 
 
 
 
I-40
 
 
 
 
 
 
 
 
I-41
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
Item 5.
 
 
II-1
 
 
 
 
 
Item 6.
 
 
II-3
 
 
 
 
 
Item 7.
 
 
II-4
 
 
 
 
 
Item 8.
 
 
II-47
 
 
 
 
 
Item 9.
 
 
II-113
 
 
 
 
 
Item 9A.
 
 
II-113
 
 
 
 
 
Item 9B.
 
 
II-113
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
Item 10.
 
 
III-1
 
 
 
 
 
Item 11.
 
 
III-1
 
 
 
 
 
Item 12.
 
 
III-1
 
 
 
 
 
Item 13.
 
 
III-1
 
 
 
 
 
Item 14.
 
 
III-1
 
 
 
 
 
 
 
PART IV
 
 
 
 
 
 
 
Item 15.
 
 
IV-1
 
 
 
 
 
Item 16.
 
 
IV-1
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I
Item 1.
Business.
OVERVIEW

ViacomCBS Inc. (“ViacomCBS”) is a leading global media and entertainment company that creates content and experiences for audiences worldwide. We operate through the following four segments:

TV Entertainment.  Our TV Entertainment segment creates and acquires programming for distribution and viewing on multiple media platforms, including our broadcast network, through multichannel video programming distributors (“MVPDs”) and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. TV Entertainment consists of the CBS Television Network, CBS Television Studios®, CBS Television Distribution®, CBS Interactive®, CBS Sports Network®, CBS Television Stations and CBS-branded streaming services CBS All Access® and CBSN®, among others.

Cable Networks.  Our Cable Networks segment creates and acquires programming for distribution and viewing on multiple media platforms, including our cable networks, through MVPDs and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. Cable Networks consists of our premium subscription cable networks Showtime®, The Movie Channel® and Flix®, and a subscription streaming offering of Showtime; our basic cable networks Nickelodeon®, MTV®, BET®, Comedy Central®, Paramount Network®, Nick Jr. ®, VH1®, TV Land®, CMT®, Pop TV and Smithsonian Channel, among others, as well as the international extensions of these brands operated by ViacomCBS Networks International(“VCNI”); international broadcast networks, Network 10®, Channel 5® and Telefe®; and Pluto TV, a leading free streaming TV platform in the United States (“U.S.”).

Filmed Entertainment.  Our Filmed Entertainment segment develops, produces, finances, acquires and distributes films, television programming and other entertainment content in various markets and media worldwide primarily through Paramount Pictures®, Paramount Players, Paramount Animation® and Paramount Television Studios.

Publishing.  Our Publishing segment publishes and distributes Simon & Schuster consumer books domestically and internationally and includes imprints such as Simon & Schuster®, Scribner, Atria Books® and Gallery Books®.

For the year ended December 31, 2019, contributions to our consolidated revenues from our segments were as follows: TV Entertainment 43%, Cable Networks 45%, Filmed Entertainment 10% and Publishing 3%.

Owners of our Class A Common Stock are entitled to one vote per share. Our Class B Common Stock does not have voting rights. ViacomCBS Class A and Class B Common Stock are listed on The Nasdaq Stock Market LLC.

As of December 31, 2019, National Amusements, Inc. (“NAI”), a closely held corporation that owns and operates movie screens in the U.S., the United Kingdom (“UK”) and South America and manages additional movie screens in South America, directly or indirectly owned approximately 79.4% of our voting Class A Common Stock, and approximately 10.2% of our Class A Common Stock and Class B Common Stock on a combined basis. NAI is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended.

We were organized as a Delaware corporation in 1986. Our principal offices are located at 1515 Broadway, New York, New York 10036. Our telephone number is (212) 258-6000 and our website is www.viacbs.com. Information included on or accessible through our website is not intended to be incorporated into this Annual Report on Form 10‑K. On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”), pursuant to an Agreement and Plan of Merger dated as of August 13, 2019, as amended on October 16, 2019 (the “Merger Agreement”). At the effective time of the Merger, we changed our


I-1


name to “ViacomCBS Inc.” Unless the context requires otherwise, references in this document to “ViacomCBS,” “Company,” “we,” “us” and “our” mean ViacomCBS Inc. and our consolidated subsidiaries, to “CBS” mean CBS Corporation and its consolidated subsidiaries prior to the Merger and to “Viacom” mean Viacom Inc. and its consolidated subsidiaries prior to the Merger.

TV ENTERTAINMENT

Overview

Our TV Entertainment segment consists of the CBS Television Network, our domestic broadcast network; CBS Television Studios and CBS Television Distribution, our television production and syndication operations; CBS Interactive, our online content services for information and entertainment; our CBS-branded streaming services CBS All Access, CBSN, CBS Sports HQ® and ET Live®; CBS Sports Network, our cable network focused on college athletics and other sports; and CBS Television Stations, our 29 owned broadcast television stations.

Our TV Entertainment segment’s revenues are generated primarily from advertising sales, the licensing and distribution of its content and affiliate revenues comprised of station affiliation fees, retransmission fees and subscription fees, as further described below. In 2019, our TV Entertainment segment advertising revenues, content licensing revenues and affiliate revenues were approximately 50%, 26% and 21%, respectively, of total revenues for this segment. Our TV Entertainment segment generated 43%, 41% and 39% of our consolidated revenues in 2019, 2018 and 2017, respectively.

cbslogoa02.jpg

The CBS Television Network, through CBS Entertainment, CBS News® and CBS Sports®, distributes a comprehensive schedule of news and public affairs broadcasts, sports and entertainment programming to more than 200 domestic television station affiliates reaching throughout the U.S., including 15 of our owned and operated television stations, and to affiliated stations in certain U.S. territories. The CBS Television Network primarily derives revenue from the sale of advertising time for its network broadcasts and affiliation fees from television stations affiliated with the CBS Television Network.

CBS Entertainment is responsible for acquiring or developing and scheduling the entertainment programming presented on the CBS Television Network, which includes primetime comedy and drama series, reality‑based programming, specials, children’s programs, daytime dramas, game shows and late-night programs such as The Late Show with Stephen Colbert. During 2019, the CBS Television Network broadcast the Tony Awards®, the Kennedy Center Honors and the Grammy Awards®. CBS won 21 awards at the 46th Annual Daytime Emmy® Awards in May 2019.

CBS News operates a worldwide news organization, providing the CBS Television Network and CBS News Radio® with regularly scheduled news and public affairs broadcasts, including 60 Minutes, 48 Hours, CBS Evening News, CBS This Morning, CBS Sunday Morning and Face the Nation as well as special reports.

CBS Sports broadcasts on the television network include PGA Tour golf tournaments, the Masters and the PGA Championship; the NCAA Division I Men’s Basketball Tournament and certain regular-season men’s college basketball games, including games from the Big Ten Conference; regular-season college football games, including games from the Southeastern Conference; and the NFL’s American Football Conference (“AFC”) regular-season, post-season wild card playoff, divisional playoff and championship games. In 2019, the CBS Television Network broadcast certain games under our agreement with the NFL to broadcast the AFC package through the 2022 season, which also includes the Super Bowl, which is broadcast on the CBS Television Network on a rotating basis with other networks. Our most recent Super Bowl broadcast was in February 2019 and our next Super Bowl broadcast will be in February 2021.


I-2



CBS Television Network content also is exhibited via the Internet, including through CBS.com, CBSSports.com® and related software applications (“apps”); our streaming services, such as CBSN and CBS All Access, which are further described below; and virtual MVPDs, such as AT&T TV Now, Hulu with Live TV and YouTube TV.

The CW, a broadcast network and our 50/50 joint venture with Warner Bros. Entertainment, airs programming, including Charmed and The Flash. Eight of our owned television stations are affiliates of The CW. Certain of The CW’s series are streamed on Netflix, a subscription video-on-demand service (“SVOD”), and are also available via The CW app on multiple digital platforms.

cbstelevisionstudios.jpg cbstelevisiondistribution.jpg

CBS Television Studios and CBS Television Distribution produce, acquire and/or distribute programming, including series, specials, news and public affairs, and generate revenue principally from the licensing and distribution of such programming. The programming is produced primarily for broadcast on network television, exhibition on basic cable and premium subscription services, streaming services or distribution via first-run syndication. First-run syndication is programming exhibited on television stations without prior exhibition on a network or cable service. We subsequently distribute programming after its initial exhibition on a network, basic cable network or premium subscription service for domestic exhibition on television stations, cable networks or streaming services (known as “off-network syndicated programming”). Off-network syndicated programming and first‑run syndicated programming distributed domestically, as well as programming distributed internationally, can sometimes be sold in successive cycles of sales known as “first cycle” sales, “second cycle” sales, and so on, which may occur on exclusive or non-exclusive bases.

Programming that our production group produced or co-produced and is broadcast on network television includes, among others, FBI (CBS), Evil (CBS) and Nancy Drew (The CW). In off-network syndication, we distribute series, such as Hawaii Five-O, Criminal Minds, Blue Bloods and NCIS: New Orleans as well as a library of older television programs. We also produce and/or distribute first-run syndicated series such as Jeopardy!, Entertainment Tonight, Inside Edition, Dr. Phil and Judge Judy and produce several series for streaming on CBS All Access, including The Good Fight, Star Trek: Discovery, Why Women Kill and Star Trek: Picard. We also distribute syndicated and other programming internationally.

cbsinteractive.jpg

CBS Interactive is one of the leading global publishers of premium content on the Internet, delivering this content via web properties, mobile properties and apps on mobile, as well as Internet-connected television and other device platform apps. CBS Interactive is ranked among the top Internet properties in the world according to comScore Media Metrix. CBS Interactive’s leading brands serve targeted audiences with text, video, audio, and mobile content spanning technology, entertainment, sports, news, business, gaming and music categories. CBS Interactive generates revenue principally from the sale of advertising and sponsorships, in addition to subscription fees, license fees and e-commerce activities.

CBS Interactive operates CBS.com, the online destination for CBS Television Network programming. Further extending the CBS.com experience, we offer a CBS app for on-demand streaming of various programs from our current network and library programming to users on multiple digital platforms. CBS Interactive operates CBSNews.com, the online destination for CBS News content, and offers an app for on-demand screening of current and library news programming and the content published on the website. CBS Interactive also operates CBSSportsDigital, the online destination for CBS Sports content, including CBSSports.com, which provides sports content, fantasy sports, and community and e-commerce features, and a related app for on-demand viewing of certain sports events broadcast on CBS and other sports information; Max Preps; and 247Sports.


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CBS Interactive also owns and operates other digital properties, including: CNET, one of the preeminent digital properties for technology and consumer electronics information; CNET en Espanol®; TVGuide Digital; GameSpot®; Last.fm®; and MetroLyrics.com®.

Under CBS Interactive, Viacom Digital Studios (“VDS”) and its international extension, Viacom Digital Studios International, produces original content for consumption across leading social platforms to build engagement with certain of our Cable Networks brands. VidCon®, an innovative conference and festival celebrating online video, drives additional growth at VDS and our live events business.

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Our CBS-branded streaming subscription services and advertiser-supported services feature general entertainment, news, sports and/or children’s programming and generate revenue from subscription fees and the sale of advertising on such services, respectively. The services are offered to customers through mobile and connected devices and third-party platforms. The below-described services are operated under CBS Interactive in collaboration with our other businesses.

CBS All Access is a streaming subscription service, which includes a commercial-free option for on-demand content. CBS All Access offers an extensive on-demand selection of both current and library programming and original series, such as The Good Fight, Star Trek: Discovery, Star Trek: Picard, Why Women Kill and The Twilight Zone series; and CBSN’s live and original news reporting and our other streaming services, as described further below, as well as the ability to stream live programming from local CBS Television Stations and certain CBS television station affiliates. All NFL games broadcast by the CBS Television Network as well as other CBS Television Network programming are streamed on CBS All Access platforms. CBS All Access also offers children’s programming, including original series and select Nickelodeon programming. CBS All Access is available at CBS.com and on multiple digital platforms and through CBS apps in the U.S. and Canada. A version of CBS All Access has launched internationally in Canada and 10 All Access in Australia includes programming from our Network 10 channels and certain of our other programming.

CBSN is a streaming live, advertiser-supported news network available 24 hours a day, seven days a week (“24/7”). Local versions of CBSN complement CBSN and stream local news from our owned television stations in major markets, including New York, Los Angeles, Philadelphia, San Francisco, Boston and Minneapolis. CBSN is available at CBSNews.com and on multiple digital platforms through the CBS News app and through CBS Television Stations’ websites and mobile apps.

CBS Sports HQ is a streaming live, advertiser-supported sports news and highlights service available 24/7; and ET Live is a streaming advertiser-supported service based on the Entertainment Tonight brand covering entertainment stories and trends available 24/7.

Through the CBS Audience Network, we deliver video content from our digital properties and television stations and affiliated television stations under an advertiser-supported distribution model to third-party digital properties. The growing slate of our content available online includes full episodes, clips and highlights based on our programming as well as original made-for-the-web content.

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CBS Sports Network is a 24/7 cable program service that provides a diverse slate of sports and related content, with a strong focus on college sports. CBS Sports Network derives revenue from carriage fees from MVPDs and virtual MVPDs and advertising sales. The network televises over 700 live professional, amateur and collegiate events


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annually, highlighted by Division I college football and basketball games, including games from the Big East Conference and Mountain West Conference. WNBA games and professional bull riding (PBR) and motor sports events. In addition, the network showcases a variety of original programming, including documentaries, features and studio shows, highlighted by NFL Monday QB, That Other Pre-Game Show (TOPS), Time to Schein and a first of its kind all-female panel sports talk show, We Need to Talk. CBS Sports Network also provides ancillary coverage for CBS Sports relating to major events, such as the NCAA Division I Men’s Basketball Tournament, Masters and PGA Championship, and for Showtime Networks relating to Showtime Championship Boxing. CBS Sports Network produces weekday simulcasts of the radio shows Boomer and Gio, Tiki and Tierney and The Jim Rome Show.

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The CBS Television Stations group consists of our 29 owned broadcast television stations, all of which operate under licenses granted by the Federal Communications Commission (“FCC”) pursuant to the Communications Act of 1934, as amended (the “Communications Act”). The licenses are renewable every eight years. The CBS Television Stations Group principally derives revenue from the sale of advertising on our television stations and fees for authorizing the MVPDs’ and vMVPDs’ carriage of our television stations, which are also known as retransmission fees.

Our television stations are located in the 6 largest, and 15 of the top 20, television markets in the U.S. We own multiple television stations within the same designated market area (“DMA”) in 10 major markets. These multiple station markets are: New York (market #1), Los Angeles (market #2), Philadelphia (market #4), Dallas-Fort Worth (market #5), San Francisco-Oakland-San Jose (market #6), Boston (market #9), Detroit (market #14), Miami-Ft. Lauderdale (market #16), Sacramento-Stockton-Modesto (market #20) and Pittsburgh (market #24). Our television stations enable us to reach a wide audience within and across geographically diverse markets in the U.S. The stations produce news and broadcast public affairs, sports and other programming to serve their local markets and offer CBS, The CW or MyNetworkTV programming and syndicated programming.

CBS All Access offers streamed live programming from local CBS Television Stations and most CBS television station affiliates. Local versions of CBSN offer streamed local news from our owned television stations in certain local markets. Our television stations have local websites which promote the stations’ programming. We also have agreements for the streaming of our owned television stations on virtual MVPDs. Our owned stations broadcast free, advertiser-supported digital channels using available broadcast spectrum, including local CBS and syndicated programming, Start TV, a national entertainment program service featuring classic television content focused on female audiences, which is an approximately 50/50 joint venture with Weigel Broadcasting, and Dabl featuring lifestyle programming.



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Television Stations, Local Websites and CBSN Streaming Services

The following table sets forth information regarding our owned television stations and related local websites and CBSN streaming services, as of February 18, 2020, within U.S. television markets:
Television
Market and Market Rank(1)
 
Stations
Type
Network Affiliation
Local Websites and
CBSN Streaming Services(2)
New York, NY (#1)
 
WCBS‑TV
UHF
CBS
newyork.cbslocal.com
 
 
WLNY‑TV
UHF
Independent
CBSN New York
 
 
 
 
 
 
Los Angeles, CA  (#2)
 
KCAL‑TV
VHF
Independent
losangeles.cbslocal.com
 
 
KCBS‑TV
UHF
CBS
CBSN Los Angeles
 
 
 
 
 
 
Chicago, IL (#3)
 
WBBM‑TV
VHF
CBS
chicago.cbslocal.com
 
 
 
 
 
 
Philadelphia, PA (#4)
 
KYW‑TV
UHF
CBS
philadelphia.cbslocal.com
 
 
WPSG‑TV
UHF
The CW
CBSN Philly
 
 
 
 
 
 
Dallas‑Fort Worth, TX (#5)
 
KTVT‑TV
UHF
CBS
dfw.cbslocal.com
 
 
KTXA‑TV
UHF
Independent
 
 
 
 
 
 
 
San Francisco, CA (#6)
 
KPIX‑TV
UHF
CBS
sanfrancisco.cbslocal.com
 
 
KBCW‑TV
UHF
The CW
CBSN Bay Area
 
 
 
 
 
 
Boston, MA (#9)
 
WBZ-TV
UHF
CBS
boston.cbslocal.com
 
 
WSBK-TV
UHF
MyNetworkTV
CBSN Boston
 
 
 
 
 
 
Atlanta, GA (#10)
 
WUPA-TV
UHF
The CW
atlanta.cbslocal.com
 
 
 
 
 
 
Tampa-St. Petersburg, FL (#12)
 
WTOG-TV
UHF
The CW
tampa.cbslocal.com
 
 
 
 
 
 
Seattle-Tacoma, WA (#13)
 
KSTW-TV
VHF
The CW
seattle.cbslocal.com
 
 
 
 
 
 
Detroit, MI (#14)
 
WKBD‑TV
UHF
The CW
detroit.cbslocal.com
 
 
WWJ‑TV
UHF
CBS
 
 
 
 
 
 
 
Minneapolis, MN (#15)
 
WCCO‑TV
UHF
CBS
minnesota.cbslocal.com
 
 
KCCW‑TV(3)
VHF
CBS
CBSN Minnesota
 
 
 
 
 
 
Miami-Ft. Lauderdale, FL (#16)
 
WFOR‑TV
UHF
CBS
miami.cbslocal.com
 
 
WBFS‑TV
UHF
MyNetworkTV
 
 
 
 
 
 
 
Denver, CO (#17)
 
KCNC‑TV
UHF
CBS
denver.cbslocal.com
 
 
 
 
 
 
Sacramento, CA (#20)
 
KOVR-TV
UHF
CBS
sacramento.cbslocal.com
 
 
KMAX-TV
UHF
The CW
 
 
 
 
 
 
 
Pittsburgh, PA (#24)
 
KDKA-TV
UHF
CBS
pittsburgh.cbslocal.com
 
 
WPCW-TV
VHF
The CW
 
 
 
 
 
 
 
Indianapolis, IN (#25)
 
WBXI-CA(4)
UHF
Independent
 
 
 
 
 
 
 
Baltimore, MD (#26)
 
WJZ‑TV
VHF
CBS
baltimore.cbslocal.com
 
 
 
 
 
 
(1)
Television market (DMA) rankings based on Nielsen Media Research Local Market Universe Estimates, September 2019.
(2)
Our television stations’ websites and the local versions of CBSN feature and promote the stations’ programming and provide news, traffic, weather, entertainment and sports information, among other services for their local communities.
(3)
KCCW-TV is operated as a satellite station of WCCO-TV.
(4)
WBXI-CA is a Class A low power television station. Class A low power television stations do not implicate the FCC’s ownership rules.



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CABLE NETWORKS

Overview

Our Cable Networks segment provides entertainment content, services and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. The Cable Networks segment also delivers advertising and marketing services, including those under our advanced marketing solutions portfolio, which both utilizes advanced addressable video inventory to allow dynamic ad insertion and advanced targeting, and provides our marketing partners with a variety of consulting and creative services and associated activations. The Cable Networks segment also licenses its brands and properties for consumer products and recreation experiences, produces live events and creates original programming for third-party distributors.

Our Cable Networks segment includes our premium subscription cable networks, Showtime, The Movie Channel and Flix; our basic cable networks, including Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TV and Smithsonian Channel; and the international extensions of our multimedia brands, and our program services created specifically for international audiences such as public service broadcaster (“PSB”) Channel 5® and Milkshake!® in the UK, Televisión Federal S.A., or Telefe®, in Argentina, COLORS® in India, Paramount Channel in various countries and international broadcast network Network 10® in Australia.

Our Cable Networks segment also develops and operates an extensive portfolio of digital and mobile experiences, including our streaming subscription offering of Showtime (“Showtime OTT”), Noggin, Nickelodeon’s preschool streaming subscription service, BET+, a subscription streaming service focused on Black audiences and consumers of Black culture, and Smithsonian Channel Plus.

Our studio production business is a global network of production studios producing premium episodic and film content across both our owned and operated platforms and for third parties. This business is primarily driven by Paramount Television Studios, Awesomeness, Nickelodeon, MTV and Comedy Central and utilizes our considerable intellectual property library to create long-form episodic content for third-party platforms.

Our Cable Networks segment’s revenues are generated primarily from affiliate revenues comprised of fees from MVPDs and virtual MVPDs for carriage of our cable networks and subscription fees from our streaming services; advertising sales; and the licensing of its content and brands. In 2019, our Cable Networks segment affiliate revenues, advertising revenues and content licensing revenues were approximately 49%, 41% and 10%, respectively, of total revenues for this segment. Our Cable Networks segment generated 45%, 46% and 47% of our consolidated revenues in 2019, 2018 and 2017, respectively.

Our most significant Cable Networks brands are discussed below.

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Our three commercial-free, premium subscription program services in the U.S. are Showtime (including Showtime OTT), which offers original scripted and unscripted series, recently released and other theatrical feature films, documentaries, sports-related programming, comedy and other specials, and special events; The Movie Channel, which offers recently released and other theatrical feature films and related programming; and Flix, which offers theatrical feature films primarily from the last several decades.

Programming highlights in 2019 included Showtime original series Billions, Ray Donovan, The L Word: Generation Q and Shameless, limited series The Loudest Voice, documentary features including Hitsville: The Story


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of Motown, documentary series including The Circus: Inside the Wildest Political Show on Earth, and various sports-related programs and documentary series including Inside the NFL. As of December 31, 2019, subscriptions to Showtime (including Showtime OTT) totaled approximately 27 million in the U.S., certain U.S. territories and Bermuda.

Showtime OTT allows subscribers to view on-demand programming as well as the live telecast of the east and west coast feeds of Showtime, and is available for purchase (without an MVPD video subscription) at showtime.com, through the Showtime app and from multiple digital platforms. Showtime Anytime®, an authenticated version of Showtime, is available online and, via certain Internet-connected devices, through the Showtime Anytime app, free of charge to Showtime subscribers as part of their Showtime subscription through participating distributors.

Showtime Networks also produces and/or provides special events on a pay-per-view basis available for purchase by both Showtime subscribers and non-subscribers through the Showtime app and third-party distributors, including the Manny Pacquiao vs. Adrien Broner boxing match in January 2019.

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Nickelodeon, now in its 40th year, is one of the most globally recognized and widely distributed multimedia entertainment brands for kids and family. Nickelodeon has been the number-one-rated ad-supported basic cable network for 24 consecutive years among kids 2 to 11. Nickelodeon features leading original and licensed series for kids across animation, live-action and preschool genres, and during the evening and overnight hours, the linear cable channel airs as Nick at Nite and features licensed family comedies. Nick Jr. entertains and educates preschoolers, engaging them with characters they love, building their imaginations and gaining key cognitive and social-emotional skills. Other Nickelodeon brands include TeenNick, Nicktoons and Nick Music.

Programming highlights in 2019 included Ryan’s Mystery Playdate, SpongeBob SquarePants, PAW Patrol, The Loud House, The Casagrandes, Henry Danger, Bubble Guppies, Blue’s Clues & You and Are You Smarter Than a 5th Grader? with John Cena and tentpole events such as Kids’ Choice Awards.

Nickelodeon is a key part of our global consumer products licensing business, licenses its brands for recreation experiences such as hotels and theme parks, and has numerous live and location-based experiences, such as JoJo Siwa’s D.R.E.A.M. The Tour, a multi-city live concert tour, its SlimeFest music festival in Chicago, multiple PAW Patrol live tours around the world, and Kids’ Choice Awards events in various international markets. In 2019, we acquired the entity holding global intellectual property rights to the Garfield franchise, including related to content, consumer products and location-based experiences. Noggin, Nickelodeon’s preschool subscription streaming service featuring over 1,000 full-length library episodes, interactive videos and short-form educational content, has an Amazon Prime Video Channel. In partnership with Paramount, Nickelodeon Movies produces branded films based on some of Nick’s most iconic franchises and characters.

Awesomeness creates programming for various social and SVOD platforms and produces premium original series and films through its Emmy®-winning dedicated television and film studios. Awesomeness’ portfolio is strengthened by a branded content sales team, a creator network, a creative agency and a roster of talent relationships. Programming highlights in 2019 included PEN15, which was nominated for a 2019 Emmy® for outstanding writing for a comedy series, season two of Light as a Feather on Hulu, and The Perfect Date and Trinkets on Netflix.

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MTV is the leading global youth media brand, with operations spanning cable and mobile networks, live events, theatrical films and MTV Studios.


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Programming highlights in 2019 included new series launches The Hills: New Beginnings and Double Shot at Love with DJ Pauly D and Vinny, returning favorites Teen MomMTV Floribama Shore, RidiculousnessWild ‘N OutAre You The One?, Siesta Key, The Challenge franchise and Jersey Shore: Family Vacation. The signature MTV hit Jersey Shore format has been adapted for our international audiences, with multiple versions around the world, including as Geordie Shore in the UK (now in its 20th season) and Acapulco Shore in Mexico, and some of our international programming formats have been imported to the U.S., such as Ex on the Beach, which originated in the UK and has become a global franchise with 14 local adaptations airing worldwide.

