Good day, everyone, and welcome to the CBS Corporation first quarter 2017 earnings release teleconference. Today's call is being recorded. At this time, I'd like to turn the conference over to the Executive Vice President of Corporate Finance and Investor Relations, Mr. Adam Townsend. Please go ahead, sir.

Thank you, Gwen. Good afternoon, everyone, and welcome to our first quarter 2017 earnings call. Joining us with today's remarks are Leslie Moonves, our Chairman and CEO; and Joe Ianniello, our Chief Operating Officer. Following Les and Joe's discussion of the company's performance, we will open the call up to questions. Please note that statements on this conference call relating to matters which are not historical facts are forward-looking statements which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's SEC filings. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website at cbscorporation.com. A webcast of this call and the earnings release related to today's presentation can also be found on our Investor section of our website. With that, it's my pleasure to turn the call over to Les.

Thank you, Adam, and good afternoon, everyone, and thank you for joining us. I'm pleased to report that CBS delivered a very healthy first quarter. EPS was $1.09, up 15%, representing the 29th consecutive quarter of EPS growth. And revenue came in at $3.3 billion, which was quite an achievement because we were going up against a quarter a year ago when we had the Super Bowl and an extra NFL playoff game. When you exclude those two games, revenue would have been up high single digits for the quarter. CBS' strong performance is the direct result of our clear strategy to diversify our revenue. During the quarter, affiliate and subscription fees grew 17%, and content licensing and distribution grew 16%. Going forward, all three of our main types of revenue are set up for success in the quarters ahead. First, affiliate and subscription fees will continue to grow rapidly from multiple sources led by retrans and reverse comp which is on track to be up about 25% in 2017. This will put us more than halfway to our goal of achieving $2.5 billion in this revenue source by 2020. Affiliate and subscription fees are also beginning to benefit meaningfully from CBS All Access and Showtime OTT. On both services, the combination of original programming and leading library titles is driving our growth, and we are pacing ahead of our goal of 8 million subscribers combined by 2020. So far, we have been selling each product individually. Starting next week, in addition to each being available on its own, we will begin offering All Access and Showtime as a combined package for the very first time. And yes, the skinny bundles we've long told you about are now here. Last month, CBS and Showtime launched on Google's YouTube TV, and…

Thanks, Les, and good afternoon, everyone. As you heard, our first quarter results underscored the strength of our business model. We delivered healthy EPS growth and strong free cash flow, driven by double digit increases in our high margin non-advertising revenue sources, and once again, we did all of this while we continued to invest in our programming as well as our own distribution platforms. So the strategy we laid out for you a year ago is currently paying off. CBS is now a pure-play content company with a diversified revenue base that is poised for continued growth. This is why we believe we are the best positioned company in the media landscape. Now let me give you some more details about our first quarter results. As you heard, revenue came in at $3.3 billion. Advertising was $1.6 billion compared with $2.1 billion in 2016, which as you know, included Super Bowl 50 and an extra NFL playoff game. Also, last year, underlying network advertising was up a very strong 12% in Q1, and we nearly held all of that growth with underlying network advertising declining less than 1% this quarter. We also saw an improvement from Q4 just as we indicated on our last call. And as we head into this year's upfront, we feel confident in the strength and stability of our primetime lineup on CBS, which is once again America's most watched network. And as Les said, content licensing and distribution grew 16% in the quarter with strength across the board. Internationally, we saw a robust demand for new shows like MacGyver and Bull, as well as established hits like Hawaii Five-0 and NCIS: Los Angeles. Domestically, we got a lift from the syndication and streaming of our off-network programming, and we are also producing more originals…

Thank you. And we'll take our first question from Ben Swinburne with Morgan Stanley. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thanks. Good afternoon, guys. Les, it seems like All Access has continued to be a strong growth driver. I think it's in your 20% growth of affiliate subscription revenues. Can you just talk about how that performed once the NFL season ended? I didn't know if churn spiked at all, how The Good Fight played. And it seems like you're getting close to 1.5 million or so of subs. I don't know if you're willing to humor us with a new disclosure, but I thought I'd try. And then I have a follow-up for Joe, a quick one.