MTV’s signature programming event, the MTV Video Music Awards, in 2019 drew 5.5 million viewers across its live linear simulcast and 269 million video views from the launch of the VMA website through the day of the show. MTV’s annual tentpole programming events also include the MTV European Music Awards, MTV Movie and TV Awards, MTV MIAWs (celebrating the best in Latin music and the digital world of the millennial generation) and MTV Fandom Awards. In July 2019, MTV hosted its 13th annual Isle of MTV Malta concert and Malta Music Week events.

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BET is a leading consumer brand in the urban marketplace, and the nation’s leading provider of entertainment, music, news and public affairs programming to African American audiences. Other BET brands include BET Her, the first network designed for black women, delivering a wide variety of culturally relevant programming, BET Gospel, featuring gospel music and spiritual programming, and BET Hip Hop, spotlighting hip hop music programming and performances.

Programming highlights in 2019 included new series launches American Soul and Boomerang, and returning favorites such as Martin, House of Payne and Meet the Browns. BET’s tentpoles and live events in 2019 included the seventh annual BET Experience, BET’s weekend-long celebration of music, entertainment and Black culture featuring the 2019 BET Awards, which aired as the number one cable awards show for the fifth consecutive year among adults 18 to 49; Black Girls Rock; and BET Hip Hop Awards. BET’s programming received seven NAACP Image Awards nominations and two wins in 2019.

BET has a multi-year content partnership with award-winning writer, director, producer, actor and playwright Tyler Perry, that extends through 2024 and spans television, film and short-form video. In October 2019, The Oval and Sistas premiered, the first two series in the multi-year partnership. In 2019, BET and Tyler Perry launched BET+, an online SVOD service focused on Black audiences and consumers of Black culture and featuring more than 1,000 hours of advertising-free premium content, including original programming from Tyler Perry and exclusive series and other content from leading Black content creators.

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Comedy Central is a leading destination for comedic talent and all things comedy, providing viewers access to a world of funny, provocative and relevant comedy, ranging from award-winning late-night, scripted and animated series, to stand-up specials, short-form and sketch.

Programming highlights in 2019 included the launch of South Side, the network’s highest-rated series premiere since 2012 among African Americans 18 to 49; returning hits The Daily Show with Trevor NoahDrunk History and digital original Hack Into Broad City, each of which received several Emmy® nominations for outstanding series in their respective categories in 2019, South Park, which was renewed in September 2019 for three additional seasons, and the premieres of the critically-acclaimed scripted series The Other Two and sketch comedy Alternatino with Arturo Castro.


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Comedy Central also produces nationwide stand-up events and festivals, operates a Grammy Award-winning record label, produces a global podcast network and operates Comedy Central Radio on SiriusXM. In May 2019, Comedy Central launched Comedy Central Productions, a new studio-production arm partnering with comedy’s best writers, producers and on-screen talent to develop and distribute compelling, premium comedy content on all platforms. In June 2019, Comedy Central hosted its third annual Clusterfest, a three-day festival in San Francisco featuring world-class standup comedy, live music and experiential activities. Internationally, Comedy Central hosted the experiential events FriendsFest and Comedy Central Fest in a number of international markets.

Comedy Central’s strategic partnership with Trevor Noah’s production company, Day Zero Productions, gives us exclusive “first-look” rights on all projects developed by Day Zero Productions across television, feature films, digital and short-form video content.

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Paramount Network is a premium entertainment destination targeting adults 18 to 49 with original scripted and non-scripted series inspired by over a century of cinema, with stories that are immersive, inclusive and deeply personal. Programming highlights in 2019 included Yellowstone, starring Kevin Costner and written and directed by critically-acclaimed screenwriter Taylor Sheridan, which in its second season was cable’s most-watched scripted cable series of the summer. The network also featured the premiere of competition series The Last Cowboy, I Am Patrick Swayze, the most-watched episode of the network’s I Am documentary series, and new episodes of Ink Master, Bar Rescue and Bellator MMA.

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VH1 is a leading pop culture brand for adults 18 to 49 with an array of digital channels and services, including the VH1 app, VH1.com and @VH1. Programming highlights in 2019 included the critically-acclaimed original series RuPaul’s Drag Race, which received 14 Emmy® nominations and won four, including outstanding competition program and outstanding host; new series Girls’ Cruise with Lil’ Kim; and returning hits Love & Hip Hop, Black Ink Crew and Basketball Wives.

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TV Land features a mix of original programming, classic and contemporary television shows and specials that appeal to adults aged 25 to 54. Programming highlights in 2019 included the sixth season of Darren Star’s hit original series Younger, which was the number one rated ad-supported cable original sitcom among female viewers 18 to 49 and 25 to 54 for the third consecutive year.

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CMT is a leading country music and lifestyle destination, offering a mix of original series, music events and specials. Programming highlights in 2019 included the launch of Racing Wives; returning favorite Dallas Cowboys


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Cheerleaders; and tentpole events and music programming such as the CMT Music Awards, CMT Artists of the Year, CMT Hot 20 Countdown and CMT Crossroads.

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Smithsonian Channel features series and documentaries of a cultural, historical, and scientific nature. Smithsonian Channel content is available via MVPDs and virtual MVPDs in the U.S. and versions of Smithsonian Channel are distributed in Canada, Singapore, Brazil, Latin America, Africa, Asia and the UK. The website SmithsonianChannel.com and various apps promote Smithsonian Channel programming and provide information and entertainment services. Smithsonian Channel Plus is a streaming subscription service that allows subscribers to view on-demand programming, including 4K Ultra HD series and documentaries.

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Pop TV is a general entertainment basic cable service focused on producing and licensing popular culture programming, such as the Emmy®-nominated original series Schitt’s Creek and Critics Choice Award®-nominated original series One Day at a Time, and licensed CBS programming, including NCIS: New Orleans and Scorpion. Pop TV is also available via the Pop Now app.

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Network 10 is one of the three major free-to-air commercial broadcast networks in Australia. Network 10 includes the channels 10, 10 Bold and 10 Peach, which broadcast a mix of entertainment, drama, news and sports programming, such as Australian Survivor, Have You Been Paying Attention? and The Australian Formula 1 Grand Prix. Network 10 also includes the digital platforms 10 Play, 10 Daily as well as 10 All Access, our streaming subscription service in Australia featuring Network 10 programming as well as our other programming.

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Channel 5, a free-to-air PSB in the UK, and its affiliated channels air a broad mix of popular content, including factual programming, entertainment, reality, sports, acquired and original drama, and preschool programming through its award-winning Milkshake! brand. Programming highlights in 2019 included new dramas 15 Days, Blood and Agatha and the Truth of Murder, documentaries including RTS Programme Award winner The Abused and Suicidal: In Our Own Words, and critically acclaimed factual shows such as Critical Condition and Warship: Life at Sea.



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Telefe is a leading free-to-air channel and one of the biggest content producers in Argentina, with 11 studios and more than 3,500 hours of content produced each year. Telefe studios co-produced four films in 2019. Programming highlights in 2019 included La Voz Argentina (a local version of The Voice), Por el Mundo, 100 Días Para Enamorarse, PH: Podemos Hablar, Pequeña Victoria and Quien Quiere Ser Millonario (local version of Who Wants to be a Millionaire).

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Paramount+ is an advertising-free, premium video-on-demand service, featuring films from Paramount Pictures and hundreds of television episodes from ViacomCBS’ library. Available as an authenticated service or to customers of select subscription service providers, as of December 2019, Paramount+ was available in Sweden, Denmark, Norway, Finland, Hungary, Poland and across Latin America.

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COLORS is a highly-rated Hindi-language general entertainment pay television channel operated by our Viacom18 joint venture in India. COLORS is available in India and over 120 additional countries, including in the U.S. as Aapka Colors. COLORS also extends to the English language through COLORS Infinity, an English general entertainment channel, six Indian regional languages and two Hindi channels, COLORS Rishtey and COLORS Cineplex in the entertainment and movie space, respectively. Programming highlights in 2019 included the first season of Dance Deewane, a dance reality show; returning seasons of Bigg Boss, Fear Factor: Khatron Ke Khiladi, Naagin, Rising Star (India’s first-ever live singing reality show) and India’s Got Talent; and the 19th edition of the International Indian Film Academy (IIFA) Awards, Bollywood’s biggest awards extravaganza.

Viacom18 Studios, Viacom18’s filmed entertainment business, includes Viacom18 Motion Pictures, a fully-integrated motion pictures studio, and Tipping Point, a digital content unit. Viacom18 Motion Pictures also partners with Paramount to market and distribute Paramount films for theatrical exhibition in the Indian sub-continent.

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Pluto TV is a leading free streaming TV platform in the U.S. Pluto TV is available across mobile devices, desktops, streaming players and game consoles and is integrated across a growing number of Smart TVs and other video and broadband platforms.

With more than 22 million monthly active users in the U.S., the majority of whom are on connected TVs, and over 175 content partners, Pluto TV offers over 250 live linear channels and thousands of hours of on-demand content, including movies, news, sports, general entertainment, African Americans, kids and digital series. In July 2019, Pluto


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TV launched Pluto TV Latino, a suite of 22 channels streaming over 4,000 hours of programming in Spanish and Portuguese, including hit TV series and movies, sports, reality, lifestyle and more. In addition, Pluto TV is available in the UK, Germany, Austria and Switzerland, and plans to expand to Latin America and additional territories.

FILMED ENTERTAINMENT

Overview

Our Filmed Entertainment segment develops, produces, finances, acquires and distributes films, television programming and other entertainment content in various markets and media worldwide through its Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios divisions. It partners on various projects with key ViacomCBS brands, including Nickelodeon Movies, MTV Films® and BET Films.

Films produced, acquired and/or distributed by the Filmed Entertainment segment are generally first exhibited theatrically in domestic and/or international markets and then released in various markets through airlines and hotels, electronic sell-through, DVDs and Blu-ray discs, transactional video-on-demand (“TVOD”), pay television, SVOD, basic cable television, free television and free video-on-demand (“FVOD”).

Our Filmed Entertainment segment’s revenues are generated primarily from the release and/or distribution of films theatrically, the release and/or distribution of film and television product through home entertainment, the licensing of film and television product to television and digital platforms and other ancillary activities. In 2019, our Filmed Entertainment segment licensing revenues, home entertainment revenues and theatrical revenues were approximately 57%, 21% and 18%, respectively, of total revenues for this segment. Our Filmed Entertainment segment generated 10%, 11% and 12% of our consolidated revenues in 2019, 2018 and 2017, respectively.

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Paramount Pictures is a major global producer and distributor of filmed entertainment and has an extensive library consisting of approximately 1,300 film titles produced by Paramount, acquired rights to approximately 2,100 additional films and a number of television programs. Paramount’s library includes many Academy Award winners, including Titanic, Braveheart, Forrest Gump, The Godfather, The Godfather Part II and Wings, which won the first Academy Award ever awarded for Best Picture in 1929. The Paramount library also includes other Academy Award Best Picture nominees such as Arrival, Fences, The Big Short, Selma and The Wolf of Wall Street, classics such as The Ten Commandments, Breakfast at Tiffany’s and Sunset Boulevard, and a number of successful franchises such as Mission: Impossible, Transformers, Star Trek and Paranormal Activity. In 2019, Paramount’s theatrical releases included Terminator: Dark Fate, Rocketman, Gemini Man, Pet Sematary, Crawl and Playing with Fire.

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Paramount Players aims to expand Paramount’s slate of films by partnering with our Cable Networks brands to develop, produce and release distinctive feature films that showcase the network brands to movie audiences worldwide. Paramount Players also focuses on modest budget films of specific genres for target audiences. In 2019, Paramount


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Players produced Dora and the Lost City of Gold, a live-action adaptation of the classic Nickelodeon series Dora the Explorer, co-produced with Nickelodeon Movies.

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Paramount Animation creates high-quality animated films and aims to release one to two titles per year. In 2019, Paramount Animation released Wonder Park, a film about the adventures of a young girl in a magical amusement park.

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Paramount Television Studios develops and finances a wide range of original, premium television content across all types of media platforms for distribution worldwide. Paramount Television Studios’ productions include Tom Clancy’s Jack Ryan for Amazon; 13 Reasons Why for Netflix; The Alienist and The Angel of Darkness for TNT; Catch-22 for Hulu; Defending Jacob for Apple; Boomerang and First Wives Club for BET and BET+, respectively; and Berlin Station for EPIX. In 2019, Paramount Television Studios’ programming received seven Emmy® nominations.

Film Production, Distribution and Financing

Paramount produces many of the films it releases and also acquires films for distribution from third parties. In some cases, Paramount co-finances and/or co-distributes films with third parties, including other studios. Paramount also enters into film-specific financing and slate financing arrangements from time to time under which third parties participate in the financing of the costs of a film or group of films in exchange for an economic participation and a partial copyright interest. Paramount distributes films worldwide or in select territories or media, and may engage third-party distributors for certain pictures in certain territories.

Paramount has several multi-picture production, distribution and financing relationships, including its agreement with Skydance Productions (“Skydance”), under which Paramount and Skydance produce and finance certain films, and Paramount has a first look on Skydance-initiated projects. Paramount also has an agreement with Hasbro Inc. (“Hasbro”) involving the production, financing and distribution of live action and animated films based on Hasbro’s expansive list of properties. In December 2019, in connection with ViacomCBS’ entry into an agreement to acquire a 49% interest in Miramax, Paramount and Miramax entered into first-look, co-financing and distribution agreements under which they will collaborate on production and financing of new film and television projects, and Paramount will distribute such new projects, as well as Miramax library content.

Domestically, Paramount generally performs marketing and distribution services for theatrical releases and sales and marketing services for its home entertainment releases. Paramount has an agreement with Universal Studios for certain back-office and distribution services for all physical DVD and Blu-ray discs released by Paramount in the U.S. and Canada. Paramount also distributes CBS’ television and other library content and Nickelodeon television shows on DVD and Blu-ray disc on a worldwide basis. Internationally, Paramount generally distributes its theatrical releases through its own international affiliates or, in territories where it does not have an operating presence, through United International Pictures, a joint venture with Universal Studios. For home entertainment releases, Paramount’s physical DVD and Blu-ray discs are distributed in certain international territories by Universal Pictures Home


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Entertainment and in certain other territories by Paramount licensees. Paramount also distributes films and television shows domestically and internationally on electronic sell-through, TVOD, SVOD, FVOD and television platforms. In the first domestic pay television distribution window, Paramount’s feature films initially theatrically released in the U.S. are generally exhibited on EPIX.

Producing, marketing and distributing films and television programming can involve significant costs, and the timing of a film’s release can cause our financial results to vary. For example, marketing costs are generally incurred before and throughout the theatrical release of a film and, to a lesser extent, other distribution windows, and are expensed as incurred. As a result, we typically incur losses with respect to a particular film prior to and during the film’s theatrical exhibition, and recoupment of investment as well as profitability for the film may not be realized until well after its theatrical release. Therefore, the results of the Filmed Entertainment segment can be volatile as films work their way through the various distribution windows.

PUBLISHING

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Our Publishing segment consists of Simon & Schuster, which publishes and distributes adult and children’s consumer books in printed, digital and audio formats in the U.S. and internationally. Its digital formats include electronic books and audio books.

Simon & Schuster’s major adult imprints include Simon & Schuster, Scribner, Atria Books and Gallery Books. Simon & Schuster’s major children’s imprints include Simon & Schuster Books For Young Readers, Aladdin® and Little Simon®. Simon & Schuster also develops special imprints and publishes titles based on the products of certain of our businesses as well as those of third parties and distributes products for other publishers. Simon & Schuster distributes its products directly and through third parties. Simon & Schuster also delivers content and promotes its products on its own websites, social media, and general Internet sites as well as those dedicated to individual titles. International publishing includes the international distribution of English-language titles through Simon & Schuster in the UK, Canada, Australia and India and other distributors, as well as the publication of locally originated titles by its international companies.

In 2019, Simon & Schuster had 200 New York Times bestsellers in hardcover, paperback, audio and combined print and ebook formats, collectively, including 21 New York Times #1 bestsellers. Best-selling titles in 2019 included Howard Stern Comes Again by Howard Stern, The Institute by Stephen King and The Pioneers by David McCullough. Best-selling children’s titles included Dork Diaries 14: Tales from a Not-So-Best Friend Forever by Rachel Renée Russell and Red Scrolls of Magic by Cassandra Clare. Simon & Schuster Digital, through SimonandSchuster.com, publishes original content, builds reader communities and promotes and sells Simon & Schuster’s books over the Internet.

Our Publishing segment’s revenues are generated from the publishing and distribution of consumer books in print, digital and audio formats. In 2019, the sale of digital content represented approximately 25% of Publishing’s revenues. Our Publishing segment generated 3% of our consolidated revenues in each of 2019, 2018 and 2017.

REVENUES

Our TV Entertainment, Cable Networks, Filmed Entertainment and Publishing segments generate advertising revenues, affiliate revenues, content licensing revenues, theatrical revenues and publishing revenues. For additional information regarding our sources of revenues, see “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition – Consolidated Results of Operations – 2019 vs. 2018 – Revenues” and “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements.” For information regarding seasonal factors affecting our revenues, see “Item 1A. Risk Factors – Our revenues, expenses and operating


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results may vary based on the timing, mix, number and availability of our films and other programming and on seasonal factors.”

Advertising

Advertising revenues are generated primarily from the sale of advertising spots on the CBS Television Network, our basic cable networks and our television stations, as well as on our ad-supported streaming services, including CBS All Access and Pluto TV, and on our websites. Our advertising revenues include integrated marketing services, which provide unique branded content and custom sponsorship opportunities to our advertisers, as well as advanced marketing solutions, including addressable video and brand solutions.

Affiliate

Affiliate revenues are principally comprised of fees received from MVPDs and virtual MVPDs for carriage of our cable networks, fees received from television stations affiliated with the CBS Television Network, fees for authorizing the MVPDs’ and virtual MVPDs’ carriage of our owned television stations, and subscription fees for our streaming services.

Content Licensing

Content licensing revenues are principally comprised of fees from the licensing of exhibition rights for our internally-produced television and film programming to television stations, cable networks and SVOD and FVOD services; home entertainment revenues, which are derived from the sale and distribution of our content through DVDs and Blu-ray discs to wholesale and retail partners, as well as from the viewing of our content on a transactional basis through TVOD and electronic sell-through services; fees from the use of our trademarks and brands for consumer products, recreation and live events, and fees from the distribution of third-party programming.

Theatrical

Theatrical revenues are principally comprised of the worldwide theatrical distribution of films through audience ticket sales.

Publishing

Publishing revenues are principally comprised of the domestic and international publishing and distribution of consumer books in printed, digital and audio formats.

COMPETITION

All of our businesses operate in highly competitive environments, and compete for creative talent and intellectual property, as well as audience and distribution of our content.

Our TV Entertainment, Cable Networks and Filmed Entertainment segments compete with a variety of media companies that have substantial resources to produce and acquire content worldwide, including broadcast networks, basic and premium cable networks, streaming services, film and television studios, production groups, independent producers and syndicators, television stations and television station groups. These segments compete with other content creators for creative talent including producers, directors, actors and writers, as well as for new program ideas and intellectual property and for the acquisition of popular programming. Similarly, our Publishing segment competes with large publishers for the rights to works by authors, and competition is particularly strong for well-known authors and public personalities.

Our businesses also face significant competition for audience share from various sources. Our Filmed Entertainment segment competes for audiences for its theatrical films with releases by other major film studios, television producers and streaming services as well as with other forms of entertainment and consumer spending


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outlets. Our TV Entertainment and Cable Networks segments compete for audiences and advertising revenues primarily with other cable and broadcast television networks; social media platforms; websites, apps and other online experiences; radio programming; and print media. In addition, our television and basic cable networks businesses face increasing competition from technologies providing digital audio and visual content in ways that allow audiences to consume content of their choosing while avoiding traditional commercial advertising.   Moreover, our businesses face competition from the many other entertainment options available to consumers including video games, sports, travel and outdoor recreation.

We also face competition for distribution of our content. Our TV Entertainment and Cable Networks segments compete for distribution of our program services (and receipt of related fees) with other broadcast networks, cable networks and programmers. The CBS Television Network also competes with other broadcast networks to secure affiliations with independently owned television stations to ensure the effective distribution of network programming nationwide. Our TV Entertainment, Cable Networks and Filmed Entertainment segments compete with studios and other producers of entertainment content for distribution on third party platforms. Our Publishing segment competes with large publishers for sales to retailers, and mass merchandisers and on-line retailers have contributed to a general trend toward consolidation in the retail channel. In addition, the growth of the electronic book market has impacted print book retailers and wholesalers, and could result in a reduction of these channels for the sales and marketing of our books.

For additional information regarding competition, see “Item 1A. Risk Factors – Our businesses operate in industries that are highly competitive and swiftly consolidating.”

ENVIRONMENTAL, SOCIAL AND GOVERNANCE STRATEGY

ViacomCBS is committed to responsible and sustainable business practices, which strengthen our ability to innovate and better serve our partners, audiences and stockholders. We are proactively identifying, measuring and mapping the environmental, social and governance (“ESG”) impacts of our global operations and are working to manage and report on various non-financial ESG impacts in an effort to transparently address them with stakeholders.

As content creators, we are passionate about entertaining and informing the world and are committed to our legacy of creating lasting impact through our work. From groundbreaking HIV awareness initiatives to campaigns supporting education, the empowerment of women and youth, health issues and the military, veterans and their families, we have always strived to be at the forefront of championing the causes that matter to our audiences. Today, we continue to leverage our brands and our global reach to amplify the efforts of those who are working to make positive changes in their communities. Striving to be a good corporate citizen and to make a positive impact in communities around the world is fundamental to what we do every day. Below are just a few examples of our efforts:

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We continue to use the immense power of our media platforms to heighten social awareness on important issues through our award-winning CBS Cares public service announcement (“PSA”) campaigns. In 2019, the CBS Television Network scheduled CBS Cares PSAs with an estimated value of $276 million and featuring a wide array of CBS talent on a variety of important topics such as heritage and history months, child advocacy, empowerment of women and girls, support for the military, veterans and their families, and health awareness. Examples include:

We and Girls Inc. created a PSA that aired in-game during the CBS Television Network’s Super Bowl LIII coverage, and post-game on the CBS Sports Network. Featuring the voiceover of CBS This Morning’s Gayle King and players from the NY Giants, the PSA encourages girls to believe they can succeed at the highest levels.



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We produce and air annual PSAs as part of our commitment to honor the victims of the Holocaust on International Holocaust Remembrance Day.

We and the Association of National Advertisers again teamed up for a multi-pronged partnership in support of the #SeeHer initiative to accurately portray girls and women in media. Supporting PSAs ran in primetime as part of Women’s History Month and featured Norah O’Donnell, Gayle King, Tea Leoni, Carrie Ann Inaba and others.

CBS Cares tackled the issue of sexual harassment, by continuing to air PSAs featuring Bridget Moynahan, Daniela Ruah and Aisha Tyler.

PSAs featuring Shemar Moore, Aisha Tyler, Sara Gilbert and Sheryl Underwood continued to air, teaching children about the importance of other cultures, races and religions, and emphasizing that we are all enriched by our differences.

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Get Schooled inspires and empowers students nationwide to thrive in high school, college and their first jobs through a unique blend of powerful digital content, gamification and personalized support. In its 10-year history, Get Schooled has partnered with over 15,000 educators and their students, and has been recognized by Fast Company as a “Most Innovative Company.”

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The Save The Music Foundation helps kids, schools, and communities realize their full potential through the power of making music. Founded in 1997, Save The Music partners with school districts and raises funds to restore music programs in public schools. Since inception, we have donated over $58 million worth of new musical instruments and technology to 2,159 schools in 276 school districts around the country, impacting the lives of countless students.

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Beyond the Backpack is a celebration of Nickelodeon’s curriculum-based preschool properties. The initiative champions kindergarten and pre-k readiness by providing fun, simple and unique tools to address the five areas identified as critical to educational success: Family Engagement, Health & Wellness, Literacy Skills, Social & Emotional Skills, and STEAM (Science, Technology, Engineering, Arts and Math) Skills. Beyond the Backpack reinforces the academic community’s view that parents and caregivers are their child's first teachers and that it is never too early to start getting ready. In 2019, Nickelodeon donated 75,000 printed toolkits and 2,500 backpacks full of school supplies.



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Paramount has a long and proud tradition of giving back with a corporate social responsibility program focused on four key initiatives: supporting public education; protecting the environment; combating HIV/AIDS; and promoting volunteerism. By offering employee engagement opportunities, coupled with financial and in-kind contributions, Paramount supports numerous local, national, and global non-profit organizations. Kindergarten to Cap & Gown - Paramount’s signature education program - mentors students through their educational experience, targeting four partner schools in Paramount’s Los Angeles neighborhood.

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In 2019, Paramount Network debuted the first installments of Take Action - a short-form digital documentary series addressing important social issues related to our content themes. We believe that stories of individual volunteers and activists have the power to connect us, inspire action and, ultimately, create real change. Each film includes a call-to-action, partnering with a nonprofit organization to give the audience the opportunity to learn more and take action themselves.

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The MTV Staying Alive Foundation produces multi-award-winning, impactful behavior change campaigns to further its purpose of storytelling to save lives and enable young people to make empowered, informed choices about their health and wellbeing.

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Our robust Veterans Network (“VetNet”) engages in multiple programs and supports numerous veteran-related causes. Among its activities in 2019, VetNet worked with our legal teams to provide more than 4,000 hours of critical, pro-bono legal assistance to more than 200 veterans and their families, representing approximately $1.5 million of legal fees donated; hosted a virtual career advice event for veterans in partnership with American Corporate Partners; worked with partners to provide mentorship and internships for 850 veterans; and collected more than 100,000 donations, including toys for veteran families and toiletries for the homeless.

REGULATION AND PROTECTION OF OUR INTELLECTUAL PROPERTY

We are, fundamentally, a content company, so the trademark, copyright, patent and other intellectual property laws that protect our brands and content are of paramount importance to us. Our businesses and the intellectual property they create or acquire are subject to and affected by laws and regulations of U.S. federal, state and local governmental authorities, as well as laws and regulations of countries other than the U.S. and pan-national bodies such as the European Union (“EU”). The laws and regulations affecting our businesses are constantly subject to change, as are the protections that those laws and regulations afford us. The discussion below describes certain, but not all, present and proposed laws and regulations affecting our businesses.



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FCC and Similar Regulation

General. Broadcast television and certain aspects of cable programming are subject to the jurisdiction of the FCC pursuant to the Communications Act. The Communications Act empowers the FCC, among other actions, to issue, renew, revoke and modify broadcasting licenses; penalize broadcasters for airing indecent or profane content; regulate the airing of emergency alerting and the use of emergency alerting tones by broadcasters or cable channels; require video programming to be accessible to persons with disabilities; determine stations’ frequencies, locations and operating power; and impose penalties for violation of its regulations, including monetary forfeitures, short-term renewal of licenses and, in egregious cases, license revocation or denial of license renewals.

Under the Communications Act, the FCC also regulates certain aspects of the operation of MVPDs and certain other electronic media that compete with broadcast stations and cable programming.

We provide below a brief summary of certain laws and FCC regulations under which we operate.

License Renewals. Television broadcast licenses are typically granted for standard terms of eight years. The Communications Act requires the FCC to renew a broadcast license if the FCC finds that the station has served the public interest, convenience and necessity and, with respect to the station, there have been no serious violations by the licensee of either the Communications Act or the FCC’s rules and regulations and there have been no other violations by the licensee of the Communications Act or the FCC’s rules and regulations that, taken together, constitute a pattern of abuse. We have no pending renewal applications, but we will be filing renewal applications with respect to all of our stations on a staggered basis between 2020 and 2023. A station remains authorized to operate while its license renewal application is pending.

License Assignments and Transfers of Licensee Control. The Communications Act requires prior FCC approval for the assignment of a license or transfer of control of an FCC licensee. Third parties may oppose our applications to assign, acquire, or transfer control of broadcast licenses.

Ownership Regulation. The Communications Act and FCC rules and regulations limit the ability of individuals and entities to have certain official positions or ownership interests, known as “attributable” interests, above specific levels in broadcast stations. In seeking FCC approval for the acquisition of a broadcast station license, the acquiring person or entity must demonstrate that the acquisition complies with the FCC’s ownership rules or that a waiver of the rules is in the public interest.

Below are descriptions of broadcast ownership rules. The FCC is reviewing its local television ownership and dual network rules through its most recent quadrennial review that commenced in November 2018 and is separately reviewing its television national audience reach rule. The FCC had relaxed certain of these rules in 2017, but in November 2019, a federal appellate court vacated that 2017 action and ordered the FCC to conduct further proceedings.

Local Television Ownership. The FCC’s local television ownership rule limits the number of full-power television stations that may be commonly owned in the same DMA. For example, common ownership of two full-power stations in a market generally is allowed only if at least eight independently owned and operating full-power stations will remain in the market following the acquisition of the second station, and if at least one of the stations is outside of the top-four ranked stations in the market based on audience share.

Dual Network Rule. The dual network rule prohibits any of the four major networks, ABC, CBS, FOX and NBC, from combining or being under common control.

Television National Audience Reach Limitation. Under the national television ownership rule, one party may not own television stations that reach more than 39% of all U.S. television households, although under current FCC rules a UHF station is attributed with reaching only 50% of the television households in its market. In December 2017, the FCC issued a Notice of Proposed Rulemaking pursuant to which it will consider modifying, retaining or eliminating the 39% national television audience reach limitation and/or the UHF


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discount. We currently own and operate television stations that reach approximately 38% or 25% of all U.S. television households on an undiscounted or discounted basis, respectively.

Cross-ownership restrictions. FCC “cross-ownership” rules reinstated as a result of a decision by a federal appellate court (a) prohibit common ownership of one or more broadcast stations (whether radio or television) and a daily newspaper in the same DMA, and (b) limit the number of radio and television broadcast stations that may be commonly owned in a given DMA. We do not currently own cognizable interests in any daily newspapers or radio broadcast stations.

Alien Ownership. In general, the Communications Act restricts foreign individuals or entities from collectively owning more than 25% of our voting power or equity. FCC approval is required to exceed the 25% threshold. The FCC has recently approved foreign ownership levels of up to 100% in certain instances, subsequent to its review and approval of specific, named foreign individuals.

Cable and Satellite Carriage of Television Broadcast Stations. The Communications Act and FCC rules govern the retransmission of broadcast television stations by cable system operators, direct broadcast satellite operators, and other MVPDs. Pursuant to these regulations, we have elected to negotiate with MVPDs for the right to carry our broadcast television stations pursuant to retransmission consent agreements. Federal law requires that broadcasters and MVPDs negotiate in good faith for retransmission consent. Some MVPDs have sought changes to federal law that would eliminate or otherwise limit the ability of broadcasters to obtain fair compensation for the grant of retransmission consent.

National Broadband Plan/Post-Auction Repack. In 2017, the FCC concluded a series of voluntary auctions to repurpose certain spectrum then utilized by broadcast television stations for use by wireless broadband services. The FCC has mandated that certain television stations that are continuing to operate subsequent to these auctions must change their channels as the FCC “repacks” the remaining spectrum dedicated to broadcast television use. Congress provided that the FCC will assist television stations in retaining their current coverage areas and established a fund to at least partially reimburse broadcasters for reasonable relocation expenses relating to the spectrum-repacking. Certain broadcast television stations, including some of those owned by us, are in the process of undertaking this repacking process and seeking reimbursement of associated costs.

Program Regulation. The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material between the hours of 6 a.m. and 10 p.m. The FCC’s maximum forfeiture penalty per station for broadcasting indecent or profane programming is approximately $415,000 per indecent or profane utterance, with a maximum forfeiture exposure of approximately $3.83 million for any continuing violation arising from a single act or failure to act. FCC regulations also prohibit broadcast television stations and cable networks from transmitting or causing the transmission of Emergency Alert System (“EAS”) tones in the absence of an actual emergency, authorized test of the EAS, or a qualified public service announcement. In September 2019, the FCC issued a Notice of Apparent Liability for Forfeiture finding that a CBS Television Network program broadcast in April 2018 violated the EAS rule and imposed a forfeiture of $272,000, which we timely paid.

Broadcast Transmission Standard. In November 2017, the FCC adopted rules to permit television broadcasters to voluntarily broadcast using the “Next Generation” broadcast television transmission standard developed by the Advanced Television Systems Committee, Inc., also called “ATSC 3.0.” Those full-service television stations using the new standard are subject to certain requirements, including the obligation to continue broadcasting a generally identical program stream in the current ATSC 1.0 broadcast standard. The ATSC 3.0 standard can be used to offer better picture quality and improved mobile broadcast viewing. A television station converting to ATSC 3.0 operation will incur significant costs in equipment purchases and upgrades. In addition, consumers may be required to obtain new television sets or other equipment that are capable of receiving ATSC 3.0 broadcasts. We are participating in various ATSC 3.0 testing with other broadcasters, but it is too early to predict any impact of this technical standard on our operations.

Children’s Programming. Our business is subject to various regulations, both in the U.S. and abroad, applicable to children’s programming. Since 1990, federal legislation and rules of the FCC have limited the amount and content


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of commercial matter that may be shown on broadcast television stations and cable channels during programming designed for children 12 years of age and younger, and since 2006 the FCC has limited the display of certain commercial website addresses during children’s programming. Moreover, each of our broadcast television stations is required to air, in general, three hours per week of educational and informational programming (“E/I programming”) designed for children 16 years of age and younger, with at least two of those three hours appearing on the station’s primary program stream. The FCC made certain modifications to its E/I programming rules in 2019, which provided additional flexibility to broadcasters with respect to certain aspects of these rules.

In addition, some policymakers have sought limitations on food and beverage marketing in media popular with children and teens. For example, restrictions on the television advertising of foods high in fat, salt and sugar (“HFSS”) to children aged 15 and under have been in place in the UK since 2007. The UK government is currently considering tighter controls, including a ban on all HFSS advertising before 9:00 p.m. Various laws with similar objectives have also been enacted in Ireland, Turkey, Mexico, Chile, Peru, Taiwan and South Korea, and significant pressure for similar restrictions continues to be felt globally, most acutely in Australia, Brazil, Canada, Colombia, India, Hungary, Singapore, South Africa and France. The implementation of these or similar limitations and restrictions could have a negative impact on our Cable Networks advertising revenues, particularly for our networks with programming for children and teens.

Certain Other Regulations Affecting Our Business

Global Data Protection Laws and Children’s Privacy Laws. A number of data protection laws impact, or may impact, the manner in which ViacomCBS collects, processes and transfers personal data. In the EU, the General Data Protection Regulation (“GDPR”) mandates data protection compliance obligations and authorizes significant fines for noncompliance, requiring significant compliance resources and efforts on our part. Further, a number of other regions where we do business, including the U.S., Asia and Latin America, have enacted or are considering new data protection regulations that may impact our business activities that involve the processing of personal data. For example, in the U.S., the California Consumer Privacy Act, which went into effect on January 1, 2020, creates a host of new obligations for businesses regarding how they handle the personal information of California residents, including creating new data access, data deletion and opt out rights. In addition, some of the mechanisms ViacomCBS relies upon for the transfer of personal data from the EU to the U.S., such as utilizing standard contractual clauses approved by the European Commission (“EC”), have been subject to legal challenges, and the EU-U.S. Privacy Shield framework, which permits the transfer of personal data from the EU to the U.S., is subject to review by the relevant EU and U.S. authorities. The outcomes of these proceedings are uncertain and may require changes to our international data transfer mechanisms.

In addition, we are subject to other laws and regulations intended specifically to protect the interests of children, including the privacy of minors online. The U.S. Children’s Online Privacy Protection Act (“COPPA”) limits the collection by operators of websites or online services of personal information online from children under the age of 13. In July 2019, the Federal Trade Commission initiated a review of its regulations implementing COPPA, which we anticipate will be updated to address changes in technology. In the EU, GDPR also limits our ability to process data from children under the age of 16. Such regulations also restrict the types of advertising we are able to sell on these sites and apps and impose strict liability on us for certain actions of ViacomCBS, advertisers and other third parties, which could affect advertising demand and pricing. State and federal policymakers are also considering regulatory and legislative methods to protect consumer privacy on the Internet, and these efforts have focused particular attention on children and teens.

Compliance with enhanced data protection laws, which may be inconsistent with one another, requires additional resources and efforts on our part, and noncompliance with personal data protection regulations could result in increased regulatory enforcement and significant monetary fines.

EU Commission’s Digital Single Market Strategy. The EU continues to pursue its Digital Single Market (“DSM”) Strategy, which contains a broad range of proposals designed to create a more complete EU-wide market for digital goods and services, several of which are likely to impact ViacomCBS’ businesses.



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In November 2018, the EU adopted a number of reforms to the Audiovisual Media Services Directive (the “AVMSD”), which sets content and advertising rules for European broadcasters. The AVMSD applies the country-of-origin principle to linear and non-linear TV services, enabling cross-border broadcasts from a single regulatory jurisdiction, and sets compulsory minimum pan-EU content and advertising rules that Member States may choose to exceed. These reforms include a mandatory quota for European works on on-demand audiovisual services platforms, the option for EU states to introduce levies on the revenues of audiovisual media-service providers, and liberalized rules governing the scheduling of advertising on linear broadcasters. Member States have until September 2020 to transpose the reforms into national law. These changes could impact revenues for the VCNI television channels business in Europe and affiliate deals with platforms for both film and TV distribution.

In June 2019, two new EU directives became effective and may impact the way we acquire and distribute content online. The Copyright Directive introduced a requirement to agree to terms for the carriage of copyrighted content on online platforms (or to remove content in the absence of such agreement), and also granted rights to authors and performers to “fair and proportionate” remuneration, greater transparency and a right to revoke agreements if their work is not adequately exploited. The Online Broadcasting Directive extends the system of mandatory collective exercise of cable retransmission rights to other forms of retransmission including Internet protocol television and mobile, thereby potentially reducing the control that rights owners have over online distribution. EU states have until June 2021 to transpose these Directives into national law, if similar provisions do not already exist.

In 2020, the EU will evaluate the impact of the 2018 EC Geo-blocking Regulation that prohibits unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment. As part of its evaluation, it will consider whether the scope of the regulation should be extended to services that offer audio-visual and other copyrighted content, which may impact content owners’ ability to distribute on an exclusive, territorial basis within the EU.

Restrictions on Content Distribution. In addition to the EU, numerous countries around the world impose restrictions on the amount and nature of content that may be distributed in that country. Such regulations in China have the greatest impact, as only 34 foreign films, as selected by relevant authorities in China, may be distributed annually on a revenue share basis based on box office performance. In addition, in September 2018, China’s film and television regulator, the National Administration of TV and Radio, published proposed regulations that would severely limit the streaming and broadcasting of foreign film and television content in China, further reducing foreign access to the Chinese market.

UK Regulations Affecting Channel 5 Business. As a PSB in the UK, Channel 5 is subject to certain UK Office of Communications (“OFCOM”) broadcasting regulations that impose detailed obligations, including mandating the proportion of total programming and programming during peak hours that must be original productions, the hours devoted to news and current affairs and the proportion of commissioned programming that must be made by independent producers. Channel 5 has also undertaken to air a certain amount of UK-originated children’s programming. Like all UK broadcasters, Channel 5 must abide by the OFCOM Broadcasting Code, which contains content and scheduling regulations relating to harm and offense, protection of individuals under the age of 18, privacy, fairness and product placement, and by OFCOM’s Code on the Scheduling of Television Advertising, which contains regulations on the amount and scheduling of advertising.

Protecting our Content from Copyright Theft

The unauthorized reproduction, distribution, exhibition or other exploitation of copyrighted material interferes with the market for copyrighted works and disrupts our ability to distribute and monetize our content. The theft of films, television, books and other entertainment content presents a significant challenge to our industry, and we take a number of steps to address this concern. Where possible, we use technological protection tools, such as encryption, to protect our content. We are actively engaged in enforcement and other activities to protect our intellectual property, including: monitoring online destinations that distribute or otherwise infringe our content and sending takedown or cease and desist notices in appropriate circumstances; using filtering technologies employed by some user-generated content sites; and pursuing litigation and referrals to law enforcement with respect to websites and other online platforms that distribute or facilitate the distribution and exploitation of our content without authorization. Through


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partnerships with various organizations, we also are actively involved in educational outreach to the creative community, state and federal government officials and other stakeholders in an effort to marshal greater resources to combat copyright theft. Additionally, we participate in various industry-wide enforcement initiatives, public relations programs and legislative activities on a worldwide basis. We have had notable success with site-blocking efforts in parts of Europe and Asia, which can be effective in diverting consumers from piracy platforms to legitimate platforms.

Notwithstanding these efforts and the many legal protections that exist to combat piracy, the proliferation of content theft and technological tools with which to carry it out continue to be a challenge. The failure to maintain enhanced legal protections and enforcement tools and to update those tools as threats evolve could make it more difficult for us to adequately protect our intellectual property, which could negatively impact its value and further increase the costs of enforcing our rights as we continue to expend substantial resources to protect our content.

INTELLECTUAL PROPERTY

We create, own and distribute intellectual property worldwide. It is our practice to protect our films, programs, content, brands, formats, characters, games, publications and other original and acquired works, and ancillary goods and services. The following brands, logos, trade names, trademarks and related trademark families are the most significant of those strongly identified with the product lines they represent and are significant assets of the Company: ViacomCBS, CBS®, Viacom®, AwesomenessTV®, BET®, CBS All Access®, CBS Entertainment, CBS Interactive®, CBS News®, CBS Sports®, CBSN®, Channel 5® (UK), CMT®, COLORS®, Comedy Central®, Flix®, MTV®, MTV Films®, Network 10®, Nickelodeon®, Nick at Nite®, Nickelodeon Movies, Nick Jr.®, Paramount Animation®, Paramount Network®, Paramount Pictures®, Paramount Players, Paramount Television Studios, Pluto TV, Pop TV, Showtime®, Simon & Schuster®, Smithsonian Channel, Telefe® (Argentina), The Movie Channel®, TV Land®, VH1®, VidCon®, WhoSay® and other domestic and international program services and digital properties and all the call letters for our stations.

EMPLOYEES

As of December 31, 2019, we employed approximately 23,990 full-time and part-time employees worldwide, and had approximately 4,580 additional project-based staff on our payroll. We also use many other temporary employees in the ordinary course of our business.

AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy and information statements and other information with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports filed with or furnished to the SEC pursuant to the Securities Exchange Act of 1934, as amended, will be available free of charge on our website at www.viacbs.com (under “Investors”) as soon as reasonably practicable after the reports are filed with the SEC. These documents are also available on the SEC’s website at www.sec.gov.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition,” contains both historical and forward-looking statements. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements reflect our current expectations concerning future results, objectives, plans and goals, and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause future results, performance or achievements to differ. These risks, uncertainties and other factors are discussed in “Item 1A. Risk Factors” below. Other risks, or updates to the risks discussed below, may be described in our news releases and filings with the SEC, including but not limited to our reports on Form 10-Q and Form 8-K. The forward-looking statements included in this document are made only as of the date of this document, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.



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Item 1A. Risk Factors.

A wide range of risks may affect our business, financial condition or results of operations, now and in the future. We consider the risks described below to be the most significant. There may be other currently unknown or unpredictable factors that could have adverse effects on our business, financial condition or results of operations.

Risks Relating to ViacomCBS’ Business and Industry

Changes in consumer behavior, as well as evolving technologies, distribution platforms and packaging, may negatively affect our business, financial condition or results of operations

The ways in which consumers view content, and technology and business models in our industry continue to evolve rapidly, and new distribution platforms, as well as increased competition from new entrants and emerging technologies, have added to the complexity of maintaining predictable revenue streams.

Technological advancements have driven changes in consumer behavior and empowered consumers to seek more control over when, where and how they consume content and have affected the options available to advertisers for reaching their target audiences. The evolution of consumer preferences towards digital services and other subscription services, and the substantial increase in availability of programming without advertising or adequate methodologies for audience measurement, may continue to have an adverse effect on our business, financial condition or results of operations. Examples of the foregoing include the convergence of television telecasts and digital delivery of programming to televisions and other devices, video-on-demand platforms, tablets, new video and electronic book formats, user-generated content sites, unauthorized digital distribution of video content including via streaming and downloading, simultaneous live streaming of telecast content which allows users to consume content on demand and in remote locations while avoiding traditional commercial advertisements or subscription payments and “cloud-based” DVR storage.

In addition, consumers are increasingly using time-shifting and advertising-blocking technologies that enable users to fast-forward or circumvent advertisements, such as DVRs, or increase the sharing of subscription content and reduce the demand for electronic sell-through, DVD and Blu-ray disc products. Substantial use of these technologies could impact the attractiveness of our programming to advertisers, adversely affecting our advertising revenue. Our business also may be adversely affected by the use of antennas (and their integration with set-top boxes or other consumer devices) to access broadcast signals to avoid subscriptions and live and stored video streaming boxes and services, which deliver unauthorized copies of copyrighted content, including those emanating from other countries in various languages.

In response to perceived consumer demand, distributors of programming and program services are continuing to develop alternative offerings for consumers, including “skinny bundles,” smaller, often customizable programming packages delivered at lower costs than traditional offerings; SVOD and other subscription services; ad-supported FVOD services developed by television manufacturers, cable providers and others; and original programming hosted on mobile and social media platforms. Also, the impact of technological changes on MVPDs may adversely affect our cable networks’ ability to grow revenue. If these alternative offerings continue to gain traction and our networks and brands are not included in those packages and services, or if consumers increasingly favor alternative offerings over traditional broadcast television and cable subscriptions, we may continue to experience a decline in viewership and ultimately demand for our programming, which could lead to lower revenues. These changing distribution models may also impact our ability to negotiate carriage deals on terms favorable to us, thereby having an adverse effect on our business, financial condition or results of operations.

In order to respond to these developments, we regularly consider and from time to time implement changes to our business models and strategies to remain competitive, and there can be no assurance that we will successfully anticipate or respond to these developments, that we will not experience disruption as we respond to such developments, or that the business models we develop will be as profitable as our current business models.



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Our advertising revenues have been and may continue to be adversely impacted by changes in consumers’ content viewership, deficiencies in audience measurement and advertising market conditions

We derive substantial revenues from the sale of advertising on a variety of platforms, and a decline in advertising revenues could have a significant adverse effect on our business, financial condition or results of operations in any given period.

Consumers are increasingly turning to online sources for viewing and purchasing content, and an increasing number of companies offer SVOD services, including some that offer exclusive high-quality original video programming delivered directly to consumers over the Internet. Consumers are also using new technologies that allow customers to live stream and time shift programming, make and store digital copies and skip or fast-forward through advertisements. The increasing number of entertainment choices available to consumers has intensified audience fragmentation and reduced the viewing of content through traditional MVPDs and virtual MVPDs, which has caused, and likely will continue to cause, audience ratings declines for our cable networks and may adversely affect the pricing and volume of advertising. In addition, the pricing and volume of advertising may be affected by shifts in spending toward digital and mobile offerings, which can deliver targeted advertising promptly, from more traditional media, or toward newer ways of purchasing advertising, such as through automated purchasing, dynamic advertising insertion, third parties selling local advertising spots and advertising exchanges, some or all of which may not be as beneficial to us as traditional advertising methods.

In addition, advertising sales are largely dependent on audience measurement, and the results of audience measurement techniques can vary for a variety of reasons, including the platforms on which viewing is measured and variations in the statistical sampling methods used. The use of evolving ratings technologies and measurements, and viewership on platforms or devices, such as tablets, smart phones and other mobile devices, that are not being fully measured, could have an impact on our program ratings and advertising revenues. Also, consumer viewership of streaming services continues to grow and is under measured. Low ratings can lead to lower pricing and advertising spending. While Nielsen’s statistical sampling method is the primary measurement technique used in our television advertising sales, we measure and monetize our campaign reach and frequency on and across digital platforms based on other third-party data as well as first-party data using a variety of methods, including the number of impressions served and demographics. In addition, multi-platform campaign verification remains in its infancy, and viewership on tablets, smartphones and other mobile devices, which continues to grow rapidly, still is not measured by any one consistently applied method. These variations and changes could have a significant effect on our advertising revenues. There can be no assurance that any replacement programming on our television stations will generate the same level of revenues or profitability as previous programming.

The strength of the advertising market can fluctuate in response to the economic prospects of specific advertisers or industries, advertisers’ current spending priorities and the economy in general or the economy of any individual geographic market, particularly a major market, such as Los Angeles or New York, in which we own and operate sizeable businesses, and this may adversely affect our advertising revenues. Natural and other disasters, acts of terrorism, political uncertainty or hostilities could lead to a reduction in domestic and international advertising expenditures as a result of disrupted programming and services, uninterrupted news coverage and economic uncertainty. In addition, advertising expenditures by companies in certain sectors of the economy, including the financial, pharmaceutical and automotive segments, represent a significant portion of our advertising revenues. Any political, economic, social or technological change resulting in a reduction in these sectors’ advertising expenditures may adversely affect our revenue. Our ability to generate advertising revenue is also dependent on demand for our content, the consumers in our targeted demographics, advertising rates and results observed by advertisers. These factors could have an adverse effect on our business, financial condition or results of operations.

Our success depends on our ability to maintain attractive brands and our reputation, and to offer popular programming and other content

Our ability to maintain attractive brands and our reputation, and to create popular programming and other content, tentpole and other live events and consumer products are key to the success of our business and our ability to generate revenues. The production and distribution of television and other programming, films and other entertainment content


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and the licensing of rights to the associated intellectual property is inherently risky because the revenues we derive from various sources primarily depend on our ability to satisfy consumer tastes and expectations in a consistent manner. The popularity of our content is affected by our ability to maintain or develop our strong brand awareness and reputation and to target key audiences, and by the quality and attractiveness of competing entertainment content and the availability of alternative forms of entertainment and leisure time activities, including online, mobile and other offerings. Audience tastes change frequently and it is a challenge to anticipate what offerings will be successful at any point in time. We invest substantial capital in creating and promoting our content, including in the production of original content on our networks, in our films, in our television production business and in our publications, before learning the extent to which it will garner critical success and popularity with consumers.

In our Cable Networks and TV Entertainment businesses, the popularity of our brands and programming has a significant impact on the revenues we are able to generate from advertising, affiliate fees, content licensing, consumer products and other licensing activities, and our ability to expand our presence internationally depends, in part, on our ability to successfully predict and adapt to changing consumer tastes and preferences outside the U.S. In addition, the success of our Publishing business is similarly dependent on audience acceptance of its publications.  In our Filmed Entertainment business, the theatrical performance of a film affects not only the theatrical revenues we receive but also revenues from other distribution outlets, such as TVOD and SVOD, television, home entertainment and licensed consumer products. Additionally, a shortfall, now or in the future, in the expected popularity of our programming that we expect to distribute or the sports events for which we have acquired rights, could lead to decreased profitability or losses for a significant period of time. Significant negative claims or publicity regarding the Company or its operations, products, management, employees, practices, business partners and culture may damage our brands or reputation, even if such claims are untrue.  A lack of popularity of our offerings or damage to our reputation could have an adverse effect on our business, financial condition or results of operations in a particular period or over a longer term.

Increased costs for programming, films and other rights, and judgments we make on the potential performance of our content, may adversely affect our business, financial condition or results of operations

In our TV Entertainment and Cable Networks segments, we produce a significant amount of original programming and other content and we invest significant resources in our brands, in part with the aim of developing higher quality and quantity of original content, and we also derive a portion of our revenue from the exploitation of our extensive library of television programming. In our Filmed Entertainment segment, we invest significant amounts in the production, marketing and distribution of films and television series. We also acquire programming, films and television series, as well as a variety of digital content and other ancillary rights such as consumer and home entertainment product offerings, and we pay license fees, royalties and/or contingent compensation in connection with these acquired rights. For example, some of CBS Television Network’s most widely viewed broadcasts, including golf’s Masters Tournament, NFL games and series such as Young Sheldon, are made available based upon programming rights of varying duration that we have negotiated with third parties. We also license various music rights from the major record companies, music publishers and performing rights organizations.