I'm not going to give you an exact, but you guys knew. You're in the neighborhood. Look, we only had the NFL on All Access for the last two weeks, and it spiked a lot during those two weeks, which leads us to be very excited about having it for a full season, able to promote it. Similarly, with The Good Fight, we knew The Good Wife had done very well on SVOD. This was an even higher elevated form of that show. So every week that built, we were very pleased with the numbers and how it ended up, but once again, this is a big learning thing. The Good Fight was our first scripted drama there. And at the end of the day, we were extremely pleased creatively with it, and the numbers ended up really, really good. Obviously, we have the big kahuna coming up with Star Trek, but I think the strategy, not to think, we're fairly confident the strategy really is working well. It's very exciting as we move forward. Moving over to the Showtime, whenever there's a new show launched, when Homeland and Billions, there is a big spike on it. There's a big spike, and that led to a good strategy that we had, which is launching a new show every single month. And therefore, you get the spikes and you keep them. And as a result, the churn is lower. So we're really pleased with where we are, and the future is looking really great. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Great. And, Joe, just on the Showtime/CANAL+ deal, I think you've done a number – I don't know if it's four or five of these. You've done a lot of these output deals. What is the financial benefit? Just remind us why that strategy makes sense for the company financially relative to selling off your shows on a one-off basis?

Sure, the first thing it does, obviously it gives us a global brand in Showtime instead of selling individual shows. So now across the world everybody knows Showtime and what it stands for and again, obviously premium content. So that's first and foremost. But secondly, financially, right, from a risk profile perspective, these deals include past, current and future shows on Showtime, sight unseen. So basically the theory is if it's good enough for Les to put on Showtime, it's good enough for us. So that really changes the risk profile as we're developing these shows from creation to understand the revenue stream that's incremental, right, to the subscriber revenue. So the licensing opportunity at Showtime, because we own that, right, is in addition to the subscriber revenue which we never had before.

It's great. Just to add to that, it's great to see on the deal memo. It says Ray Donovan through its finale, then the substitute for Ray Donovan through its finale, then the substitute for the substitute. So it gives us great confidence that 10 years from now, we're going to be selling at great pricing these programs. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Got it, thank you both.

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

And we'll go next to Jessica Reif Cohen with Bank of America Merrill Lynch.

Thank you. A couple questions, just two, three maybe. One, now that the writers' strike has been resolved before I think it actually goes, what is the financial impact of the new contract? Second, you aren't in – part of the consortium that advertising consortium with Viacom, Fox and Turner. Do you think that impacts in any way how you can sell targeted demographics? And then you are part of Hulu which has now announced a launch date. Could you talk about your expectations for that?

For what? I didn't hear what the last one was.

The last one was Hulu. Hulu finally announced specifics.

Hulu. Hulu.

Hulu finally announced specifics.

All right. I'll talk about the writers' strike, and then I'll give the other two to Joe. Look, the writers' strike, we were all extremely pleased that we avoided the strike. We felt like the deal was extremely fair. It was appropriate for the industry. It also gave the writers some additional things that are writer-centric. A lot of the gains had to do with span. In other words, those shows that are less than 13 episodes, which frankly are on premium and they're on Netflix and Amazon more so than anything else, and frankly it is not anything that was not built into what we anticipated in the deal. As I said, it was a very fair deal. The writers got what they wanted, but you will not see an adverse effect to the bottom line with us, and we're very happy that it worked out.

Jessica, I think your other two questions were some of those other consortiums on the data on measurement and stuff like that. So for us, look, I mean, all we've ever asked for is just to counter all of our eyeballs fairly. And when you do that, again CBS, the number one network, more eyeballs for the last 14 years and 15 years out of anybody. So we feel really good about that. So just because people are watching on different platforms or different timing just positions us. We know they're watching, and we know that. And so if there is any other – Nielsen is obviously making great strides in it. If there's others in there, so be it. But I think our opportunity is making sure we're getting paid fairly for all of those. But we don't have to necessarily own those distribution – that data, that measurement service. So I'm not sure if that answered your question, but I think that hits it. And as far as Hulu, look, we have great expectations. There are a lot of new entrants entering. I think obviously their bundle looks somewhat compelling. So I know it just launched yesterday. And I know a lot of folks signed up for it. But it's a great economic deal for us because obviously these new entrants pay the fair value kind of going in knowing what we deliver. And so the more and more subscribers they get, the better for CBS.

Okay, thank you.

Great. Thank you, Jessica. Next question, please.

And we'll go next to Alexia Quadrani with JPMorgan.