Our investments in original and acquired programming are significant and involve complex negotiations with numerous third parties, and rapid changes in consumer behavior have increased the risk associated with the success of all kinds of programming. Competition for popular content is intense, and we may have to increase the price we are willing to pay for talent and intellectual property rights, which may result in significantly increased costs. Further, increased competition in the market for development and production of original programming, such as from Amazon, Apple, Facebook, Hulu, Netflix and YouTube, and streaming services by large entertainment companies, increases our content costs as they introduce different ways of compensating talent and approaching production. We may be outbid by our competitors for the rights to new, popular programming or in connection with the renewals of popular programming that we currently license. Finally, certain of our counterparties and vendors may encounter financial and operational pressures, which could result in increased costs to us or delays in production. As such, there can be no assurance that we will recoup our investments in programming, films and other content when the content is broadcast or distributed. If our content offerings cease to be widely accepted by audiences or are not continuously replenished with popular content, our revenues could be adversely affected.


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The accounting for the expenses we incur in connection with our programming and films requires that we make judgments about their potential success and useful life. We initially estimate the ultimate revenues of a television program or film and then update our estimate of ultimate revenues based on expected future and actual results, including following a television program’s initial broadcast or a film’s initial theatrical release. If our estimates prove to be incorrect or are reduced, it may result in decreased profitability as a result of the accelerated recognition of the expense and/or write-down of the value of the asset. Similarly, if we determine it is no longer advantageous for us to air a program on our broadcast or cable networks, we would accelerate our amortization of the program costs.

These factors could have an adverse effect on our business, financial condition or results of operations.

The loss of key talent could adversely affect our business, financial condition or results of operations

Our business depends upon the continued efforts, abilities and expertise of not only our corporate and divisional executive teams, but also the various creative talent and entertainment personalities with whom we work. For example, we employ or contract with several entertainment personalities with loyal audiences and we produce films with highly regarded directors, producers, writers, actors and other talent. These individuals are important to achieving the success of our programs, films and other content. There can be no assurance that these individuals will remain with us or will retain their current appeal, or that the costs associated with retaining them or new talent will be reasonable. If we fail to retain these individuals on current terms or if our entertainment personalities lose their current appeal or we fail to attract new talent, our business, financial condition or results of operations could be adversely affected.

Our businesses operate in industries that are highly competitive and swiftly consolidating

We depend on the popularity of our content and other offerings, our appeal to advertisers and widespread distribution of our content. We compete with other media companies to attract creative talent and produce high quality content, and for distribution on a variety of third-party platforms to draw large audiences. Competition for talent, content, audiences, service providers, production infrastructure, advertising and distribution is intense and comes from broadcast television stations and networks, cable television systems and networks (including our own), streaming service distributors, the Internet and social media platforms, film studios and independent film producers and distributors, consumer products companies and other entertainment outlets and platforms, as well as from search engines, program guides and “second screen” applications and non-traditional programming services, such as streaming offerings. Additionally, other television stations or cable networks may change their formats or programming, a new station or new network may adopt a format to compete directly with our stations or networks, or stations or networks might engage in aggressive promotional campaigns. Further, competition from additional entrants into the market for development and production of original programming and streaming services, such as Amazon, Apple, Facebook, Hulu, Netflix and YouTube, and major entertainment companies, continues to increase. In book publishing, competition among electronic and print book retailers could decrease the prices for new releases and the outlets available for book sales. Moreover, the growing use of self-publishing technologies by authors increases competition and could result in decreased use of traditional publishing services.

Our ability to obtain widespread distribution on favorable terms, which contributes to our ability to attract audiences and, in turn, advertisers, is adversely affected by the consolidation of advertising agencies, programmers, content providers, distributors (including telecom companies) and television service providers. This consolidation reduces the number of distributors with whom we negotiate and increases the negotiating leverage and market power of the combined companies. In addition, consolidation in the film business may adversely affect the distribution of our films on various platforms. Consolidation among book retailers and the growth of online sales and electronic books sales have resulted in increased competition for limited physical shelf space for our publications and for the attention of consumers online.

In addition, our competitors generally include market participants with interests in multiple media businesses that are often vertically integrated, whereas our Cable Networks business generally relies on distribution relationships with third parties. As more cable and satellite operators, Internet service providers, telecom companies and other content distributors, aggregators and search providers create or acquire their own content, they may have significant


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competitive advantages, which could adversely affect our ability to negotiate favorable terms for distribution or otherwise compete effectively in the delivery marketplace. Our competitors could also have preferential access to important technologies, customer data or other competitive information, as well as significant financial resources.

This competition and consolidation could result in lower ratings and advertising, lower affiliate and other revenues, and increased content costs and promotional and other expenses, negatively affecting our ability to generate revenues and profitability. There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that competition or consolidation in the marketplace will not have an adverse effect on our business, financial condition or results of operations.

Because we derive a significant portion of our revenues from a limited number of distributors, the loss of affiliation and distribution agreements, renewal on less favorable terms or adverse interpretations could have a significant adverse effect on our business, financial condition or results of operations

A significant portion of our revenues, particularly from Cable Networks and TV Entertainment, are attributable to agreements with MVPDs and virtual MVPDs, and other distributors of our programming and program services. These agreements generally have fixed terms that vary by market and distributor, and there can be no assurance that these agreements will be renewed in the future, or renewed on favorable terms, including but not limited to those related to pricing and programming tiers. We may also be unable to modify existing agreements with terms that have over time become less favorable. The loss of existing packaging, positioning, pricing or other marketing opportunities and the loss of carriage on cable and satellite programming tiers or the failure to renew our agreements with any distributor, or renew or modify them on favorable terms, could reduce the distribution of our programming and program services and decrease the potential audience for our programs, thereby negatively affecting our growth prospects and revenues from both affiliate fees and advertising.

The CBS Television Network provides its affiliates with up to approximately 98 hours of regularly scheduled programming per week. In return, the CBS Television Network’s affiliated stations broadcast network-inserted commercials during that programming and pay us station affiliation fees. Loss of station affiliation agreements of the CBS Television Network could adversely affect our results of operations by reducing the reach of our programming and therefore our attractiveness to advertisers, and renewal of these affiliation agreements on less favorable terms may also adversely affect our results of operations.

Consolidation among MVPDs and increased vertical integration of such distributors into the cable or broadcast network business have provided more leverage to these distributors and could adversely affect our ability to maintain or obtain distribution for our network programming or distribution and/or marketing of our subscription program services on favorable or commercially reasonable terms, or at all. Also, consolidation among television station group owners could increase their negotiating leverage. Moreover, competitive pressures faced by MVPDs, particularly in light of the lower retail prices of streaming services, could adversely affect the terms of our renewals with MVPDs. In addition, MVPDs and streaming services continue to develop alternative offerings for consumers, including “skinny bundles.” To the extent these packages do not include our programming and become widely accepted in lieu of traditional program packages, we could experience a decline in affiliate revenues.

Similarly, our revenues are dependent on the compliance of major distributors with the terms of our affiliation or distribution agreements. As these agreements have grown in complexity, the number of disputes regarding the interpretation, and even validity, of the agreements has grown, resulting in greater uncertainty and, from time to time, litigation with respect to our rights and obligations. For example, some of our distribution agreements contain “most favored nation” (“MFN”) clauses, which provide that if we enter into an agreement with a distributor and such agreement includes specified terms that are more favorable than those held by a distributor holding an MFN right, we must offer some of those terms to the distributor holding the MFN right. These clauses are generally complex and may lead to disagreement over their interpretation and application. Disagreements with a distributor on the interpretation or validity of an agreement could adversely impact our revenues from both affiliate fees and advertising, as well as our relationship with that distributor.

These factors could have an adverse effect on our business, financial condition or results of operations.


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The integration of the CBS and Viacom businesses may not be successful or may be more difficult, time consuming or costly than expected. Synergies and other benefits may not be realized within the expected time frames, or at all. Operating costs, customer loss and business disruption may be greater than expected and revenues may be lower than expected following the Merger.  Our ongoing investment in new businesses, products, services and technologies present many risks, and we may not realize the financial and strategic goals we had contemplated. 

Our ability to realize the anticipated benefits of the Merger will depend, to a large extent, on our ability to integrate the businesses of the combined companies in a manner that facilitates growth opportunities and achieves the projected standalone cost savings and revenue growth trends that have been identified without adversely affecting current revenues and investments in future growth. The failure to meet the challenges involved in combining CBS’ and Viacom’s businesses following the Merger and to realize the anticipated benefits of the Merger, including expected synergies, could cause an interruption of, or a loss of momentum in, the activities of ViacomCBS and could adversely affect the results of operations of ViacomCBS. The overall combination of our businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships. The difficulties of combining the operations of the companies include, among others:

the diversion of management attention to integration matters;

difficulties in integrating operations and systems, including administrative and information technology infrastructure and financial reporting and internal control systems;

challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;

difficulties in integrating employees and attracting and retaining key personnel, including talent;

challenges in retaining existing, and obtaining new customers, viewers, suppliers, distributors, licensors, employees and others, including material content providers, studios, producers, directors, actors, authors and other talent, and advertisers;

difficulties in achieving anticipated cost savings, synergies, business opportunities, financing plans and growth prospects from the combination;

difficulties in managing the expanded operations of a significantly larger and more complex company;

challenges in continuing to develop valuable and widely accepted content and technologies;

contingent liabilities that are larger than expected; and

potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Merger.

In addition, even if our operations are integrated successfully, the full benefits of the Merger may not be realized, including, among others, the synergies, cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all. Further, additional unanticipated costs may be incurred in the integration of our businesses. Many of these factors are outside of our control, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact our business, financial condition and results of operations. 

In the past, we have acquired and invested, and expect to continue to acquire and invest, in new businesses, products, services and technologies as part of our ongoing strategic initiatives. Such acquisitions and strategic initiatives may involve significant risks and uncertainties, including the types described above as well as insufficient revenues from such investments to offset any new liabilities assumed and expenses associated with the new


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investments, unidentified issues not discovered in our due diligence that could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities and a failure to successfully further develop an acquired business or technology. Because new investments are inherently risky, and the anticipated benefits or value of these investments may not materialize, no assurance can be given that such investments and other strategic initiatives will not adversely affect our business, financial condition or results of operations.

Service disruptions or failures of, or cybersecurity attacks upon, our or our service providers’ networks, information systems and other technologies could result in the disclosure of confidential or valuable business or personal information, disruption of our businesses, damage to our brands and reputation, legal exposure and financial losses

Networks, cloud services, information systems and other technologies, including technology systems used in connection with the production and distribution of our programming, films and other content by us or our third-party providers (“Systems”), are critical to our business activities, and shutdowns or service disruptions of, and cybersecurity attacks on, these Systems pose increasing risks. Such shutdowns, disruptions and attacks may be caused by third-party hacking of computers and Systems; dissemination of computer viruses, worms, malware, ransomware and other destructive or disruptive software; denial of service attacks and other bad acts; human error; and power outages, natural disasters, extreme weather, terrorist attacks or other similar events. Shutdowns, disruptions and attacks could have an adverse impact on us, our business partners, employees, advertisers, viewers and users of our content offerings, including degradation or disruption of service, loss of data and damage to equipment and data. Steps we take to add software and hardware, upgrade our Systems and network infrastructure, and improve the stability and efficiency of our Systems may not be sufficient to avoid shutdowns, disruptions and attacks. Significant events could result in a disruption of our operations and reduction of our revenues, the loss of or damage to the integrity of data used by management to make decisions and operate our businesses, viewer or advertiser dissatisfaction or a loss of viewers or advertisers, and damage to our reputation or brands.

We operate communications and computer hardware Systems located both in our facilities and that of third-party providers. In addition, we use third-party “cloud” computing services in connection with our business operations. We also use content delivery networks to help us stream programming, films and other content in high volume to viewers and users of our online, mobile and app offerings over the internet. Problems faced by us, our hosting providers, our third-party “cloud” computing or other network providers, including technological or business-related disruptions, as well as cybersecurity attacks and regulatory interference, could result in a disruption of our operations and reduction of our revenues, adversely impact the experience of our viewers and users, and could damage our reputation and brands.

We are subject to risks caused by the misappropriation, misuse, falsification or intentional or accidental release or loss of business or personal data or programming content maintained in our or our third-party providers’ Systems, including proprietary and personal information (of third parties, employees and users of our online, mobile and app offerings), business information including intellectual property, or other confidential information. Outside parties may attempt to penetrate our Systems or those of our third-party providers or fraudulently induce employees, business partners or users of our online, mobile and app offerings to disclose sensitive or confidential information in order to gain access to our data or our subscribers’ or users’ data, or our programming. The number and sophistication of attempted and successful information security breaches in the U.S. and elsewhere have increased in recent years, and because of our prominence, we and/or third-party providers we use may be a particularly attractive target for such attacks. Because the techniques used to obtain unauthorized access to, or disable, degrade or sabotage, these Systems change frequently and often are not recognized until launched, we may be unable to anticipate these techniques, implement adequate security measures or remediate any intrusion on a timely or effective basis. Moreover, the development and maintenance of security measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite our efforts, the possibility of these events occurring cannot be eliminated.

If a material breach of our Systems or those of our third-party providers occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose subscribers, viewers, advertisers and other


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business partners, and users of our online, mobile and app offerings; and our reputation, brands and credibility could be damaged; and we could be required to expend significant amounts of money and other resources to repair or replace such Systems or to comply with regulatory requirements. We could also be subject to actions by regulatory authorities and claims asserted in private litigation. The costs relating to any data breach could be material, and we may not have adequate insurance coverage to compensate us for any losses associated with such events.

Each of these factors could have an adverse effect on our reputation, business, financial condition or results of operations.

We are subject to complex, often inconsistent and potentially costly laws, rules, regulations, industry standards and contractual obligations relating to privacy and personal data protection

We are subject to laws, rules and regulations in the U.S. and in other countries relating to privacy and the collection, use and security of personal data. In the EU, for example, the GDPR mandates data protection compliance obligations and authorizes significant fines for noncompliance, requiring significant compliance resources and efforts on our part. Further, a number of other regions where we do business have enacted or are considering new data protection regulations that may impact our business activities. In the U.S., the California Consumer Privacy Act, which went into effect on January 1, 2020, creates a host of new obligations for businesses regarding how they handle the personal information of California residents. We are also subject to laws and regulations intended specifically to protect the interests of children and the privacy of minors online, including COPPA in the U.S. and the GDPR in the EU, and we have been required to limit some functionality on our websites and apps as a result of these regulations. Such regulations also restrict the types of advertising we are able to sell on these sites and apps and impose strict liability on us for certain actions of ViacomCBS, advertisers and other third parties, which could affect advertising demand and pricing. We will continue to expend resources to comply with data protection and privacy standards imposed by law, industry standards or contractual obligations, which may be inconsistent with one another, and despite such efforts we may face regulatory and other legal actions. See “Regulation and Protection of our Intellectual Property—Certain Other Regulations Affecting Our Business—Global Data Protection Laws and Children’s Privacy Laws.”

Each of these factors could have an adverse effect on our reputation, business, financial condition or results of operations.

The failure, destruction and/or breach of satellites and facilities that we depend upon to distribute our programming could adversely affect our business, financial condition or results of operations

We use satellite systems, fiber and other methods to transmit our programs and program services to broadcast television and cable television operators and other distributors worldwide. The distribution facilities include uplinks, communications satellites and downlinks. Notwithstanding certain back-up and redundant systems, transmissions may be disrupted as a result of power outages, natural disasters, extreme weather, terrorist attacks, cyber attacks, failures or impairments of communications satellites or on-ground uplinks or downlinks used to transmit programming or other similar events. Currently, there are a limited number of communications satellites available for the transmission of programming, and if a disruption occurs, we may not be able to secure alternate distribution facilities in a timely manner. There can be no assurance that such failure or disruption would not have an adverse effect on our business, financial condition or results of operations.

Theft of our content, including digital copyright theft and other unauthorized uses of our content, reduces revenue received from legitimate distribution of our programming, films, books and other entertainment content and adversely affects our business, financial condition or results of operations

The success of our businesses depends in part on our ability to maintain and monetize our intellectual property rights. We are fundamentally a content company and theft of our content - specifically, the infringement of our films and home entertainment products, television programming, digital content, books and other intellectual property rights - affects us and the value of our content. Intellectual property theft is particularly prevalent in many parts of the world that either lack effective laws and technical protection measures similar to those existing in the U.S. and Europe or


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lack effective enforcement of such measures, or both. Such foreign copyright theft often creates a supply of pirated content for major markets as well. The interpretation of copyright, trademark and other intellectual property laws as applied to our content, and our infringement-detection and enforcement efforts, remain in flux, and some methods of enforcement have encountered political opposition. The failure to appropriately enforce and/or the weakening of existing intellectual property laws could make it more difficult for us to adequately protect our intellectual property and thus negatively affect its value.

Content theft is made easier by the wide availability of higher bandwidth and reduced storage costs, as well as tools that undermine encryption and other security features and enable infringers to cloak their identities online. We and our numerous production and distribution partners operate various technology systems in connection with the production and distribution of our programming and films, and intentional or unintentional acts could result in unauthorized access to our content. The continuing proliferation of digital formats and technologies heightens this risk. The unauthorized distribution and consumption of our content through a wide array of platforms and devices remain problematic and an ever-present challenge, as Internet-connected televisions, set-top boxes and mobile devices are ubiquitous and many can support illegal re-transmission platforms, illicit video-on-demand/streaming services and pre-loaded hardware, providing more accessible, versatile and legitimate-looking environments for consuming pirated film and television content. Unauthorized access to our content could result in the premature release of films, television programs or other content as well as a reduction in legitimate audiences, which would likely have significant adverse effects on the value of the affected content and our ability to monetize our content.

Copyright theft has an adverse effect on our business because it reduces the revenue that we are able to receive from the legitimate sale and distribution of our content, undermines lawful distribution channels, reduces the public’s and some affiliate partners’ perceived value of our content and inhibits our ability to recoup or profit from the costs incurred to create such content. While legal protections exist, piracy and technological tools with which to engage in copyright theft continue to escalate, evolve and present challenges for enforcement. We are actively engaged in enforcement and other activities to protect our intellectual property, and it is likely that we will continue to expend substantial resources in connection with these efforts. Efforts to prevent the unauthorized reproduction, distribution and exhibition of our content may affect our profitability and may not be successful in preventing harm to our business and may have an adverse effect on our business, financial condition or results of operations.

Political and economic conditions in a variety of markets around the world could have an adverse effect on our business, financial condition or results of operations

Our businesses operate and have audiences, customers and partners worldwide, and we are focused on expanding our international operations in key markets, some of which are emerging markets. For that reason, economic conditions in many different markets around the world affect a number of aspects of our businesses, in particular revenues in both domestic and international markets derived from advertising sales, theatrical releases, home entertainment distribution, television licensing and sales of consumer products. Economic conditions in each market can also impact our audience’s discretionary spending and therefore their willingness to access our content, as well as the businesses of our partners who purchase advertising on our networks, causing them to reduce their spending on advertising. We may also be subject to longer payment cycles. In addition, as we have expanded our international operations, our exposure to foreign currency fluctuations against the U.S. dollar (compared to, for example, the Argentinian peso, the British pound and the Euro, among others) has increased. Such fluctuations could have an adverse effect on our business, financial condition or results of operations, and there is no assurance that downward trending currencies will rebound or that stable currencies will remain stable in any period.

Our businesses are also exposed to certain political risks inherent in conducting a global business, including retaliatory actions by governments reacting to changes in the U.S. and other countries, including in connection with trade negotiations; issues related to the presence of corruption in certain markets and enforcement of anti-corruption laws and regulations; increased risk of political instability in some markets as well as conflict and sanctions preventing us from accessing those markets; escalating trade, immigration and nuclear disputes; wars, acts of terrorism or other hostilities; and other political, economic or other uncertainties.



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The UK left the EU on January 31, 2020. It is now in a ‘transition period’ scheduled to end on December 31, 2020 that allows the negotiation of a future UK-EU trade relationship while remaining part of the EU Single Market. Depending on the ultimate terms of a trade deal, the UK could lose access to the single EU market and to the global trade deals negotiated by the EU on behalf of its members. It is possible that the UK could revert to World Trade Organization terms if no deal is reached. The effects of Brexit and the on-going trade negotiations may continue to adversely affect business activity, political stability and economic and market conditions in the UK, the Eurozone, the EU and elsewhere and contribute to instability in global financial and foreign exchange markets, including volatility in the value of the Euro and the British Pound. A new trade deal, or no deal at all, could lead to additional political, legal and economic instability and uncertainty in the EU, including changes in the regulatory environment, which could impact our ability to use UK law under “country of origin” rules for programming in the EU, potential trade barriers between the UK and the EU and between the UK and other countries, and potential content production quota regulations. Given that a portion of our business is conducted in the EU, including the UK, any of these effects of Brexit and a trade deal, and others we cannot anticipate, could have an adverse effect on our business, financial condition or results of operations.

These political and economic risks could create instability in any of the markets where our businesses derive revenues, which could result in a reduction of revenue or loss of investment that adversely affects our businesses, financial condition or results of operations.

Changes in U.S. or foreign laws or regulations may have an adverse effect on our business, financial condition or results of operations

Our program services, filmed entertainment and online, mobile and app properties are subject to a variety of laws and regulations, both in the U.S. and/or in the foreign jurisdictions in which we or our partners operate, including relating to intellectual property, content regulation, user privacy, data protection, anti-corruption, repatriation of profits, tax regimes, quotas, tariffs or other trade barriers, currency exchange controls, operating license and permit requirements, restrictions on foreign ownership or investment, export and market access restrictions, and exceptions and limitations on copyright and censorship, among others.

The television broadcasting and distribution industries in the U.S. are highly regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC. For example, we are required to obtain licenses from the FCC to operate our television stations. It cannot be assured that the FCC will approve our future renewal applications or that the renewals will be for full terms or will not include conditions or qualifications. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on our revenues. We must also comply with extensive FCC regulations and policies in the ownership and operation of our television stations and our television networks, which prohibit common ownership of two or more of the top four television networks and limit the number of television stations that a licensee can own in a market and the number of television stations that can be owned in the U.S., which could restrict our ability to consummate future transactions and in certain circumstances could require us to divest some television stations. Our programming directed towards children is subject to a number of additional regulations. For example, privacy regulations make it difficult to measure online viewership by children. The threat of regulatory action or increased scrutiny that deters certain advertisers from advertising or reaching their intended audiences could adversely affect advertising revenue.

The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations, and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation and ownership of our television properties. For example, from time to time, proposals have been advanced in the U.S. Congress and at the FCC to require television stations to provide advertising time to political candidates for free or at a reduced charge. Any restrictions on advertising may adversely affect our advertising revenues. Changes to the media ownership and other FCC rules may affect the competitive landscape in ways that could increase the competition faced by us. Proposals have also been advanced from time to time before the U.S. Congress and the FCC to extend the program access rules (currently applicable only to those cable program services which also own or are owned in whole or in part by cable distribution or telephone company systems) to all cable program services. Our ability to


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obtain the most favorable terms available for our content could be adversely affected should such an extension be enacted into law. It is difficult to predict the likelihood or impact of any proposed actions by the U.S. Congress or the FCC on our television properties.

Laws in some non-U.S. jurisdictions differ in significant respects from those in the U.S., and the enforcement of such laws can be inconsistent and unpredictable, which could impact our ability to expand our operations and undertake activities that we believe are beneficial to our business. In addition, changes in or new interpretations of international laws and regulations governing the broadcast and distribution of content, competition and the Internet, including those affecting data privacy, as well as the new EU law requiring 30% local content on SVOD services and proposed amendments to the law governing territorial exclusivity of the distribution of content in Europe, may have an adverse impact on our international businesses and digital properties.

Our businesses are also subject to laws and regulations in the U.S. and internationally governing the collection, use, sharing, protection and retention of personal data, which has implications for how such data is managed. For example, GDPR expands the regulation of personal data processing throughout the EU and significantly increases penalties for non-compliance. Complying with these laws and regulations could be costly, require us to change our business practices, or limit or restrict aspects of our business in a manner adverse to our business operations. Many of these laws and regulations continue to evolve, and substantial uncertainty surrounds their scope and application. Our failure to comply could result in exposure to enforcement by U.S. or foreign governments, as well as significant negative publicity and reputational damage.

Our businesses could be adversely affected by new laws and regulations, changes in existing laws, changes in interpretations of existing laws by courts and regulators and the threat that additional laws or regulations may be forthcoming, as well as our ability to enforce our legal rights. We could be required to change or limit certain of our business practices, which could impact our ability to generate revenues. We could also incur substantial costs to comply with new and existing laws and regulations, or substantial fines and penalties or other liabilities if we fail to comply with such laws and regulations.

Vigorous enforcement or modification of FCC indecency and other program content rules against the broadcast and cable industries could have an adverse effect on our businesses and results of operations

The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material on television stations between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition against broadcasting indecent material because of the vagueness of the FCC’s indecency/profanity definition, coupled with the spontaneity of live programming. The FCC enforces its indecency rules against the broadcasting industry. The FCC has found on a number of occasions that the content of television broadcasts has contained indecent material. In such instances, the FCC issued fines or advisory warnings to the offending licensees. Moreover, the FCC has in some instances imposed separate fines for each allegedly indecent “utterance,” in contrast with its previous policy, which generally considered all indecent words or phrases within a given program as constituting a single violation. Broadcasting indecent material could result in fines per station of a maximum of approximately $415,000 per utterance and/or the loss of a station’s FCC license. If the FCC denied a license renewal or revoked the license for one of our television stations, we would lose our authority to operate the station. The determination of whether content is indecent is inherently subjective and, as such, it can be difficult to predict whether particular content could violate indecency standards. The difficulty in predicting whether individual programs, words or phrases may violate the FCC’s indecency rules adds significant uncertainty to our ability to comply with the rules. Violation of indecency rules could lead to sanctions which may adversely affect our businesses and results of operations. Some policymakers support the extension of the indecency rules that are applicable to over-the-air broadcasters to cover cable and satellite programming and/or attempts to increase enforcement of or otherwise expand existing laws and rules. If such an extension, attempt to increase enforcement or other expansion took place and were found to be constitutional, some of our cable content could be subject to additional regulation and might not be able to attract the same subscription and viewership levels.



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We could be subject to material liabilities as a result of adoption of or changes in tax laws, regulations and administrative practices, interpretations and policies

We are subject to taxation in the U.S. and numerous international jurisdictions. Our tax rates are impacted by the tax laws, regulations and administrative practices, interpretations and policies in the federal, state and local and international territories where our businesses operate, and these rates may be subject to significant change. Our tax returns are routinely audited and litigation, adverse outcomes, or settlements may occur because tax authorities may disagree with certain positions we have taken, including our methodologies for intercompany arrangements. Additionally, shifting economic and political conditions may result in significant changes to tax policies, laws or tax rates in various jurisdictions. Such changes, litigation, adverse outcomes, or audit settlements may result in the recognition of additional charges to our income tax provision in any given period and may adversely affect our effective income tax rate or cash payments and may therefore adversely affect our business, financial condition or results of operations.

Volatility and weakness in capital markets may adversely affect our credit availability and related financing costs

Bank and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be adversely affected. Although we can currently access the bank and capital markets, there is no assurance that such markets will continue to be a reliable source of financing for us. In addition, our access to and cost of borrowing can be affected by our short- and long-term debt ratings assigned by ratings agencies. In addition, the interest rates included in certain agreements that govern certain of our debt securities and/or credit facilities may be based on the London Interbank Offered Rate (“LIBOR”). In the future, use of LIBOR may be discontinued and we cannot be certain how long LIBOR will continue to be a viable benchmark interest rate. Use of alternative interest rates could result in increased borrowing costs or volatility in the markets and interest rates. These factors, including the tightening of credit markets, or a decrease in our debt ratings, could adversely affect our ability to obtain cost-effective financing.

We could be adversely affected by strikes and other union activity

We and our business partners engage the services of writers, directors, actors, musicians and other talent, production crew members, trade employees, players in sports leagues and others who are subject to industry-wide or specially-negotiated collective bargaining agreements, and occasionally individual agreements. The Alliance of Motion Picture and Television Producers (AMPTP) is a multi-employer trade association that, along with and on behalf of hundreds of member companies including Paramount Pictures and CBS Studios, negotiates the industry-wide collective bargaining agreements with these parties, and we may lack practical control over the negotiations and terms of the agreements. The Writers Guild of America contract expires on May 1, 2020, and the Directors Guild of America and Screen Actors Guild-American Federation of Television and Radio Artists contracts expire on June 30, 2020.  The AMPTP expects to negotiate successor deals with these guilds and unions in the coming months. Any labor disputes that arise may disrupt our operations and cause delays in the production of our programming, and we may not be able to negotiate favorable terms for a renewal, which could increase our costs. Depending on its duration, any lockout, labor dispute, strike or work stoppage could have an adverse effect on our revenues, cash flows and/or operating income and/or their timing.

Our revenues, expenses and operating results may vary based on the timing, mix, number and availability of our films and other programming and on seasonal factors

Our revenues, expenses and operating results fluctuate due to the timing, mix, number and/or availability of our theatrical films, home entertainment releases and programs for licensing. For example, our operating results may increase or decrease during a particular period relative to the corresponding period in the prior year due to differences in the number and/or mix of films released, the commencement of a license period or the timing of delivery of programming to licensees for exhibition. Our operating results also fluctuate due to the timing of the recognition of marketing expenses, which are generally incurred before and throughout the theatrical release of a film, with the recognition of related revenues through the film’s theatrical exhibition and subsequent distribution windows.



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Our business also has experienced and is expected to continue to experience seasonality due to, among other things, seasonal advertising patterns and seasonal influences on audiences’ viewing, reading and attendance habits. Typically, our revenue from advertising is highest in the first and fourth quarters. In the Cable Networks segment, advertising is typically highest in the fourth quarter due to the holiday season, among other factors. In the TV Entertainment segment, advertising revenues benefit principally in the first quarter of the years in which we telecast the Super Bowl and NCAA Division I Men’s Basketball Tournament National Semifinals and Championship and in the fourth quarter due to the holiday season and, in even-numbered years, advertising placed by candidates for political offices. Revenues from the Filmed Entertainment segment’s theatrical film releases tend to be cyclical with increases during the summer. The Publishing segment is subject to increased periods of demand during the summer and year-end holiday season. The effects of these variances make it difficult to estimate future operating results based on the previous results of any specific quarter.

We could suffer losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and programming

We test goodwill and indefinite-lived intangible assets, including FCC licenses, for impairment on an annual basis and between annual tests if events or circumstances require an interim impairment assessment. Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in advertising markets, a decrease in audience acceptance of our programming or films, a shift by advertisers to competing advertising platforms and/or changes in consumer behavior could result in a downward revision in the estimated fair value of a reporting unit or intangible assets, including FCC licenses, which could result in a non-cash impairment charge. Any such impairment charge for goodwill, intangible assets and/or programming could have a material adverse effect on our reported net earnings.

Our liabilities related to discontinued operations and former businesses could adversely impact our financial conditions

We have both recognized and potential liabilities and costs related to discontinued operations and former businesses, certain of which are unrelated to the media business, including leases, guarantees, environmental liabilities, liabilities related to the pensions and medical expenses of retirees, asbestos liabilities, contractual disputes and other pending and threatened litigation. We cannot be assured that our accruals for these matters are sufficient to cover these liabilities in their entirety or any one of these liabilities when it becomes due or at what point any of these liabilities may come due. Therefore, there can be no assurances that these liabilities will not have a material adverse effect on our financial position, operating performance or cash flow.

Risks Relating to NAI’s Voting Control of ViacomCBS and Pledged Shares

NAI, through its voting control of ViacomCBS, will be in a position to control actions that require stockholder approval

NAI, through its direct and indirect ownership of our Class A Common Stock, has voting control of ViacomCBS. At December 31, 2019, NAI directly or indirectly owned approximately 79.4% of the shares of our Class A Common Stock outstanding, and approximately 10.2% of the shares of our Class A Common Stock and our Class B Common Stock outstanding on a combined basis. Sumner M. Redstone is the beneficial owner of the controlling interest in NAI and, accordingly, beneficially owns all such shares. Mr. Redstone is the controlling stockholder, Chairman of the Board of Directors and Chief Executive Officer of NAI. Shari E. Redstone, the President and a director of NAI, serves as non-executive Chair of the ViacomCBS Board of Directors (the “ViacomCBS Board”). NAI is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), which owns 80% of the voting interest of NAI, and such voting interest of NAI held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the NAI voting interest held by the SMR Trust will pass to seven trustees, who will include Ms. Redstone. No member of our management is a trustee of the SMR Trust.



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Subject to the terms of the Governance Agreement dated as of August 13, 2019, which is incorporated by reference as an exhibit in this Annual Report on Form 10-K, NAI is in a position to control the outcome of corporate actions that require, or may be accomplished by, stockholder approval, including amending ViacomCBS’ bylaws, the election or removal of directors and transactions involving a change of control. For example, the ViacomCBS bylaws provide that:

the affirmative vote of not less than a majority of the aggregate voting power of all outstanding shares of our capital stock then entitled to vote generally in an election of directors, voting together as a single class, is required for our stockholders to amend, alter, change, repeal or adopt any of our bylaws;

any or all of our directors may be removed from office at any time prior to the expiration of his or her term of office, with or without cause, only by the affirmative vote of the holders of record of outstanding shares representing at least a majority of all the aggregate voting power of outstanding shares of our Common Stock then entitled to vote generally in the election of directors, voting together as a single class at a special meeting of our stockholders called expressly for that purpose; provided that during the two-year period following the closing date of the ViacomCBS Merger, the removal of our Chief Executive Officer requires the approval of the ViacomCBS Board by the “Requisite Approval” (as defined in the ViacomCBS certificate of incorporation incorporated by reference as an exhibit in this Annual Report on Form 10-K); provided further, that during the two-year period following the closing date, NAI and NAI Entertainment Holdings LLC are not permitted to remove any other persons who were members of the ViacomCBS Board at the effective time of the Merger in accordance with the Merger Agreement or who otherwise become members the ViacomCBS Board (other than any of the NAI Affiliated Directors (as defined in the bylaws)) without the Requisite Approval; and

in accordance with the General Corporation Law of the State of Delaware, our stockholders may act by written consent without a meeting if such stockholders hold the number of shares representing not less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote thereon were present and voted.

Accordingly, ViacomCBS stockholders who may have different interests are unable to affect the outcome of any such corporate actions for so long as NAI retains voting control. For more information, see the Governance Agreement incorporated by reference as an exhibit in this Annual Report on Form 10-K.

Sales of NAI’s shares of ViacomCBS Common Stock, some of which are pledged to lenders, could adversely affect the stock price

At December 31, 2019, NAI directly or indirectly owned approximately 79.4% of the shares of our Class A Common Stock outstanding, and approximately 10.2% of the shares of our Class A Common Stock and our Class B Common Stock outstanding on a combined basis. Based on information received from NAI, NAI has pledged to its lenders a portion of shares of our Class A Common Stock and our Class B Common Stock owned directly or indirectly by NAI.

At December 31, 2019, the aggregate number of shares of our Common Stock pledged by NAI to its lenders represented approximately 4.1% of the total outstanding shares of our Class A Common Stock and our Class B Common Stock, on a combined basis. At December 31, 2019, the amount of our Class A Common Stock that NAI directly or indirectly owned and that was not pledged by NAI to its lenders represented approximately 64.0% of the total outstanding shares of our Class A Common Stock.

If there is a default on NAI’s debt obligations and the lenders foreclose on the pledged shares, the lenders may not effect a transfer, sale or disposition of any pledged shares of our Class A Common Stock, unless NAI and its affiliates beneficially own 50% or less of our Class A Common Stock then outstanding or such shares have first been converted into our Class B Common Stock. A sale of the pledged shares could adversely affect our Common Stock share price.  In addition, there can be no assurance that at some future time NAI will not sell or pledge additional shares of our Common Stock, which could adversely affect our Common Stock share price.



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Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Our principal physical properties are described below. In addition, we own and lease office, studio, production and warehouse space and broadcast, antenna and satellite transmission facilities throughout the U.S. and around the world for our businesses. We consider our properties adequate for our present needs.

ViacomCBS

Our world headquarters is located at 1515 Broadway, New York, New York, where we lease approximately 1.4 million square feet for executive, administrative and business offices for the Company and certain of our operating divisions. The lease runs through 2031, with two renewal options based on market rates at the time of renewal for ten years each.

We also own a building at 51 West 52nd Street, New York, New York containing approximately 892,000 square feet of space. Of the 855,000 square feet of office space in the building, we occupy approximately 270,000 square feet and lease the balance to third parties. We have retained a real estate brokerage firm to explore a possible sale of this property.

We maintain facilities for our Global Business Services Center at our offices in Budapest, Hungary, where we lease approximately 44,000 square feet of space through 2023, and at our offices in Warsaw, Poland, where we lease approximately 50,000 square feet of space through 2025.

TV Entertainment

We own the CBS Broadcast Center complex located on approximately 3.7 acres at 524 West 57th Street, New York, New York, which consists of approximately 860,000 square feet of office and studio space.

We own studio facilities at the CBS Studio Center at 4024 Radford Avenue, Studio City, California, located on approximately 40 acres.

CBS Interactive occupies approximately 193,000 square feet of space at 235 Second Street, San Francisco, California, under a lease expiring in 2022.

We occupy approximately 106,000 square feet of office, production and technical space at Television City, 7800 Beverly Boulevard, Los Angeles, California under a lease expiring in 2024.

Cable Networks

In addition to occupying space at 1515 Broadway in New York, we occupy the following major office facilities:

Our Cable Networks business occupies approximately 277,000 square feet of office and production space at 345 Hudson Street, New York, New York, under a lease expiring in 2022.

Our Cable Networks business occupies approximately 210,000 square feet of office and production space at 1575 North Gower Street, Los Angeles, California, under a lease expiring in 2028.



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Our Cable Networks’ Network Operations Center in Hauppauge, New York contains approximately 65,000 square feet of floor space on approximately nine acres of owned land.

The Nickelodeon Animation Studio at 203-231 West Olive Avenue, Burbank, California contains approximately 180,000 square feet of studio and office space, leased under two leases expiring in 2036.

Nickelodeon’s Live Action Studio contains approximately 108,000 square feet of stage and office space at Burbank Studios, 3000 West Alameda Avenue, Burbank, California, under a lease expiring in 2024.

Showtime Networks leases approximately 253,000 square feet at 1633 Broadway, New York, New York, under a lease expiring in 2026 and leases approximately 56,000 square feet at The Lot, 1041 N. Formosa Avenue, West Hollywood, California, under a lease expiring in 2028.

Telefe occupies approximately 496,000 square feet of office, studio and production space, transmission facilities and for other ancillary uses at its owned and leased facilities in Buenos Aires, Argentina.

ViacomCBS Networks International occupies approximately 140,000 square feet of space at its owned and leased Hawley Crescent facilities in London.

Network 10 leases approximately 100,000 square feet of space at 1 Saunders Street, Pyrmont, New South Wales, Australia, under a lease expiring in 2023.

Filmed Entertainment

Paramount owns the Paramount Pictures Studio situated at 5555 Melrose Avenue, Los Angeles, California, located on approximately 62 acres of land, and containing approximately 1.85 million square feet of floor space used for executive, administrative and business offices, sound stages, production facilities, theatres, equipment facilities and other ancillary uses. Paramount has embarked on a planned 25-year expansion and revitalization project for the studio.

Publishing

Simon & Schuster leases approximately 300,000 square feet of office space at 1230 Avenue of the Americas, New York, New York, under a lease expiring in 2034.

Item 3. Legal Proceedings.

The information set forth under the caption “Legal Matters” in Note 19 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements” is incorporated herein by reference.

Item 4.    Mine Safety Disclosures.

Not applicable.



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OUR BOARD OF DIRECTORS

ViacomCBS’ directors as of February 18, 2020 are as follows:
Name
Age
Position
Shari E. Redstone
65
Non-Executive Chair, Director
56
President and Chief Executive Officer, Director
Candace K. Beinecke
73
Director
Barbara M. Byrne
65
Director
Brian Goldner
56
Director
Linda M. Griego
72
Director
Robert N. Klieger
47
Director
Judith A. McHale
73
Director
Ronald L. Nelson
67
Director
Charles E. Phillips, Jr.
60
Director
Susan Schuman
60
Director
Nicole Seligman
63
Director
Frederick O. Terrell
65
Director

Shari E. Redstone has been a member of the ViacomCBS Board of Directors (the “Board”) since January 1994. She has served as the Non-Executive Chair of our Board since December 2019 and, prior to that, served as Non-Executive Vice Chair of the Board beginning in 2005 and as Non-Executive Vice Chair of the board of Viacom beginning in 2006. Ms. Redstone is Co-founder and Managing Partner of Advancit Capital, an investment firm launched in 2011 that focuses on early stage companies at the intersection of media, entertainment and technology, with investments in over 75 companies. Ms. Redstone has been President of NAI since 2000, and also serves as a director of NAI. Ms. Redstone brings to the Board her extensive experience in and a deep understanding of the entertainment industry, broad experience and talent managing a large business, extensive legal experience and her experience as President of NAI, including as one of its significant stockholders. Ms. Redstone is actively involved in a variety of charitable, civic, and educational organizations, including serving as a member of the board of trustees of The Paley Center for Media. She sits on the Board of Trustees of the Dana-Farber Cancer Institute. Ms. Redstone earned a BS from Tufts University and a JD and a Masters in Tax Law from Boston University. She practiced corporate law, estate planning and criminal law in the Boston area before joining NAI. Ms. Redstone is the daughter of Sumner M. Redstone.

Robert M. Bakish has been our President and Chief Executive Officer and a member of our Board since December 2019. Mr. Bakish served as President and Chief Executive Officer and a member of the board of Viacom from December 2016 to December 2019, having served as Acting President and Chief Executive Officer beginning earlier in 2016. Mr. Bakish joined Viacom’s predecessor (“Former Viacom”) in 1997 and held positions throughout the organization, including as President and Chief Executive Officer of Viacom International Media Networks and its predecessor company, MTV Networks International (“MTVNI”), from 2007 to 2016; President of MTVNI; Executive Vice President, Operations and Viacom Enterprises; Executive Vice President and Chief Operating Officer, MTV Networks Advertising Sales; and Senior Vice President, Planning, Development and Technology. Before joining Former Viacom, Mr. Bakish was a partner with Booz Allen Hamilton in its Media and Entertainment practice. Mr. Bakish has extensive knowledge and deep understanding of the Viacom business and the entertainment industry through various leadership positions at Viacom spanning approximately 20 years and culminating with President and Chief Executive Officer, and broad expertise overseeing global operations. Mr. Bakish has served as a director of Avid Technology, Inc. since 2009.

Candace K. Beinecke has been a member of our Board since September 2018. Ms. Beinecke is the Senior Partner of Hughes Hubbard & Reed LLP, a New York law firm, and is a practicing partner in Hughes Hubbard’s corporate department. In 1999, Ms. Beinecke became the first woman to Chair a major New York law firm. Ms. Beinecke also serves as the Lead Trustee of Vornado Realty Trust, the Chairperson of the Board of First Eagle Funds (a mutual fund


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family), and as a board member of ALSTOM (a public French transport company). As the long-time head of a top-ranked international law firm, Ms. Beinecke is well-recognized in the legal profession for her corporate governance and mergers and acquisitions expertise and brings to the Board extensive legal, governance, business and risk management experience. Ms. Beinecke’s breadth of director experience, which includes service as a lead trustee and chairperson, as well as service on other nominating and governance committees, a remuneration committee and an executive committee, gives her a deep understanding of public company governance.

Barbara M. Byrne has been a member of our Board since September 2018. Ms. Byrne is the former Vice Chairman, Investment Banking at Barclays PLC. During her more than 35 years of financial services experience, Ms. Byrne served as team leader for some of Barclay’s most important multinational corporate clients and was the primary architect of several of Barclays’ marquee transactions. Widely recognized as a leading investment banker and strategic advisor, she is a member of various industry councils and participates as a forum leader on strategic issues and trends facing the financial services sector and global markets. With this experience, Ms. Byrne brings to the Board important business and financial expertise in its deliberations on complex transactions, risk management, strategy and other financial matters.

Brian Goldner has been a member of our Board since September 2018. Mr. Goldner has served as the Chief Executive Officer of Hasbro, Inc. since 2008, and additionally has served as its Chairman of the Board since May 2015. In addition to being Chief Executive Officer, from 2008 to 2016, Mr. Goldner was also the President of Hasbro. Besides being a member of Hasbro’s board, he also served on the boards of The Gap, Inc. from 2016 to 2019 and Molson Coors Brewing Company from 2010 to 2016. Mr. Goldner brings to the Board significant leadership, operational and brand management experience from his executive positions at one of the leading public companies in his industry, where he was instrumental in transforming a traditional toy and game company into a global play and entertainment leader. With his direct experience in executing on strategies to differentiate Hasbro in a competitive global marketplace in response to industry evolution, he is well-positioned to advise on the strategic direction of the Company’s businesses. Further, Mr. Goldner’s service on other boards and board committees gives him a deep understanding of public company governance.

Linda M. Griego has been a member of our Board since March 2007. Ms. Griego has served, since 1986, as President and Chief Executive Officer of Griego Enterprises, Inc., a business management company. For more than 20 years, she oversaw the operations of Engine Co. No. 28, a prominent restaurant in downtown Los Angeles that she founded in 1988. From 1990 to 2000, Ms. Griego held a number of government-related appointments, including Deputy Mayor of the city of Los Angeles, President and Chief Executive Officer of the Los Angeles Community Development Bank, and President and Chief Executive Officer of Rebuild LA, the agency created to jump-start inner-city economic development following the 1992 Los Angeles riots. Over the past two decades, she has also served on a number of government commissions and boards of directors of nonprofit organizations, including current service on the boards of The Ralph M. Parsons Foundation, the MLK Health and Wellness, CDC, and the Charles R. Drew University of Medicine and Science. Ms. Griego has served as a director of publicly traded and private corporations, including serving as director of AECOM and the American Funds (7 funds). With the breadth of her leadership experience as a businesswoman, in the public sector through her multiple government appointments and extensive community-based participation in Los Angeles, an area where the Company has a significant presence, and on multiple not-for-profit boards, Ms. Griego provides the Board with financial and business acumen, as well as public policy expertise as it relates to business practices. Ms. Griego is also an experienced director, including through service on other audit, compensation and organization, and nominating and governance committees, with demonstrated expertise in the application of sound corporate governance principles.

Robert N. Klieger has been a member of our Board since July 2017. Mr. Klieger is a partner in the Los Angeles law firm Hueston Hennigan LLP. Mr. Klieger’s practice focuses on complex civil litigation and counseling in the areas of entertainment and intellectual property. Mr. Klieger represents motion picture studios, broadcast and cable television networks, production companies, video game publishers and high net worth individuals in the media and entertainment space, as well as clients in other industries including apparel, aviation and venture capital. Prior to joining Hueston Hennigan, Mr. Klieger was a partner at Irell & Manella LLP and a founding partner at Kendall Brill & Klieger LLP. Before beginning his career in private practice, Mr. Klieger served as a law clerk to the Honorable


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Cynthia Holcomb Hall of the United States Court of Appeals for the Ninth Circuit, and the Honorable William Matthew Byrne, Jr. of the United States District Court for the Central District of California. Mr. Klieger is recognized as one of the most prominent attorneys in the entertainment industry, with a practice focused on complex civil litigation and counseling in the areas of media, entertainment and intellectual property and clients that include leading enterprises in television, film and digital media. With his exceptional legal acumen and distinguished reputation for his trial practice and counsel, Mr. Klieger brings to the Board legal and strategic expertise in matters germane to the Company’s businesses and complex business transactions.

Judith A. McHale has been a member of our Board since December 2019 and, prior to that, served on the board of Viacom from August 2016 to December 2019. Ms. McHale is President and Chief Executive Officer of Cane Investments, LLC, a private investment company. Prior to joining Cane Investments in 2011, Ms. McHale served as the Under Secretary of State for Public Diplomacy and Public Affairs for the U.S. Department of State from 2009 to 2011. From 2004 to 2006, Ms. McHale served as the President and Chief Executive Officer of Discovery Communications, Inc., the parent company of Discovery Channel, and served as its President and Chief Operating Officer from 1995 to 2004. In 2006, Ms. McHale worked with private equity firm Global Environment Fund to launch the GEF/Africa Growth Fund, an investment vehicle focused on supplying expansion capital to small and medium-sized enterprises that provide consumer goods and services in emerging African markets. Ms. McHale has extensive experience leading a major media conglomerate with a background in operations and financial management, expertise in global affairs, experience in government affairs and extensive public company and corporate governance experience. She has served on the board of Ralph Lauren Corporation since 2011 and the board of Hilton Worldwide Holdings Inc. since 2013. She previously served on the boards of SeaWorld Entertainment, Inc., Host Hotel & Resorts, Inc., DigitalGlobe Inc., John Hancock Financial Services, Inc. and Potomac Electric Power Company.

Ronald L. Nelson has been a member of our Board since December 2019 and served on the board of Viacom from August 2016 to December 2019. Mr. Nelson served as a consultant to Avis Budget Group, Inc. until May 2019. Prior to that, he served as Executive Chairman of the Board of Avis Budget Group from 2016 to 2018 and as its Chairman and Chief Executive Officer from 2006 to 2015, and also served as Chief Operating Officer from 2010 to 2015. Prior to that, Mr. Nelson held several executive finance and operating roles, beginning in 2003 with Cendant Corporation, including as its Chief Financial Officer and President and a member of its board from 2003 to 2006. From 1994 to 2003, Mr. Nelson served as Co-Chief Operating Officer of DreamWorks SKG. Prior to that, he was Executive Vice President, Chief Financial Officer and a director at Paramount Communications, Inc., formerly Gulf + Western Industries, Inc. Mr. Nelson has extensive experience as a chief executive officer, chief financial officer and chief operating officer of major global companies, significant financial expertise, international business experience, public company and corporate governance experience and a long-standing background in the media industry. Mr. Nelson has served on the board of Hanesbrands Inc. since 2008 and as its Non-Executive Chairman since 2019, and on the board of Wyndham Hotels & Resorts, Inc. since 2019. He previously served on the board of Convergys.

Charles E. Phillips, Jr. has been a member of our Board since December 2019 and served on the board of Viacom from January 2006 to December 2019 and, prior to that, on the board of Former Viacom beginning in 2004. Mr. Phillips is Chairman of Infor, Inc., a multi-billion dollar enterprise software company and served as its Chief Executive Officer from 2010 to 2019. He was a President of Oracle Corporation from 2003 to 2010 and served as a member of its Board of Directors and Executive Management Committee from 2004 to 2010. Prior to Oracle, Mr. Phillips was a managing director at Morgan Stanley in the Technology Group and served on its Board of Directors. Mr. Phillips has extensive experience as a senior executive in a large, multinational corporation, financial industry background and financial and analytical expertise, significant public company and corporate governance experience, expertise in technology issues and familiarity with issues facing media, new media and intellectual property-driven companies and a deep knowledge of the Viacom business. He is a member of the Board of Directors of the Federal Reserve Bank of New York, the Apollo Theater, Business Executives for National Security and the New York Police Foundation. He served on President Obama’s Economic Recovery Board, led by Paul Volcker, and is a member of the Council on Foreign Relations.

Susan Schuman has been a member of our Board since September 2018. Ms. Schuman is the Chief Executive Officer and Co-Founder of SYPartners LLC, a consultancy firm that partners with chief executive officers and their


I-43


leadership teams undergoing business and cultural transformation. Over the past 20 years, Ms. Schuman has built and led SYPartners, working with executives at many high-profile companies and organizations. This experience in advising on business, organization and cultural transformation, including new value creation strategies, positions Ms. Schuman as a skilled advisor to the Board on the strategic and transformational direction of the Company.

Nicole Seligman has been a member of our Board since December 2019 and, prior to that, served on the board of Viacom from August 2016 to December 2019. Until March 2016, Ms. Seligman served as the President of Sony Entertainment, Inc. (beginning in 2014) and of Sony Corporation of America (beginning in 2012), and as Senior Legal Counsel of Sony Group (beginning in 2014). Ms. Seligman previously served as Executive Vice President and General Counsel of Sony Corporation from 2005 to 2014. She joined Sony in 2001 and served in a variety of other capacities during her tenure, including as a Corporate Executive Officer and Group Deputy General Counsel of Sony Corporation, and as General Counsel and an Executive Vice President at Sony Corporation of America, a subsidiary of Sony Corporation. Prior to joining Sony Corporation of America, Ms. Seligman was a partner in the litigation practice at Williams & Connolly LLP in Washington, D.C., where she worked on a broad range of complex civil and criminal matters and counseled a wide range of clients, including President William Jefferson Clinton and Lt. Col. Oliver North. Ms. Seligman joined Williams & Connolly in 1985. Ms. Seligman served as law clerk to Justice Thurgood Marshall on the Supreme Court of the United States from 1984 to 1985 and as law clerk to Judge Harry T. Edwards at the U.S. Court of Appeals for the District of Columbia Circuit from 1983 to 1984. Ms. Seligman has extensive media industry experience with various leadership roles at a major media conglomerate, public company and corporate governance experience, and exceptional achievements in the legal profession. Ms. Seligman has served on the board of Far Point Acquisition Corporation since 2018 and the board of MeiraGTx Holdings plc since 2019, and has been a Non-Executive Director of WPP plc since 2014 and its Senior Independent Director since 2016.

Frederick O. Terrell has been a member of our Board since December 2018. Mr. Terrell served as Executive Vice Chairman of Investment Banking and Capital Markets at Credit Suisse and later Senior Advisor from January 2018 to November 2018. From 2010 to 2017 he was Vice Chairman of Investment Banking and Capital Markets at Credit Suisse. His investment banking career began in 1983 as an Associate with The First Boston Corporation. During his accomplished career in the financial services sector spanning more than 25 years, Mr. Terrell was responsible for Credit Suisse’s global banking relationships with some of its most high-profile clients. From 2000 to 2008 he was the Managing Partner of Provender Capital Group, LLC a private equity firm focusing on investments in emerging companies. He has served as a member of the Board of Directors of the New York Life Insurance Company, Wellchoice Inc. (formerly Empire Blue Cross Blue Shield) and Carver Bancorp, Inc. His experience also includes past and present service on multiple not-for-profit boards, including the Yale School of Management, The Partnership for New York City, The Partnership Fund for New York City, Coro New York Leadership Center, Big Brothers Big Sisters of New York City and the Center for a New American Security. He is a member of the Council on Foreign Relations, The Economic Club of New York and the Investment Committee of the Rockefeller Foundation. Based on his extensive banking and corporate advisory experience, Mr. Terrell brings significant business and financial expertise to the Board in its deliberations on corporate strategy, complex transactions and other financial matters.



I-44


OUR EXECUTIVE OFFICERS

ViacomCBS’ executive officers as of February 18, 2020 are as follows:

Name
Age
Position
56
President and Chief Executive Officer, Director
51
Executive Vice President, General Counsel and Secretary
55
Executive Vice President, Controller and Chief Accounting Officer
Richard M. Jones
54
Executive Vice President, General Tax Counsel and Chief Veteran Officer
Doretha (DeDe) Lea
55
Executive Vice President, Global Public Policy and Government Relations
Julia Phelps
42
Executive Vice President, Chief Communications and Corporate Marketing Officer
Nancy Phillips
52
Executive Vice President, Chief People Officer
50
Executive Vice President, Chief Financial Officer

See “Our Board of Directors” for Mr. Bakish’s biography.

Christa A. D’Alimonte has been our Executive Vice President, General Counsel and Secretary since December 2019. Prior to that, she served as Executive Vice President, General Counsel and Secretary of Viacom beginning in 2017, having previously served as Senior Vice President, Deputy General Counsel and Assistant Secretary of Viacom beginning in 2012. Prior to joining Viacom, Ms. D’Alimonte was a partner of Shearman & Sterling LLP, where she was Deputy Practice Group Leader of the Firm’s Global Mergers & Acquisitions group. She first joined Shearman & Sterling in 1993 and became a partner in 2001.

Katherine Gill-Charest has been our Executive Vice President, Controller and Chief Accounting Officer since December 2019. Prior to that, she served as Senior Vice President, Controller and Chief Accounting Officer of Viacom beginning in 2010, having previously served as Senior Vice President, Deputy Controller of Viacom during 2010 and Vice President, Controller beginning in 2007. Prior to that, Ms. Gill-Charest was the Chief Accounting Officer of WPP Group from 2001 to 2007 and was the Vice President and Worldwide Controller of Young & Rubicam Inc. from 1998 to 2000. Ms. Gill-Charest also held roles in financial reporting and accounting policy at Time Warner Inc. from 1991 to 1998 and at NYNEX Corporation from 1988 to 1991 and served in the audit practice of Price Waterhouse for two years. 

Richard M. Jones has been our Executive Vice President, General Tax Counsel and Chief Veteran Officer since August 2014. Prior to that, he served as Senior Vice President and General Tax Counsel of CBS Corporation beginning in 2006 and for Former Viacom beginning in 2005. Prior to that, he served as Vice President of Tax, Assistant Treasurer and Tax Counsel for NBC Universal, Inc. beginning in 2003 and he served 13 years with Ernst & Young in its media & entertainment and transaction advisory services practices. Mr. Jones served honorably as a non-commissioned officer in the U.S. Army’s 75th Ranger Regiment and 10th Mountain Division.

Doretha (DeDe) Lea has been our Executive Vice President, Global Public Policy and Government Relations since December 2019. Prior to that, she served as Executive Vice President, Global Government Affairs of Viacom beginning in 2013, having previously served as Executive Vice President, Government Relations of Former Viacom beginning in 2005. Prior to that, she was Senior Vice President, Government Relations of Former Viacom beginning earlier in 2005. Prior to that, she served as Vice President of Government Affairs at Belo Corp. from 2004 to 2005 and as Vice President, Government Affairs of Former Viacom from 1997 to 2004.

Julia Phelps has been our Executive Vice President, Chief Communications and Corporate Marketing Officer since December 2019. Prior to that, she served as Executive Vice President, Communications, Culture and Marketing of Viacom beginning in 2017, having previously served as Senior Vice President, Communications and Culture of Viacom beginning earlier in 2017. Prior to that, she served as Executive Vice President of Communications for Viacom


I-45


International Media Networks beginning in 2012, after having served as Vice President of Corporate Communications for Viacom. Ms. Phelps joined Viacom in 2005 from DeVries Public Relations, a New York-based communications agency.

Nancy Phillips has been our Executive Vice President, Chief People Officer since December 2019. Prior to that, she served as Executive Vice President and Chief Human Resources Officer of Nielsen Holdings PLC beginning in 2017, having served as Executive Vice President and Chief Human Resources Officer of Broadcom Corporation from 2014 to 2016. From 2010 to 2014, Ms. Phillips was Senior Vice President, Human Resources for the Imaging and Printing Group at Hewlett-Packard Company, and previously served as Senior Vice President, Human Resources, Enterprise Services. From 2008 to 2010, Ms. Phillips served as Executive Vice President and Chief Human Resources Officer at Fifth Third Bancorp. Prior to that, Ms. Phillips spent 11 years at General Electric Company, holding various human resources positions.  Ms. Phillips practiced law from 1993 to 1997.

Christina Spade has been our Executive Vice President, Chief Financial Officer since October 2018. Prior to that, she served as Executive Vice President, Chief Financial Officer and Strategy for Showtime Networks Inc. (“Showtime”) beginning in 2013. Previously, Ms. Spade served as Senior Vice President, Affiliate Finance and Business Operations for Showtime beginning in 2003. Prior to joining Showtime in 1997, Ms. Spade was an Audit Manager with PricewaterhouseCoopers LLP in its Entertainment, Media and Communications practice.



I-46


Part II
Item 5.
Market for ViacomCBS Inc.’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities.
Our voting Class A Common Stock and non-voting Class B Common Stock are listed and traded on the Nasdaq Stock Market LLC under the symbols “VIACA” and “VIAC”, respectively.

On December 19, 2019, we declared a quarterly cash dividend of $.24 per share on our Class A and Class B Common Stock, resulting in total dividends of $150 million, which were paid on January 10, 2020. Prior to the Merger, Viacom and CBS each declared a quarterly cash dividend during each of the first three quarters of 2019 and during each of the four quarters of 2018 and 2017. During 2019, CBS declared total per share dividends of $.54, resulting in total dividends of $205 million. For each of the years ended December 31, 2018 and 2017, CBS declared total per share dividends of $.72, resulting in total annual dividends of $274 million and $289 million, respectively. During 2019, Viacom declared total per share dividends of $.60, resulting in total dividends of $245 million. For each of the years ended December 31, 2018 and 2017, Viacom declared total per share dividends of $.80, resulting in total annual dividends of $325 million and $323 million, respectively.

On February 12, 2020, we announced a quarterly cash dividend of $.24 per share on our Class A and Class B Common Stock, payable on April 1, 2020. We currently expect to continue to pay a regular cash dividend to our stockholders.

In November 2010, we announced that our Board of Directors approved a program to repurchase $1.5 billion of our common stock in open market purchases or other types of transactions (including accelerated stock repurchases or privately negotiated transactions). Since then, various increases totaling $16.4 billion have been approved and announced, including most recently, an increase to the share repurchase program to a total availability of $6.0 billion on July 28, 2016. Below is a summary of our purchases of our Class B Common Stock during the three months ended December 31, 2019.
(in millions, except per share amounts)
Total
Number of
Shares
Purchased
 
Average
Price Per
Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
 
Remaining
Authorization
 

 
 
$

 
 

 
 
 
$
2,457

 
 

 
 
$

 
 

 
 
 
$
2,457

 
 
1.2

 
 
$
40.78

 
 
1.2

 
 
 
$
2,408

 
Total
 
1.2

 
 
 
 
 
1.2

 
 
 
$
2,408

 
As of February 14, 2020, there were approximately 2,227 record holders of our Class A Common Stock and approximately 31,784 record holders of our Class B Common Stock.

II-1


Performance Graph
The following graph compares the cumulative total stockholder return of our Class A and Class B Common Stock with the cumulative total return on the companies listed in the Standard & Poor’s 500 Stock Index (“S&P 500”) and a Peer Group of companies identified below.
On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. Accordingly, the performance graph also includes Viacom Class B Common Stock.
The performance graph assumes $100 invested on December 31, 2014 in each of our Class A and Class B Common Stock, Viacom’s Class B Common Stock, the S&P 500 and the Peer Group identified below, including reinvestment of dividends, through the calendar year ended December 31, 2019.

Total Cumulative Stockholder Return
For Five-Year Period Ended December 31, 2019
chart-c378fcdfc52750e5db4.jpg
2014
2015
2016
2017
2018
2019
Class A Common Stock
$100
$94
$118
$110
$82
$85
Class B Common Stock
$100
$86
$118
$110
$83
$81
Viacom Class B Common Stock (a)
$100
$56
$50
$45
$38
$38
S&P 500
$100
$101
$114
$138
$132
$174
Peer Group (b)
$100
$98
$99
$108
$123
$154
(a) At the effective time of the Merger, each share of Viacom Class B Common Stock was converted into 0.59625 shares of ViacomCBS Class B Common Stock. Accordingly, the performance graph reflects the performance of Viacom Class B Common Stock through December 4, 2019, the date of the Merger, and the performance of ViacomCBS Class B Common Stock from December 4, 2019 through December 31, 2019.
(b) The Peer Group consists of the following companies: The Walt Disney Company (“Disney”), Fox Corporation and Discovery Inc. In March 2019, Disney acquired Twenty-First Century Fox (“21st Century Fox”) following the spin-off of Fox Corporation from 21st Century Fox. The performance graph reflects the performance of 21st Century Fox stock through the date of such transactions.

II-2


Item 6.
Selected Financial Data.
VIACOMCBS INC. AND SUBSIDIARIES
(In millions, except per share amounts)
 
Year Ended December 31, (a)
 
2019 (c)
 
2018 (d)
 
2017 (e) (h)
 
2016 (f) (h)
 
2015 (g) (h)
Revenues
$
27,812

 
$
27,250

 
$
26,535

 
$
25,685

 
$
25,559

Operating income
$
4,273

 
$
5,204

 
$
5,341

 
$
5,297

 
$
5,708

Net earnings from continuing operations
(ViacomCBS and noncontrolling interests)
$
3,301

 
$
3,460

 
$
3,320

 
$
2,970

 
$
3,506

Net earnings from continuing operations
attributable to ViacomCBS
$
3,270

 
$
3,423

 
$
3,268

 
$
2,935

 
$
3,427

 
 
 
 
 
 
 
 
 
 
Net earnings from continuing operations per
common share attributable to ViacomCBS
 
 
 
 
 
 
 
 
 
Basic
$
5.32

 
$
5.55

 
$
5.11

 
$
4.32

 
$
4.75

Diluted
$
5.30

 
$
5.51

 
$
5.05

 
$
4.28

 
$
4.71

 
 
 
 
 
 
 
 
 
 
Dividends per common share:
 
 
 
 
 
 
 
 
 
ViacomCBS Inc. (formerly CBS Corporation)
$
.78

 
$
.72

 
$
.72

 
$
.66

 
$
.60

Viacom Inc. (b)
$
.60

 
$
.80

 
$
.80

 
$
1.20

 
$
1.53

 
 
 
 
 
 
 
 
 
 
At Year End:
 
 
 
 
 
 
 
 
 
Total assets
$
49,519

 
$
44,497

 
$
43,503

 
$
47,383

 
$
45,922

Total debt
$
18,719

 
$
19,113

 
$
20,351

 
$
21,675

 
$
21,015

Total ViacomCBS stockholders’ equity
$
13,207

 
$
10,449

 
$
8,519

 
$
8,235

 
$
9,311

Total equity
$
13,289

 
$
10,503

 
$
8,600

 
$
8,286

 
$
9,369

(a) On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger, the combined company changed its name to ViacomCBS Inc. The Merger has been accounted for as a transaction between entities under common control and therefore, the net assets of Viacom were combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.
(b) Amounts reflect the historical dividends of Viacom Inc. and have not been adjusted for the conversion to ViacomCBS shares in connection with the Merger.
(c) For 2019, the following items affected the comparability of results: costs for restructuring and other corporate matters, including costs related to the Merger, of $775 million ($641 million, net of tax); programming charges of $589 million ($447 million, net of tax); a gain on sale of assets of $549 million ($386 million, net of tax); and discrete tax benefits of $827 million.
(d) For 2018, the following items affected the comparability of results: costs for restructuring and other corporate matters of $490 million ($374 million, net of tax); programming charges of $162 million ($123 million, net of tax); and discrete tax benefits of $297 million.
(e) For 2017, the following items affected the comparability of results: restructuring charges of $258 million ($163 million, net of tax); programming charges of $144 million ($94 million, net of tax); a gain on sale of assets of $146 million ($130 million, net of tax); a gain on the sale of EPIX of $285 million ($189 million, net of tax); a pension settlement charge of $352 million ($237 million, net of tax); and discrete tax benefits of $321 million.
(f) Results for 2016 included costs for restructuring and other corporate matters of $286 million ($182 million, net of tax) and a pension settlement charge of $211 million ($130 million, net of tax).
(g) Results for 2015 included programming charges of $578 million ($383 million, net of tax); costs for restructuring and other corporate matters of $287 million ($186 million, net of tax); and a gain on sale of assets of $139 million ($131 million, net of tax).
(h) On November 16, 2017, we completed the disposition of CBS Radio Inc. (“CBS Radio”) through a tax-free split-off. CBS Radio has been presented as a discontinued operation in the consolidated financial statements for all periods presented.


II-3


Item 7.
Management’s Discussion and Analysis of Results of Operations and Financial Condition.
(Tabular dollars in millions, except per share amounts)
Management’s discussion and analysis of the results of operations and financial condition of ViacomCBS Inc. should be read in conjunction with the consolidated financial statements and related notes. References in this document to “ViacomCBS,” the “Company,” “we,” “us” and “our” refer to ViacomCBS Inc. and its consolidated subsidiaries, unless the context otherwise requires.

Significant components of management’s discussion and analysis of results of operations and financial condition include:
Overview—The overview section provides a summary of ViacomCBS and our business and operational highlights.
Consolidated Results of Operations—The consolidated results of operations section provides an analysis of our results on a consolidated basis for the three years ended December 31, 2019.
Segment Results of Operations—The segment results of operations section provides an analysis of our results on a reportable segment basis for the three years ended December 31, 2019.
Liquidity and Capital Resources—The liquidity and capital resources section provides a discussion of our cash flows for the three years ended December 31, 2019, and of our outstanding debt, commitments and contingencies existing as of December 31, 2019.
Critical Accounting Policies—The critical accounting policies section provides detail with respect to accounting policies that are considered by management to require significant judgment and use of estimates and that could have a significant impact on our financial statements.
Legal Matters—The legal matters section discusses our legal matters and other litigation to which we are a party.
Market Risk—The market risk section discusses how we manage exposure to market and interest rate risks.
Overview
ViacomCBS is a leading global media and entertainment company that creates content and experiences for audiences worldwide.
Merger with Viacom Inc.
On December 4, 2019, Viacom Inc. (“Viacom”) merged with and into CBS Corporation (“CBS”), with CBS continuing as the surviving company (the “Merger”). At the effective time of the Merger (the “Effective Time”), the combined company changed its name to ViacomCBS Inc. (“ViacomCBS”).

At the Effective Time, (1) each share of Viacom Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBS Class A Common Stock, and (2) each share of Viacom Class B Common Stock issued and outstanding immediately prior to the Effective Time, other than shares held directly by Viacom as treasury shares or held by CBS, was converted automatically into 0.59625 shares of ViacomCBS Class B Common Stock (together with ViacomCBS Class A Common Stock, the “ViacomCBS Common Stock”). At the Effective Time, each share of CBS Class A Common Stock and each share of CBS Class B Common Stock (together with CBS Class A Common Stock, the “CBS Common Stock”) issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of ViacomCBS Class A Common Stock and ViacomCBS Class B Common Stock, respectively, and was not affected by the Merger.

Following the Merger, the CBS Common Stock was delisted from the New York Stock Exchange and the Viacom Common Stock ceased trading on the Nasdaq Stock Market LLC (“Nasdaq”). On December 5, 2019, ViacomCBS

II-4




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Class A Common Stock and ViacomCBS Class B Common Stock were listed on Nasdaq and began trading under the ticker symbols VIACA and VIAC, respectively.

The Merger is being accounted for as a transaction between entities under common control as National Amusements, Inc. (“NAI”) was the controlling stockholder of each of CBS and Viacom (and remains the controlling stockholder of ViacomCBS). The net assets of Viacom have been combined with those of CBS at their historical carrying amounts and the companies have been presented on a combined basis for all periods presented.

Operational Highlights 2019 vs. 2018
Consolidated results of operations
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
GAAP:
 
 
 
 
 
 
 
 
Revenues
$
27,812

 
$
27,250

 
$
562

 
2
 %
 
Operating income
$
4,273

 
$
5,204

 
$
(931
)
 
(18
)%
 
Net earnings from continuing operations
attributable to ViacomCBS
$
3,270

 
$
3,423

 
$
(153
)

(4
)%
 
Diluted EPS from continuing operations
attributable to ViacomCBS
$
5.30

 
$
5.51

 
$
(.21
)
 
(4
)%
 
Net cash flow provided by operating activities
$
1,230

 
$
3,464

 
$
(2,234
)
 
(64
)%
 
 
 
 
 
 
 
 
 
 
Non-GAAP: (a)
 
 
 
 
 
 
 
 
Adjusted OIBDA
$
5,531

 
$
6,289

 
$
(758
)
 
(12
)%
 
Adjusted net earnings from continuing operations
attributable to ViacomCBS
$
3,090

 
$
3,646

 
$
(556
)
 
(15
)%
 
Adjusted diluted EPS from continuing operations
attributable to ViacomCBS
$
5.01

 
$
5.87

 
$
(.86
)
 
(15
)%
 
Free cash flow
$
877

 
$
3,111

 
$
(2,234
)
 
(72
)%
 
(a) See pages II-6 - II-8 and II-33 for reconciliations of adjusted results to the most directly comparable financial measures in accordance with accounting principles generally accepted in the United States (“GAAP”).

For 2019, revenues increased 2% to $27.81 billion from $27.25 billion in 2018, driven by CBS’ broadcast of Super Bowl LIII in 2019, growth from our streaming services, which include CBS All Access, Pluto TV and the Showtime streaming subscription offering (“Showtime OTT”), and higher content licensing revenues driven by the production of programming for third parties. These increases were partially offset by lower theatrical revenues, primarily due to the difficult comparison against Mission: Impossible - Fallout in 2018, and lower political advertising sales as a result of the midterm elections in 2018. Foreign exchange rate changes had a 1-percentage point unfavorable impact on the revenue comparison.

Operating income decreased 18% to $4.27 billion from $5.20 billion in 2018. This comparison was impacted by items identified as affecting comparability, including restructuring charges, costs related to the Merger and other corporate matters, programming charges and gains on the sale of assets. Adjusted operating income before depreciation and amortization (“Adjusted OIBDA”) decreased 12%, primarily reflecting an increased investment in content, including a higher number of series produced for exhibition on our properties as well as for third parties. Net earnings from continuing operations attributable to ViacomCBS for 2019 were $3.27 billion, or $5.30 per diluted share, compared with $3.42 billion, or $5.51 per diluted share, for 2018. This comparison was impacted by the aforementioned items as well as other items identified as affecting comparability set forth in the section “Reconciliation of Non-GAAP Measures” below. Adjusted net earnings from continuing operations attributable to ViacomCBS decreased 15% and adjusted diluted earnings per share (“EPS”) from continuing operations decreased 15% to $5.01 for 2019, driven by the lower Adjusted OIBDA. Adjusted OIBDA, adjusted net earnings from continuing operations attributable to ViacomCBS and adjusted diluted EPS from continuing operations are non-GAAP financial measures. See pages II-6

II-5




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


- II-8 for details of the items excluded from financial results, and reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

We generated operating cash flow of $1.23 billion in 2019 compared with $3.46 billion in 2018. Free cash flow was $877 million for 2019 compared with $3.11 billion for 2018. These decreases primarily reflected the aforementioned increased investment in content, higher payments for income taxes and payments of $132 million in 2019 for costs related to the Merger. In addition, operating cash flow and free cash flow included payments for restructuring activities of $234 million in 2019 and $219 million in 2018. Free cash flow is a non-GAAP financial measure. See “Free Cash Flow” on pages II-33 for a reconciliation of net cash flow provided by (used for) operating activities, the most directly comparable financial measure in accordance with GAAP, to free cash flow.

Reconciliation of Non-GAAP Measures
Results for the years ended December 31, 2019, 2018 and 2017 included certain items identified as affecting comparability. Adjusted OIBDA, adjusted earnings from continuing operations before income taxes, adjusted provision for income taxes, adjusted net earnings from continuing operations attributable to ViacomCBS and adjusted diluted EPS from continuing operations (together, the “adjusted measures”) exclude the impact of these items and are measures of performance not calculated in accordance with GAAP. We use these measures to, among other things, evaluate our operating performance. These measures are among the primary measures used by management for planning and forecasting of future periods, and they are important indicators of our operational strength and business performance. In addition, we use Adjusted OIBDA to, among other things, value prospective acquisitions. We believe these measures are relevant and useful for investors because they allow investors to view performance in a manner similar to the method used by our management; provide a clearer perspective on our underlying performance; and make it easier for investors, analysts and peers to compare our operating performance to other companies in our industry and to compare our year-over-year results.

Because the adjusted measures are measures of performance not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, operating income, earnings from continuing operations before income taxes, benefit (provision) for income taxes, net earnings from continuing operations attributable to ViacomCBS or diluted EPS from continuing operations, as applicable, as indicators of operating performance. These measures, as we calculate them, may not be comparable to similarly titled measures employed by other companies.

The following tables reconcile the adjusted measures to their most directly comparable financial measures in accordance with GAAP.
Year Ended December 31,
2019
 
2018
 
2017
Operating Income (GAAP)
$
4,273

 
$
5,204

 
$
5,341

Depreciation and amortization (a)
443

 
433

 
443

Restructuring and other corporate matters (b)
775

 
490

 
258

Programming charges (b)
589

 
162

 
144

Gain on sale of assets (b)
(549
)
 

 
(146
)
Adjusted OIBDA (Non-GAAP)
$
5,531

 
$
6,289

 
$
6,040

(a) 2019 includes an impairment charge of $20 million to reduce the carrying value of intangible assets.
(b) See notes on the following tables for additional information on items affecting comparability.

II-6




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


 
 
Earnings from Continuing Operations Before Income Taxes
 
Benefit (Provision) for Income Taxes
 
Net Earnings from Continuing Operations Attributable to ViacomCBS
 
Diluted EPS from Continuing Operations
Reported (GAAP)
 
$
3,345

 
 
 
$
9

 
 
 
$
3,270

 
 
 
$
5.30

 
Items affecting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and other corporate matters (a)
 
775

 
 
 
(134
)
 
 
 
641

 
 
 
1.04

 
Impairment charge (b)
 
20

 
 
 
(6
)
 
 
 
14

 
 
 
.02

 
Programming charges (c)
 
589

 
 
 
(142
)
 
 
 
447

 
 
 
.73

 
Gain on sale of assets (d)
 
(549
)
 
 
 
163

 
 
 
(386
)
 
 
 
(.63
)
 
Net gain from investments (e)
 
(85
)
 
 
 
16

 
 
 
(69
)
 
 
 
(.11
)
 
Discrete tax items (f)
 

 
 
 
(827
)
 
 
 
(827
)
 
 
 
(1.34
)
 
Adjusted (Non-GAAP)
 
$
4,095

 
 
 
$
(921
)
 
 
 
$
3,090

 
 
 
$
5.01

 
(a) Reflects severance and exit costs relating to restructuring activities and costs incurred in connection with the Merger, legal proceedings involving the Company and other corporate matters.
(b) Reflects a charge to reduce the carrying value of our international broadcast licenses in Australia to their fair value.
(c) Programming charges principally reflect accelerated amortization associated with changes in the expected monetization of certain programs, and decisions to cease airing, alter future airing patterns or not renew certain programs, in connection with management changes implemented as a result of the Merger.
(d) Reflects a gain on the sale of the CBS Television City property and sound stage operation (“CBS Television City”).
(e) Reflects a gain on marketable securities of $113 million; gains of $22 million on the sale and acquisition of joint ventures; and an impairment charge of $50 million to write-down an investment to its fair value.
(f) Primarily reflects a deferred tax benefit of $768 million resulting from the transfer of intangible assets between our subsidiaries in connection with a reorganization of our international operations; tax benefits of $44 million realized in connection with the preparation of the 2018 federal tax return, based on further clarity provided by the United States government on tax positions relating to federal tax legislation enacted in December 2017 (the “Tax Reform Act”); and a tax benefit of $39 million triggered by the bankruptcy of an investee.


II-7




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


 
 
Earnings from Continuing Operations Before Income Taxes
 
Provision for Income Taxes
 
Net Earnings from Continuing Operations Attributable to ViacomCBS
 
Diluted EPS from Continuing Operations
Reported (GAAP)
 
$
4,124

 
 
 
$
(617
)
 
 
 
$
3,423

 
 
 
$
5.51

 
Items affecting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and other corporate matters (a)
 
490

 
 
 
(116
)
 
 
 
374

 
 
 
.60

 
Programming charges (b)
 
162

 
 
 
(39
)
 
 
 
123

 
 
 
.20

 
Gain on early extinguishment of debt
 
(18
)
 
 
 
4

 
 
 
(14
)
 
 
 
(.02
)
 
Net loss from investments (c)
 
53

 
 
 
(16
)
 
 
 
37

 
 
 
.06

 
Discrete tax items (d)
 

 
 
 
(297
)
 
 
 
(297
)
 
 
 
(.48
)
 
Adjusted (Non-GAAP)
 
$
4,811

 
 
 
$
(1,081
)
 
 
 
$
3,646

 
 
 
$
5.87

 
(a) Primarily reflects severance and exit costs relating to restructuring activities as well as professional fees related to legal proceedings, cost transformation initiatives, investigations at our Company and the evaluation of potential merger activity.
(b) Reflects programming charges resulting from changes to our programming strategy, including at CBS Films and our Cable Networks segment, in connection with management changes.
(c) Reflects a loss on marketable securities of $23 million; an impairment charge of $46 million to write-down an investment to its fair value; and a gain of $16 million on the sale of a 1% equity interest in Viacom18 to our joint venture partner.
(d) Primarily reflects a net discrete tax benefit of $80 million related to the Tax Reform Act and other tax law changes; a net tax benefit of $71 million relating to a tax accounting method change granted by the Internal Revenue Service (“IRS”); and the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019.
 
 
Earnings from Continuing Operations Before Income Taxes
 
Provision for Income Taxes
 
Net Earnings from Continuing Operations Attributable to ViacomCBS
 
Diluted EPS from Continuing Operations
Reported (GAAP)
 
$
4,120

 
 
 
$
(804
)
 
 
 
$
3,268

 
 
 
$
5.05

 
Items affecting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
 
258

 
 
 
(95
)
 
 
 
163

 
 
 
.25

 
Programming charges (a)
 
144

 
 
 
(50
)
 
 
 
94

 
 
 
.14

 
Gain on sale of assets (b)
 
(146
)
 
 
 
16

 
 
 
(130
)
 
 
 
(.20
)
 
Loss on early extinguishment of debt
 
38

 
 
 
(17
)
 
 
 
21

 
 
 
.03

 
Gain on sale of EPIX
 
(285
)
 
 
 
96

 
 
 
(189
)
 
 
 
(.29
)
 
Pension settlement charge
 
352

 
 
 
(115
)
 
 
 
237

 
 
 
.37

 
Impairment of investments (c)
 
18

 
 
 
(7
)
 
 
 
11

 
 
 
.02

 
Discrete tax items (d)
 

 
 
 
(321
)
 
 
 
(321
)
 
 
 
(.50
)
 
Adjusted (Non-GAAP)
 
$
4,499

 
 
 
$
(1,297
)
 
 
 
$
3,154

 
 
 
$
4.87

 
(a) Reflects programming charges associated with the execution of a strategy for certain of our flagship brands, as well as strategic initiatives at Paramount.
(b) Reflects a gain of $127 million, with $11 million attributable to the noncontrolling interest, on the sale of broadcast spectrum in connection with the FCC’s broadcast spectrum auction and a net gain of $19 million relating to the disposition of property and equipment.
(c) Reflects the write-down of certain investments to their fair value.
(d) Primarily reflects a tax benefit of $279 million reflecting the recognition of foreign tax credits on the distribution of securities to the United States (“U.S”).

II-8




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Consolidated Results of Operations—2019 vs. 2018
Revenues
Revenues by Type
 
 
% of Total
 
 
 
% of Total
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
Revenues
 
2018
 
Revenues
 
$
 
%
 
Advertising
$
11,074

 
 
40
%
 
 
$
10,841

 
 
40
%
 
 
$
233

 
2
 %
 
Affiliate
8,602

 
 
31

 
 
8,376

 
 
31

 
 
226

 
3

 
Content licensing
6,483

 
 
23

 
 
6,163

 
 
22

 
 
320

 
5

 
Theatrical
547

 
 
2

 
 
744

 
 
3

 
 
(197
)
 
(26
)
 
Publishing
814

 
 
3

 
 
825

 
 
3

 
 
(11
)
 
(1
)
 
Other
292

 
 
1

 
 
301

 
 
1

 
 
(9
)
 
(3
)
 
Total Revenues
$
27,812

 
 
100
%
 
 
$
27,250

 
 
100
%
 
 
$
562

 
2
 %
 
Advertising
Advertising revenues are generated primarily from the sale of advertising spots on the CBS Television Network, our basic cable networks and our television stations, as well as on our ad-supported streaming services, including CBS All Access and Pluto TV, and on our websites. Our advertising revenues include integrated marketing services, which provide unique branded content and custom sponsorship opportunities to our advertisers, as well as advanced marketing solutions (“AMS”), including addressable video and brand solutions. For 2019, the 2% increase in advertising revenues was driven by 5% growth in domestic advertising revenues, reflecting CBS’ broadcast of tent-pole sporting events in 2019, mainly Super Bowl LIII and the national semifinals and championship game of the NCAA Division I Men’s Basketball Tournament (“NCAA Tournament”), as well as higher revenues from AMS, which includes Pluto TV. These increases were partially offset by lower political advertising sales at our owned television stations, as a result of the benefit to last year from the 2018 midterm elections. International advertising revenues decreased 14%, reflecting the unfavorable impact of foreign exchange rate changes, as well as softness in the Australian and UK markets, partially offset by increases in pricing and political advertising in Argentina. Foreign exchange rate changes had an unfavorable impact of 1-percentage point on the total advertising revenues comparison and 9-percentage points on the international advertising revenues comparison.

The Super Bowl is broadcast on the CBS Television Network on a rotating basis with other networks through the 2022 season under the current contract with the National Football League (“NFL”), and the national semifinals and championship games of the NCAA Tournament are broadcast on the CBS Television Network every other year through 2032 under the current agreement with the NCAA and Turner Broadcasting System, Inc. (“Turner”). In 2020, the advertising revenue comparison will be negatively affected by the benefit in 2019 from CBS’ broadcasts of the Super Bowl and the national semifinals and championship game of the NCAA Tournament. These events will not be broadcast by CBS in 2020. Advertising revenues in 2020 will benefit from higher political advertising sales, mainly in the second half of the year, associated with the U.S. Presidential election.

Affiliate
Affiliate revenues are principally comprised of fees received from multichannel video programming distributors (“MVPDs”) and virtual MVPDs for carriage of our cable networks (“cable affiliate fees”), fees received from television stations affiliated with the CBS Television Network (“station affiliation fees”); fees for authorizing the MVPDs’ and virtual MVPDs’ carriage of our owned television stations (“retransmission fees”); and subscription fees for our streaming services. For 2019, the 3% increase in affiliate revenues reflects 20% growth in station affiliation fees and retransmission fees, driven by annual contractual increases and contract renewals with MVPDs and virtual MVPDs, as well as 45% growth from our streaming services, including CBS All Access and Showtime OTT, driven by subscriber growth. These increases were partially offset by 5% lower cable affiliate fees, mainly resulting from subscriber declines. Domestic affiliate revenues increased 4%, while international affiliate revenues decreased 6% from the prior

II-9




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


year driven by the unfavorable impact of foreign exchange rate changes. Foreign exchange rate changes had an unfavorable impact of 1-percentage point on the total affiliate revenues comparison and 6-percentage points on the international affiliate revenues comparison.

Content Licensing
Content licensing revenues are principally comprised of fees from the licensing of exhibition rights for our internally-produced television and film programming to television stations, cable networks, and subscription video-on-demand (“SVOD”) and free video-on-demand services; home entertainment revenues, which are derived from the sale and distribution of our content through DVDs and Blu-ray discs to wholesale and retail partners, as well as from the viewing of our content on a transactional basis through transactional video-on-demand (“TVOD”) and electronic sell-through services; fees from the use of our trademarks and brands for consumer products, recreation and live events; and fees from the distribution of third-party programming. For 2019, content licensing revenues increased 5%, primarily reflecting higher revenues from the domestic licensing of our content, driven by the production of programming for third parties and the licensing of programming to SVOD providers. These increases were partially offset by a decline in international licensing revenues.

Revenues from the licensing of exhibition rights are recognized at the beginning of the license period in which programs are made available to the licensee for exhibition, and therefore, content licensing revenue comparisons are impacted by fluctuations resulting from the timing of the availability of our programming for multiyear licensing agreements.

Theatrical
Theatrical revenues are principally comprised of the worldwide theatrical distribution of films through audience ticket sales. For 2019, theatrical revenues decreased 26%, principally reflecting a difficult comparison against the prior year, as a result of the 2018 releases of Mission: Impossible - Fallout and A Quiet Place. Theatrical revenues in 2019 benefited from the releases of Rocketman, Gemini Man and Dora and the Lost City of Gold, as well as the continued success of the 2018 release, Bumblebee. Domestic theatrical revenues decreased 31% and international theatrical revenues decreased 23%.

Theatrical revenues may be affected by many factors, including domestic and international audience response, the number, timing and mix of releases and competitive offerings in any given period, consumer tastes and consumption habits and overall economic conditions, including discretionary spending. Revenues from theatrical film releases tend to be cyclical with increases during the summer.

Publishing
Publishing revenues are principally comprised of the domestic and international publishing and distribution of consumer books in printed, digital and audio formats. For 2019, publishing revenues decreased 1%, driven by lower print book sales, which were partially offset by higher sales from digital audio books.

Other
Other revenues are principally comprised of revenues from the rental of production facilities and digital revenues from search and e-commerce partners. For 2019, other revenues decreased 3%, mainly reflecting lower revenues from the rental of our production facilities as a result of the sale of CBS Television City in January 2019.


II-10




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Operating Expenses
 
 
 
% of
 
 
 
% of
 
 
 
Operating Expenses by Type
 
 
Operating
 
 
 
Operating
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
Expenses
 
2018
 
Expenses
 
$
 
%
 
Production
$
6,797

 
 
39
%
 
 
$
6,483

 
 
41
%
 
 
$
314

 
5
%
 
Programming
4,287

 
 
25

 
 
3,965

 
 
25

 
 
322

 
8

 
Participation, distribution and
royalty
3,369

 
 
20

 
 
3,295

 
 
21

 
 
74

 
2

 
Programming charges
589

 
 
3

 
 
162

 
 
1

 
 
427

 
n/m

 
Other
2,181

 
 
13

 
 
2,012

 
 
12

 
 
169

 
8

 
Total Operating Expenses
$
17,223

 
 
100
%
 
 
$
15,917

 
 
100
%
 
 
$
1,306

 
8
%
 
n/m - not meaningful
Production
Production expenses reflect the amortization of direct costs of internally-produced television and theatrical film content as well as other television production costs, including on-air talent. For 2019, the 5% increase in production expenses reflected an increased investment in content, including a higher number of series produced for distribution on multiple platforms, including our streaming services and cable networks, as well as higher amortization of television production costs associated with the increase in content licensing revenues. These increases were partially offset by lower amortization of feature film costs, driven by costs in 2018 associated with Mission: Impossible - Fallout.

Programming
Programming expenses reflect the amortization of acquired programs exhibited on our television broadcast networks, cable networks and television stations. For 2019, the 8% increase in programming expenses was driven by higher sports programming costs, mainly from CBS’ broadcasts of Super Bowl LIII and the national semifinals and championship game of the NCAA Tournament in 2019, which were not broadcast by CBS in 2018, and programming for Pluto TV, which we acquired in March 2019. These increases were partially offset by lower amortization of acquired programming for our cable networks.

Participation, Distribution and Royalty
Participation, distribution and royalty costs primarily include participation and residual expenses for television and film programming, royalty costs for publishing content and other distribution expenses incurred with respect to film and television content, such as print and advertising. For 2019, the 2% increase in participation, distribution and royalty costs was driven by higher participation costs associated with the increase in content licensing revenues.

Programming Charges
During 2019, in connection with the Merger, we implemented management changes across the organization. In connection with these changes, we performed an evaluation of our programming portfolio across all of our businesses, including an assessment of the optimal use of our programming in the marketplace, which resulted in the identification of programs not aligned with management’s strategy. As a result, we recorded programming charges of $589 million principally reflecting accelerated amortization associated with changes in the expected monetization of certain programs, and decisions to cease airing, alter future airing patterns or not renew certain programs.

In addition, during 2018, in connection with management changes, we recorded programming charges of $162 million relating to changes to our programming strategy, including at CBS Films, which shifted its focus from theatrical films to developing content for our streaming services, as well as at our Cable Networks segment where we ceased the use of certain programming.

II-11




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Other
Other operating expenses primarily include compensation and costs associated with book sales, including printing and warehousing. For 2019, the 8% increase in other operating expenses mainly reflected higher costs associated with growth and expansion of our streaming services.

Selling, General and Administrative Expenses
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Selling, general and administrative expenses
$
5,647

 
$
5,206

 
$
441

 
8
%
 
Selling, general and administrative (“SG&A”) expenses include expenses incurred for selling and marketing costs, occupancy, professional service fees and back office support, including employee compensation. The 8% increase in SG&A expenses was driven by higher advertising and marketing costs, reflecting an increase in the number of series premieres and costs associated with our streaming services, as well as the inclusion of Pluto TV and Pop TV since their acquisitions in the first quarter of 2019. These increases were partially offset by cost savings associated with restructuring activities and compensation cost savings resulting from changes in senior management at CBS in 2018.

Depreciation and Amortization
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Depreciation and amortization
$
443

 
$
433

 
$
10

 
2
%
 

Depreciation and amortization expense reflects depreciation of fixed assets, including amortization of transponders and equipment under finance leases, and amortization of finite-lived intangible assets. For 2019, depreciation and amortization expense also includes an impairment charge of $20 million to reduce the carrying value of broadcast licenses in Australia to their fair value.

Restructuring and Other Corporate Matters
During 2019 and 2018, we recorded costs for restructuring and other corporate matters as follows:
Year Ended December 31,
2019
 
2018
Severance
$
401

 
$
235

Exit costs and other
23

 
75

Restructuring charges
424

 
310

Restructuring-related costs

 
52

Merger-related costs
294

 

Other corporate matters
57

 
128

Restructuring and other corporate matters
$
775

 
$
490

During the year ended December 31, 2019, we recorded restructuring charges of $424 million, primarily for severance and the acceleration of stock-based compensation in connection with the Merger, as well as costs related to a restructuring plan initiated in the first quarter of 2019 under which severance payments are being provided to certain eligible employees who voluntarily elected to participate. In addition, in 2019 we incurred costs of $294 million in connection with the Merger, consisting of financial advisory, legal and other professional fees, transaction-related bonuses, and contractual executive compensation, including the accelerated vesting of stock-based compensation, that was triggered by the Merger. We also incurred costs of $40 million in connection with the settlement of a commercial dispute and $17 million associated with legal proceedings involving the Company (see Note 19) and other corporate matters.

II-12




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


During the year ended December 31, 2018, we recorded restructuring charges of $310 million resulting from cost transformation initiatives to improve margins, as well as restructuring-related costs of $52 million, comprised of third-party professional services associated with such initiatives. In addition, in 2018 we recorded expenses of $128 million primarily for professional fees related to legal proceedings, investigations at our Company and the evaluation of potential merger activity.

Gain on Sale of Assets
In 2019, we completed the sale of CBS Television City for $750 million. We have guaranteed a specified level of cash flows to be generated by the business during the first five years following the completion of the sale. Included on the Consolidated Balance Sheet at December 31, 2019 is a liability of $124 million, reflecting the present value of the estimated amount payable under the guarantee obligation. This transaction resulted in a gain of $549 million for 2019, which includes a reduction for the guarantee obligation. We also recognized a tax benefit of $140 million in the fourth quarter of 2018 for the reversal of a valuation allowance relating to capital loss carryforwards that were utilized in connection with this sale.

Interest Expense and Interest Income
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Interest expense
$
(962
)
 
$
(1,030
)
 
$
(68
)
 
(7
)%
 
Interest income
$
66

 
$
79

 
$
(13
)
 
(16
)%
 
The following table presents our outstanding debt balances, excluding finance leases, and the weighted average interest rate as of December 31, 2019 and 2018:
 
 
 
Weighted Average
 
 
 
Weighted Average
 
2019
 
Interest Rate
 
2018
 
Interest Rate
 
Total long-term debt
$
17,976

 
 
4.70
%
 
 
$
18,370

 
 
4.64
%
 
 
Commercial paper
$
699

 
 
2.07
%
 
 
$
674

 
 
3.02
%
 
 
Gain (Loss) on Marketable Securities
For 2019 and 2018, we recorded a gain of $113 million and a loss of $23 million, respectively, reflecting changes in the fair value of marketable securities.

Gain (Loss) on Early Extinguishment of Debt
For 2018, we recorded a gain on early extinguishment of debt of $18 million associated with the redemption of senior notes and debentures prior to maturity totaling $1.13 billion.

Other Items, Net
The following table presents the components of Other items, net.
Year Ended December 31,
2019
 
2018
Pension and postretirement benefit costs
$
(105
)

$
(68
)
Foreign exchange losses
(17
)

(18
)
Impairment of investments
(50
)
 
(46
)
Gains from investments
22

 
16

Other
5


(8
)
Other items, net
$
(145
)
 
$
(124
)

II-13




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)



Benefit (Provision) for Income Taxes
The benefit (provision) for income taxes represents federal, state and local, and foreign taxes on earnings from continuing operations before income taxes and equity in loss of investee companies. For 2019, we recorded a benefit for income taxes of $9 million, reflecting an effective income tax rate of (0.3)%, which included discrete items such as a deferred tax benefit of $768 million resulting from the transfer of intangible assets between our subsidiaries in connection with a reorganization of our international operations; tax benefits of $44 million realized in connection with the preparation of the 2018 federal tax return, based on further clarity provided by the United States government on tax positions relating to the Tax Reform Act; and a tax benefit of $39 million triggered by the bankruptcy of an investee. For 2018, the provision for income taxes was $617 million, reflecting an effective income tax rate of 15.0%. The provision for income taxes for 2018 included discrete items such as the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019; a tax benefit of $80 million relating to the Tax Reform Act and other tax law changes; and a net tax benefit of $71 million relating to a tax accounting method change granted by the Internal Revenue Service.
Equity in Earnings (Loss) of Investee Companies, Net of Tax
The following table presents equity in loss of investee companies for our equity-method investments.
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Equity in loss of investee companies
$
(72
)
 
$
(62
)
 
$
(10
)
 
(16
)%
 
Tax benefit
19

 
15

 
4

 
27

 
Equity in loss of investee companies, net of tax
$
(53
)
 
$
(47
)
 
$
(6
)
 
(13
)%
 
Net Earnings from Continuing Operations Attributable to ViacomCBS and Diluted EPS from Continuing Operations Attributable to ViacomCBS
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Net earnings from continuing operations attributable to
ViacomCBS
$
3,270

 
$
3,423

 
$
(153
)
 
(4
)%
 
Diluted EPS from continuing operations attributable to
ViacomCBS
$
5.30

 
$
5.51

 
$
(.21
)
 
(4
)%
 
For 2019, net earnings from continuing operations attributable to ViacomCBS and diluted EPS from continuing operations each decreased 4%, primarily driven by the lower operating income, mainly reflecting our increased investment in content. The lower operating income was partially offset by the aforementioned discrete tax benefits.

Net Earnings Attributable to ViacomCBS and Diluted EPS Attributable to ViacomCBS
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Net earnings attributable to ViacomCBS
$
3,308

 
$
3,455

 
$
(147
)
 
(4
)%
 
Diluted EPS attributable to ViacomCBS
$
5.36

 
$
5.56

 
$
(.20
)
 
(4
)%
 
Consolidated Results of Operations— 2018 vs. 2017
Revenues
Revenues by Type
 
 
% of Total
 
 
 
% of Total
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
Revenues
 
2017
 
Revenues
 
$
 
%
 
Advertising
$
10,841

 
 
40
%
 
 
$
10,582

 
 
40
%
 
 
$
259

 
2
 %
 
Affiliate
8,376

 
 
31

 
 
8,153

 
 
31

 
 
223

 
3

 
Content licensing
6,163

 
 
22

 
 
5,947

 
 
22

 
 
216

 
4

 
Theatrical
744

 
 
3

 
 
716

 
 
3

 
 
28

 
4

 
Publishing
825

 
 
3

 
 
830

 
 
3

 
 
(5
)
 
(1
)
 
Other
301

 
 
1

 
 
307

 
 
1

 
 
(6
)
 
(2
)
 
Total Revenues
$
27,250

 
 
100
%
 
 
$
26,535

 
 
100
%
 
 
$
715

 
3
 %
 
Advertising
For 2018, the 2% increase in advertising revenues was driven by our acquisition of Network 10 in the fourth quarter of 2017; record political advertising sales in 2018 associated with the U.S. midterm elections; higher pricing at our broadcast and cable networks; and growth in revenues from AMS. Advertising revenues for 2018 also benefited from the adoption of a new revenue recognition standard in the first quarter of 2018, under which revenues for certain distribution arrangements are recognized based on the gross amount of consideration received from the customer, with an offsetting increase to operating expenses. Under previous accounting guidance, such revenues were recognized at the net amount retained by us after the payment of fees to the third party. This guidance was applied prospectively from the date of adoption, and therefore, amounts for 2017 are reported under previous accounting guidance. These increases were partially offset by lower linear impressions at our cable networks and the absence of the broadcasts of five Thursday Night Football games and the national semifinals and championship game of the NCAA Tournament, which were broadcast on the CBS Television Network in 2017. The national semifinals and championship game of the NCAA Tournament are broadcast by the CBS Television Network every other year through 2032 under the current agreements with the NCAA and Turner. Foreign exchange rate changes had an unfavorable impact of 1-percentage point on the advertising revenues comparison.
 
Affiliate
For 2018, the 3% increase in affiliate revenues reflects 22% growth in station affiliation and retransmission fees and 65% growth from subscription fees for our streaming services, CBS All Access and Showtime OTT. These increases were partially offset by the unfavorable comparison against Showtime Networks’ distribution in 2017 of the Floyd Mayweather/Conor McGregor pay-per-view boxing event. Cable affiliate fees were relatively flat for 2018 compared with 2017, as contractual rate increases under carriage agreements for our cable networks and the benefit of new channel launches and acquisitions were offset by subscriber declines.

Content Licensing
For 2018, the 4% increase in content licensing revenues reflects higher revenues from the distribution of third-party content, resulting from revenues under certain distribution arrangements now being recognized at the gross amount of consideration received from the customer, with an offsetting increase to participation expense, as a result of the adoption of a new revenue recognition standard in the first quarter of 2018. Under previous guidance, such

II-14




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


distribution revenues were recognized at the net amount retained by us after the payment of fees to the third party. The increase also reflected growth from domestic and international license fees, including the 2018 availability of Tom Clancy’s Jack Ryan, The Haunting of Hill House, Maniac, The Alienist and The Cloverfield Paradox, compared with 2017, which included the licensing of NCIS: New Orleans, Madam Secretary and titles from the CSI franchise. These increases were partially offset by lower home entertainment revenues, primarily reflecting the number and mix of titles in release.

Theatrical
For 2018, theatrical revenues increased 4%, principally reflecting the strong performance of the theatrical release of Mission: Impossible - Fallout in 2018.

Publishing
Publishing revenues for 2018 decreased 1% driven by lower sales of print and electronic books, which were partially offset by higher sales of digital audio books.

Operating Expenses
 
 
 
% of Total
 
 
 
% of Total
 
 
 
Operating Expenses by Type
 
 
Operating
 
 
 
Operating
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
Expense
 
2017
 
Expense
 
$
 
%
 
Production
$
6,483

 
 
41
%
 
 
$
5,994

 
 
39
%
 
 
$
489

 
8
 %
 
Programming
3,965

 
 
25

 
 
4,268

 
 
28

 
 
(303
)
 
(7
)
 
Participation, distribution and
royalty
3,295

 
 
21

 
 
3,182

 
 
20

 
 
113

 
4

 
Programming charges
162

 
 
1

 
 
144

 
 
1

 
 
18

 
13

 
Other
2,012

 
 
12

 
 
1,895

 
 
12

 
 
117

 
6

 
Total Operating Expenses
$
15,917

 
 
100
%
 
 
$
15,483

 
 
100
%
 
 
$
434

 
3
 %
 
Production
For 2018, the 8% increase in production expenses reflected an increased investment in content, including a higher number of series produced for distribution on multiple platforms, including our owned networks and streaming services, and the acquisition of Network 10 in the fourth quarter of 2017.

Programming
For 2018, the 7% decrease in programming expenses was driven by lower sports programming costs, resulting from Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event in 2017 and the absence of Thursday Night Football and the national semifinals and championship game of the NCAA Tournament, which were broadcast on the CBS Television Network in 2017. These decreases were partially offset by costs for programming on Network 10, which we acquired in the fourth quarter of 2017, and an increased investment in programming for our cable networks.

Participation, Distribution and Royalty
For 2018, the 4% increase in participation, distribution and royalty costs was primarily driven by the adoption of new revenue recognition guidance in the first quarter of 2018, which resulted in revenues under certain distribution arrangements being recognized based on the gross amount of consideration received from the customer, with an offsetting participation expense recognized for the fees paid to the third party. Under previous accounting guidance, such revenues were recognized at the net amount retained by us after the payment of fees to the third party. This

II-15




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


change resulted in an increase to both revenues and participation expenses of $279 million for 2018, with no impact to our operating income. The increase also reflects higher participation costs associated with the increase in content licensing revenues. These increases were partially offset by lower film distribution costs, driven by the number and mix of theatrical releases and a charge in 2017 resulting from the termination of a slate financing agreement.
 
Programming Charges
During 2018, in connection with management changes, we recorded programming charges of $162 million relating to changes to our programming strategy, including at CBS Films, which shifted its focus from theatrical films to developing content for our streaming services, as well as at our Cable Networks segment where we ceased the use of certain programming.
In addition, during 2017, we recorded programming charges of $144 million associated with management’s decision to cease use of certain original and acquired programming, in connection with the execution of a strategy for certain of our flagship brands and strategic initiatives at Paramount.
Other
For 2018, the 6% increase in other operating expenses mainly reflected higher costs associated with growth in our streaming services and expenses of Network 10, which we acquired in the fourth quarter of 2017.

Selling, General and Administrative Expenses
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
2017
 
$
 
%
 
Selling, general and administrative expenses
$
5,206

 
$
5,156

 
$
50

 
1
%
 
For 2018, the 1% increase in SG&A expenses reflected higher advertising and marketing costs, mainly for the launch of the Paramount Network and to support our growth initiatives. These increases were partially offset by savings from cost transformation initiatives.
Depreciation and Amortization
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
2017
 
$
 
%
 
Depreciation and amortization
$
433

 
$
443

 
$
(10
)
 
(2
)%
 
Restructuring and Other Corporate Matters
During 2018 and 2017, we recorded costs for restructuring and other corporate matters as follows:
Year Ended December 31,
2018
 
2017
Severance
$
235

 
$
224

Exit costs and other
75

 
12

Asset impairment

 
22

Restructuring charges
310

 
258

Restructuring-related costs
52

 

Other corporate matters
128

 

Restructuring and other corporate matters
$
490

 
$
258


During the year ended December 31, 2018, we recorded restructuring charges of $310 million resulting from cost transformation initiatives to improve margins, as well as restructuring-related costs of $52 million, comprised of third-

II-16




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


party professional services associated with such initiatives. In addition, in 2018 we recorded expenses of $128 million primarily for professional fees related to legal proceedings, investigations at our Company and the evaluation of potential merger activity.

During the year ended December 31, 2017, we recorded restructuring charges of $258 million, resulting from the execution of a strategy for certain of our flagship brands and strategic initiatives at Paramount, as well as costs relating to other restructuring plans across several of our businesses in a continued effort to reduce our cost structure. The restructuring charges for 2017 included a non-cash impairment charge resulting from the decision to abandon an international trade name in connection with the strategic initiatives.

Gain on Sale of Assets
In 2017, we completed the sale of broadcast spectrum in connection with the FCC’s broadcast spectrum auction. The sale resulted in a pre-tax gain of $127 million on the Consolidated Statement of Operations, with $11 million attributable to the noncontrolling interest. In addition, in 2017 we recorded a net gain of $19 million relating to the disposition of property and equipment.

Interest Expense and Interest Income
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
2017
 
$
 
%
 
Interest expense
$
(1,030
)
 
$
(1,088
)
 
$
(58
)
 
(5
)%
 
Interest income
$
79

 
$
87

 
$
(8
)
 
(9
)%
 
The following table presents our outstanding debt balances, excluding finance leases, and the weighted average interest rate as of December 31, 2018 and 2017:
 
 
 
Weighted Average
 
 
 
Weighted Average
 
2018
 
Interest Rate
 
2017
 
Interest Rate
 
Total long-term debt
$
18,370

 
 
4.64
%
 
 
$
19,466

 
 
4.67
%
 
 
Commercial paper
$
674

 
 
3.02
%
 
 
$
779

 
 
1.91
%
 
 
Gain (Loss) on Marketable Securities
During 2018, we recorded a loss on marketable securities of $23 million. In connection with the adoption of FASB guidance on financial instruments, beginning in the first quarter of 2018, changes in the fair value of marketable securities are recognized in the Consolidated Statements of Operations.

Gain (Loss) on Early Extinguishment of Debt
For 2018, the gain on early extinguishment of debt of $18 million reflected the pre-tax gain associated with the redemption of senior notes and debentures prior to maturity totaling $1.13 billion. During 2017, we redeemed, prior to maturity, senior notes totaling $4.27 billion, resulting in the recognition of a pre-tax loss on the early extinguishment of debt of $38 million.

Gain on Sale of EPIX
During 2017, we completed the sale of our 49.76% interest in EPIX, resulting in a pre-tax gain of $285 million.


II-17




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Pension Settlement Charge
During 2017, we purchased a group annuity contract under which an insurance company permanently assumed our obligation to pay and administer pension benefits to certain pension plan participants, or their designated beneficiaries, who had been receiving pension benefits. The purchase of this group annuity contract was funded with pension plan assets. As a result, our outstanding pension benefit obligation was reduced by approximately $800 million. In connection with this transaction, we recorded a settlement charge of $352 million in 2017, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. Additionally, during 2017, we made discretionary contributions totaling $600 million to prefund our qualified pension plans.

Other Items, Net
The following table presents the components of Other items, net.
Year Ended December 31,
2018
 
2017
Pension and postretirement benefit costs
$
(68
)
 
$
(96
)
Foreign exchange losses
(18
)
 
(20
)
Impairment of investments
(46
)
 
(18
)
Gain on sale of investment
16

 

Other
(8
)
 
19

Other items, net
$
(124
)
 
$
(115
)
Benefit (Provision) for Income Taxes
For 2018, the provision for income taxes was $617 million, reflecting an effective income tax rate of 15.0%. The provision for income taxes for 2018 included discrete items such as the reversal of a valuation allowance of $140 million relating to capital loss carryforwards that were utilized in connection with the sale of CBS Television City in 2019; a tax benefit of $80 million relating to the Tax Reform Act and other tax law changes; and a tax benefit of $71 million relating to a tax accounting method change granted by the Internal Revenue Service. For 2017, the provision for income taxes was $804 million, reflecting an effective income tax rate of 19.5%. The provision for income taxes for 2017 included discrete items such as a tax benefit of $279 million reflecting the recognition of foreign tax credits on the distribution of securities to the U.S.

Equity in Earnings (Loss) of Investee Companies, Net of Tax
The following table presents equity in earnings (loss) of investee companies for our equity-method investments.
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
2017
 
$
 
%
 
Equity in earnings (loss) of investee companies
$
(62
)
 
$
14

 
$
(76
)
 
n/m
 
Tax benefit (provision)
15

 
(10
)
 
25

 
n/m
 
Equity in earnings (loss) of investee companies, net of tax
$
(47
)
 
$
4

 
$
(51
)
 
n/m
 
n/m - not meaningful

II-18




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Net Earnings from Continuing Operations Attributable to ViacomCBS and Diluted EPS from Continuing Operations Attributable to ViacomCBS
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
2017
 
$
 
%
 
Net earnings from continuing operations attributable to
ViacomCBS
$
3,423

 
$
3,268

 
$
155

 
5
%
 
Diluted EPS from continuing operations attributable to
ViacomCBS
$
5.51

 
$
5.05

 
$
.46

 
9
%
 
For 2018, the 5% increase in net earnings from continuing operations attributable to ViacomCBS was driven by the lower effective income tax rate in 2018, partially offset by lower operating income. Diluted EPS from continuing operations attributable to ViacomCBS grew 9%, reflecting the higher earnings and lower weighted average shares outstanding as a result of share repurchases and the shares retired as a result of the split-off of CBS Radio Inc. (“CBS Radio) during the fourth quarter of 2017.

Net Loss from Discontinued Operations, Net of Tax
On November 16, 2017, we completed the split-off of CBS Radio through an exchange offer, in which we accepted 17.9 million shares of CBS Class B Common Stock from our stockholders in exchange for the 101.4 million shares of CBS Radio common stock that we owned. Immediately following the exchange offer, each share of CBS Radio common stock was converted into one share of Entercom Communications Corp. (“Entercom”) Class A common stock upon completion of the merger of CBS Radio and Entercom. CBS Radio has been presented as a discontinued operation in the consolidated financial statements for all periods presented.

II-19




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


The following table sets forth details of net earnings (loss) from discontinued operations for the year ended December 31, 2017. Net earnings from discontinued operations for the year ended December 31, 2018 was not material to our consolidated financial statements.
CBS Radio
 
Other
 
Total
Revenues
$
1,018

 
 
$

 
 
$
1,018

Costs and expenses:
 
 
 
 
 
 
 
Operating
364

 
 

 
 
364

Selling, general and administrative
444

 
 
(8
)
 
 
436

Market value adjustment
980

(a) 
 

 
 
980

Restructuring charges
7

 
 

 
 
7

Total costs and expenses
1,795

 
 
(8
)
 
 
1,787

Operating income (loss)
(777
)
 
 
8

 
 
(769
)
Interest expense
(70
)
 
 

 
 
(70
)
Other items, net
(2
)
 
 

 
 
(2
)
Earnings (loss) from discontinued operations
(849
)
 
 
8

 
 
(841
)
Income tax benefit (provision)
(55
)
 
 
43

(b) 
 
(12
)
Earnings (loss) from discontinued operations, net of tax
(904
)
 
 
51

 
 
(853
)
Net gain (loss) on disposal
(109
)
 
 
13

 
 
(96
)
Income tax benefit (provision)
4

 
 
(2
)
 
 
2

Net gain (loss) on disposal, net of tax
(105
)
 
 
11

(c) 
 
(94
)
Net earnings (loss) from discontinued operations, net of tax
$
(1,009
)
 
 
$
62

 
 
$
(947
)
(a) During 2017, prior to the split-off, CBS Radio was measured each reporting period at the lower of its carrying amount or fair value less cost to sell. The value of the transaction with Entercom was determined based on Entercom’s stock price at the closing of the transaction and therefore, we recorded a market value adjustment of $980 million in 2017 to adjust the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom.
(b) Primarily reflects a tax benefit from the resolution of a tax matter in a foreign jurisdiction relating to a previously disposed business that was accounted for as a discontinued operation.
(c) Reflects adjustments to the loss on disposal of our outdoor advertising businesses, primarily from a decrease to the guarantee liability associated with the 2013 disposal of our outdoor advertising business in Europe.

Net Earnings Attributable to ViacomCBS and Diluted EPS Attributable to ViacomCBS
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2018

2017
 
$
 
%
 
Net earnings attributable to ViacomCBS
$
3,455

 
$
2,321

 
$
1,134

 
49
%
 
Diluted EPS attributable to ViacomCBS
$
5.56

 
$
3.59

 
$
1.97

 
55
%
 

II-20




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Segments
We operate in the following four segments:
 
TV ENTERTAINMENT:  Our TV Entertainment segment creates and acquires programming for distribution and viewing on multiple media platforms, including our broadcast network, through multichannel video programming distributors (“MVPDs”) and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. TV Entertainment consists of the CBS Television Network, CBS Television Studios, CBS Television Distribution, CBS Interactive, CBS Sports Network, CBS Television Stations and CBS-branded streaming services CBS All Access and CBSN, among others.  TV Entertainment’s revenues are generated primarily from advertising sales, the licensing and distribution of its content, and affiliate revenues.
 
CABLE NETWORKS:  Our Cable Networks segment creates and acquires programming for distribution and viewing on multiple media platforms, including our cable networks, through MVPDs and virtual MVPDs, and our streaming services, as well as for licensing to third parties both domestically and internationally. Cable Networks consists of our premium subscription cable networks Showtime, The Movie Channel and Flix, and a subscription streaming offering of Showtime; our basic cable networks Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TV and Smithsonian Channel, among others, as well as the international extensions of these brands operated by ViacomCBS Networks International; international broadcast networks, Network 10, Channel 5 and Telefe; and Pluto TV, a leading free streaming TV platform in the United States. Cable Networks’ revenues are generated primarily from affiliate revenues, advertising sales and the licensing of its content and brands.
 
FILMED ENTERTAINMENT:  Our Filmed Entertainment segment develops, produces, finances, acquires and distributes films, television programming and other entertainment content in various markets and media worldwide primarily through Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios. Filmed Entertainment’s revenues are generated primarily from the release and/or distribution of films theatrically, the release and/or distribution of film and television product through home entertainment, the licensing of film and television product to television and digital platforms and other ancillary activities.
 
PUBLISHING:  Our Publishing segment publishes and distributes Simon & Schuster consumer books domestically and internationally and includes imprints such as Simon & Schuster, Scribner, Atria Books and Gallery Books. Publishing generates revenues from the publishing and distribution of consumer books in print, digital and audio formats.

We present operating income (loss) excluding depreciation and amortization, stock-based compensation, costs for restructuring and other corporate matters, programming charges and gain on sale of assets, each where applicable (“Adjusted OIBDA”), as the primary measure of profit and loss for our operating segments in accordance with FASB guidance for segment reporting. We began presenting Adjusted OIBDA as our segment profit measure in the fourth quarter of 2019 in order to align with the primary method used by our management beginning after the Merger to evaluate segment performance and to make decisions regarding the allocation of resources to our segments. We believe the presentation of Adjusted OIBDA is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by our management and enhances their ability to understand our operating performance. Stock-based compensation is excluded from our segment measure of profit and loss because it is set and approved by our Board of Directors in consultation with corporate executive management. Stock-based compensation is included as a component of our consolidated Adjusted OIBDA. The reconciliation of Adjusted OIBDA to our consolidated net earnings is presented in Note 17 to the consolidated financial statements.


II-21




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Segment Results of Operations - 2019 vs. 2018
 
 
 
% of Total
 
 
 
% of Total
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
Revenues
 
2018
 
Revenues
 
$
 
%
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TV Entertainment
$
11,924

 
 
43
 %
 
 
$
11,061

 
 
41
 %
 
 
$
863

 
8
 %
 
Cable Networks
12,449

 
 
45

 
 
12,683

 
 
46

 
 
(234
)
 
(2
)
 
Filmed Entertainment
2,990

 
 
10

 
 
2,956

 
 
11

 
 
34

 
1

 
Publishing
814

 
 
3

 
 
825

 
 
3

 
 
(11
)
 
(1
)
 
Corporate/Eliminations
(365
)
 
 
(1
)
 
 
(275
)
 
 
(1
)
 
 
(90
)
 
(33
)
 
Total Revenues
$
27,812

 
 
100
 %
 
 
$
27,250

 
 
100
 %
 
 
$
562

 
2
 %
 
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Adjusted OIBDA:
 
 
 
 
 
 
 
 
TV Entertainment
$
2,443

 
$
2,466

 
$
(23
)
 
(1
)%
 
Cable Networks
3,515

 
4,341

 
(826
)
 
(19
)
 
Filmed Entertainment
80

 
(33
)
 
113

 
n/m

 
Publishing
143

 
153

 
(10
)
 
(7
)
 
Corporate/Eliminations
(449
)
 
(433
)
 
(16
)
 
(4
)
 
Stock-based compensation
(201
)
 
(205
)
 
4

 
2

 
Total Adjusted OIBDA
5,531

 
6,289

 
(758
)
 
(12
)
 
Depreciation and amortization
(443
)
 
(433
)
 
(10
)
 
(2
)
 
Restructuring and other corporate matters
(775
)
 
(490
)
 
(285
)
 
n/m

 
Programming charges
(589
)
 
(162
)
 
(427
)
 
n/m

 
Gain on sale of assets
549

 

 
549

 
n/m

 
Total Operating Income
$
4,273

 
$
5,204

 
$
(931
)
 
(18
)%
 
n/m - not meaningful
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Depreciation and Amortization:
 
 
 
 
 
 
 
 
TV Entertainment
$
150

 
$
160

 
$
(10
)
 
(6
)%
 
Cable Networks
219

 
194

 
25

 
13

 
Filmed Entertainment
37

 
38

 
(1
)
 
(3
)
 
Publishing
5

 
6

 
(1
)
 
(17
)
 
Corporate
32

 
35

 
(3
)
 
(9
)
 
Total Depreciation and Amortization
$
443

 
$
433

 
$
10

 
2
 %
 
TV Entertainment (CBS Television Network, CBS Television Studios, CBS Television Distribution, CBS Interactive, CBS Sports Network, CBS Television Stations and CBS-branded streaming services CBS All Access and CBSN, among others)
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Advertising
$
6,008

 
$
5,751

 
$
257

 
4
 %
 
Affiliate
2,550

 
2,082

 
468

 
22

 
Content licensing
3,157

 
3,006

 
151

 
5

 
Other
209

 
222

 
(13
)
 
(6
)
 
Revenues
$
11,924

 
$
11,061

 
$
863

 
8
 %
 
 
 
 
 
 
 
 
 
 
Adjusted OIBDA
$
2,443

 
$
2,466

 
$
(23
)
 
(1
)%
 


II-22




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Revenues
For 2019, the 8% increase in TV Entertainment revenues reflects growth across each of the segment’s main revenue streams.
Advertising
The 4% increase in advertising revenues was driven by 11% growth in CBS Network advertising, principally reflecting CBS’ broadcasts of Super Bowl LIII and the national semifinals and championship game of the NCAA Tournament, partially offset by the timing of other sporting events. Taken together these items contributed 9-percentage points of the growth in network advertising. Advertising sales at our owned television stations decreased 11%, primarily reflecting record political advertising in 2018 from the midterm elections, partially offset by the benefit from CBS’ broadcast of Super Bowl LIII. The Super Bowl is broadcast on the CBS Television Network on a rotating basis with other networks through the 2022 season under the current contract with the NFL and the national semifinals and championship games of the NCAA Tournament are broadcast on the CBS Television Network every other year through 2032 under the current agreement with the NCAA and Turner.

Affiliate
Affiliate revenues grew 22%, primarily as a result of a 20% increase in station affiliation fees and retransmission revenues as well as subscriber growth at CBS All Access.

Content Licensing
Content licensing increased 5%, driven by higher revenues from the production of programming for third parties, including Unbelievable and Dead to Me, and higher revenues from the licensing of library programming to SVOD providers.

Adjusted OIBDA
Adjusted OIBDA decreased 1% as a result of an increased investment in content and higher costs associated with the growth and expansion of our streaming services, partially offset by higher revenues.

Comparability in 2020 will be negatively affected by the benefit in 2019 from CBS’ broadcasts of Super Bowl LIII and the national semifinals and championship game of the NCAA Tournament. Results in 2020 will benefit from higher political advertising revenues, mainly in the second half of the year, associated with the U.S. Presidential election.

II-23




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Cable Networks (Showtime Networks, Nickelodeon, MTV, BET, Comedy Central, Paramount Network, Nick Jr., VH1, TV Land, CMT, Pop TV, Smithsonian Networks, ViacomCBS Networks International, Network 10, Channel 5, Telefe and Pluto TV)
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019
 
2018
 
$
 
%
 
Advertising
$
5,129

 
$
5,130

 
$
(1
)
 
 %
 
Affiliate
6,052

 
6,294

 
(242
)
 
(4
)
 
Content licensing
1,268

 
1,259

 
9

 
1

 
Revenues
$
12,449

 
$
12,683

 
$
(234
)
 
(2
)%
 
 
 
 
 
 
 
 
 
 
Adjusted OIBDA
$
3,515

 
$
4,341

 
$
(826
)
 
(19
)%
 

Revenues
For 2019, Cable Networks revenues decreased 2% from the prior year, reflecting an unfavorable impact from foreign exchange rate changes of 2-percentage points. Domestic revenues remained substantially flat compared with the prior year as higher advertising revenues were offset by a decline in affiliate revenues. International revenues decreased 9% mainly as a result of a 7-percentage point unfavorable impact of foreign exchange rate changes.

Advertising
Advertising revenues remained flat compared with the prior year and included an unfavorable impact of foreign exchange rate changes of 3-percentage points. Domestic advertising revenues increased 6%, reflecting higher revenues from AMS, which comprised approximately 19% of domestic advertising revenues in 2019, and includes Pluto TV, which was acquired in March 2019. The domestic advertising growth also reflects higher pricing and the inclusion of the results of Pop TV. We began consolidating Pop TV in March 2019 when we acquired the 50% stake we did not own, which brought our ownership to 100%. These increases were partially offset by lower linear impressions. International advertising revenues decreased 13%, mainly reflecting the unfavorable impact of foreign exchange rate changes of 9-percentage points, as well as softness in the Australian and UK markets, partially offset by increases in pricing and political advertising in Argentina.

Affiliate
Affiliate revenues decreased 4%, which included a 1-percentage point unfavorable impact from foreign exchange rate changes. Domestic affiliate revenues decreased 4%, primarily driven by declines in traditional MVPD subscribers at our basic and premium cable networks. These declines were partially offset by growth from Showtime OTT, the inclusion of the results of Pop TV, and contractual rate increases under carriage agreements. International affiliate revenues decreased 6%, reflecting a 6-percentage point unfavorable impact of foreign exchange rate changes. As of December 31, 2019, Showtime subscriptions, including Showtime OTT, totaled approximately 27 million.

Content Licensing
The 1% increase in content licensing revenues, which includes the unfavorable impact of foreign exchange rate changes of 1-percentage point, was the result of increased revenues from the production of programming for third parties, including The Real World and Bellator mixed martial arts events. These increases were partially offset by lower secondary market revenue, driven by the renewal of a significant domestic licensing agreement for the Showtime original series, Dexter, in 2018.


II-24




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Adjusted OIBDA
Adjusted OIBDA decreased 19%, driven by lower revenues as well as increased investment in content and higher advertising and promotion expenses.
Filmed Entertainment (Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television Studios)
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019

2018

$
 
%
 
Theatrical
$
547

 
$
744

 
$
(197
)
 
(26
)%
 
Home Entertainment
623

 
617

 
6

 
1

 
Licensing
1,709

 
1,493

 
216

 
14

 
Other
111

 
102

 
9

 
9

 
Revenues
$
2,990

 
$
2,956

 
$
34

 
1
 %
 
 
 
 
 
 
 
 
 
 
Adjusted OIBDA
$
80

 
$
(33
)
 
$
113

 
n/m

 
n/m - not meaningful
Revenues
For 2019, the 1% increase in Filmed Entertainment revenues reflects growth in licensing revenues, partially offset by lower theatrical revenues. Foreign exchange rate changes had a 1-percentage point unfavorable impact on the revenue comparison.

Theatrical
The 26% decrease in theatrical revenues principally reflects a difficult comparison to the prior year, as a result of the 2018 releases of Mission: Impossible - Fallout and A Quiet Place. Theatrical revenues in 2019 benefited from the releases of Rocketman, Gemini Man and Dora and the Lost City of Gold, as well as the continued success of the 2018 release, Bumblebee. Foreign exchange rate changes had a 1-percentage point unfavorable impact on theatrical revenues.

Home Entertainment
The 1% increase in home entertainment revenues was driven by the number and mix of titles in release. Significant 2019 releases included Bumblebee, Rocketman, Instant Family, and Pet Sematary, while 2018 benefited from the releases of Mission: Impossible - Fallout, Daddy’s Home 2 and A Quiet Place. Changes in foreign exchange rates resulted in a 1-percentage point unfavorable impact on the revenue comparison.

Licensing
The 14% growth in licensing revenues was driven by increases in licensing of film catalog titles to SVOD providers and recent releases to pay television services. Foreign exchange rate changes had a 1-percentage point unfavorable impact on licensing revenues.

Other
The 9% increase in other revenues was driven by higher studio rental revenues.


II-25




Management’s Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)


Adjusted OIBDA
Adjusted OIBDA for 2019 increased to $80 million from a loss of $33 million for 2018, principally driven by higher profits from licensing of film library titles. This increase was partially offset by costs associated with future film releases and higher incentive compensation costs. Fluctuations in results for the Filmed Entertainment segment may occur as a result of the timing of the recognition of print and advertising expenses, which are generally incurred before and throughout the theatrical release of a film, while the revenues for the respective film are recognized as earned through the film’s theatrical exhibition and subsequent distribution windows.
Publishing (Simon & Schuster)
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2019

2018

$
 
%
 
Revenues
$
814

 
$
825

 
$
(11
)
 
(1
)%
 
 
 
 
 
 
 
 
 
 
Adjusted OIBDA
$
143

 
$
153

 
$
(10
)
 
(7
)%
 

Revenues
For 2019, the 1% decrease in revenues primarily reflects lower print book sales, partially offset by 15% growth in digital audio sales. Bestselling titles for 2019 included Howard Stern Comes Again by Howard Stern, The Institute by Stephen King and The Pioneers by David McCullough.

Adjusted OIBDA
The 7% decrease in Adjusted OIBDA primarily reflects lower revenues and higher costs from the mix of titles.

Segment Results of Operations - 2018 vs. 2017
 
 
 
% of Total
 
 
 
% of Total
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
Revenues
 
2017
 
Revenues
 
$
 
%
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TV Entertainment
$
11,061

 
 
41
 %
 
 
$
10,476

 
 
39
 %
 
 
$
585

 
6
 %
 
Cable Networks
12,683

 
 
46

 
 
12,479

 
 
47

 
 
204

 
2

 
Filmed Entertainment
2,956

 
 
11

 
 
3,075

 
 
12

 
 
(119
)
 
(4
)
 
Publishing
825

 
 
3

 
 
830

 
 
3

 
 
(5
)
 
(1
)
 
Corporate/Eliminations
(275
)
 
 
(1
)
 
 
(325
)
 
 
(1
)
 
 
50

 
15

 
Total Revenues
$
27,250

 
 
100
 %
 
 
$
26,535

 
 
100
 %
 
 
$
715

 
3
 %
 
 
 
 
 
 
Increase/(Decrease)
 
Year Ended December 31,
2018
 
2017
 
$
 
%
 
Adjusted OIBDA:
 
 
 
 
 
 
 
 
TV Entertainment
$
2,466

 
$
2,301

 
$
165

 
7
 %
 
Cable Networks
4,341

 
4,442

 
(101
)
 
(2
)
 
Filmed Entertainment
(33
)
 
(187
)
 
154

 
82

 
Publishing
153

 
146

 
7

 
5

 
Corporate/Eliminations
(433
)
 
(442
)