Hi, thank you. I guess just two questions. First, any further commentary you can give us on the overall ad market? We've heard such mixed things over the last couple of days. And I totally understand CBS is in such a strong position versus peers given your rating strengths going into the upfront, but I guess any color how you think you might do overall in terms of where you might end up there. And then second question's really just on the local station group. I heard you mentioned I think before that you might have interest in buying some more local stations with further deregulation, which we've seen some of already. I guess any information in terms of would you be interested in buying a sort of a larger group or just sort of one-offs in the markets where you really see value.

Yes. Alexia, and I know I sounds like a broken record every year at this time, but the upfront to me is going to be exceedingly strong. You start hearing numbers like high singles in CPM growths, and judging by – the scatter market once again remains very strong. There's a lot of demand for our product. So we're looking at a year where we think it's going to be much better than last year, and we had a very solid year last year. So I know I'm Mr. Broadcast and I'm the cheerleader, but I got to tell you I've been right – I sound like Donald Trump – I've been right more than I've been wrong in terms of those things that are going on. And so Carnegie Hall is two weeks away. And you know me, I get a kick out of what happens there during that whole process. But we're looking towards a very strong upfront.

And, Alexia, just on your local station, look, I think we've demonstrated a very disciplined approach to M&A generally, but specifically for TV stations. So we'll always look at those opportunities. Obviously, the value of the underlying stations we own, we feel very good about. But we look at those kind of market by market specifically because our position is going in is we're going to get our value vis-à-vis the retrans negotiation or the reverse comp, because the stations need the major networks. And that's what's really driving their entire business model. So I think, again, we like to – what we say is have our cake and eat it too, because why else would you want cake if you're not going to eat it.

Thank you very much.

Thanks, Alexia. Let's go to the next question.

And we'll go next to Anthony DiClemente with Instinet Nomura.

Thanks for taking my questions. I have one for Joe, and one for Les. Joe, just on these deals with YouTube TV and Hulu, you can clear the economics per subscriber accretive to your existing retrans fees, let's say, either the same or better or let's say better. Can you talk about what's in those agreements in terms of planned annual increases? So for example, in your Hulu deal, will your per-subscriber fee increase in years two and three? And then your apps, still from DIRECTV NOW and Sling. So any update on those talks, and what the gating factors might be would be helpful? And I do have one for Les.

Anthony, I think again, we can't get into any specifics about any of the deals, but I think you should assume there are pricing increases in all of our deals. I think the terms have to reflect the current market value we deliver, and I think we've now proven, we've been able to do this with multiple parties, not just one, not just two, not just three. So DIRECTV and Sling is ongoing. Those discussions continue, though they're complicated. They're new areas for those guys to enter into. And we're engaged and we'll see if we can come to a meeting of the minds on all deal terms. But it's complicated. So, but we're very encouraged with the new entrants in the marketplace and it seems to really be working, but we're again, as Les said, for a bundle – a skinny bundle to truly be successful, not to have the number one network with sports, entertainment, news. I mean, again, I'm not sure you're setting yourself up for success.

Okay. You guys were talking about deal memos before, so I thought I'd try there. Les, this is just maybe a high-level philosophical question. Facebook and Twitter and YouTube have been increasingly vocal about leaning into their ad-supported video strategies. Twitter having done a series of content deals recently, and Facebook having talked about their video ad revenue share model last night, really. So, the question is at a high level. Are there ways as you see those, are there ways that you could or should deepen or extend your relationships with those platforms in order to perhaps better share in their audience and advertising growth? And at a high level, what are your thoughts on making CBS content more available? And then we have some news in the late-night content on those platforms, but more available in order to participate in a, perhaps, shared revenue model. Thanks

Yes, look, you're right. At a very high level philosophically we are a content maker. We like to sell our content. We like to make – all sorts of different deals are going on. We are good at doing content. We're good at selling advertising. The answer is yes, we already have existing deals with some of those places you mentioned and that will continue to grow. I think what's happened is the realization that we're pretty good at producing content, and they have different skillsets and hopefully they can – we can be combined, and looking forward it will be a good – a new source of revenue for us.

Okay, thank you.

Thanks, Anthony. Next question, please.

We'll go next to Mike Morris with Guggenheim.

Thanks. Good afternoon, guys. Two questions. First, Les, you mentioned C7 as being the currency for most of the inventory in the upfront this year. When you think about being able to expand to C7, do you see the advantage there in maybe taking share within the television universe in terms of ad dollars available? Or do you see that as an opportunity to perhaps bring additional dollars into the television universe? And then second, Joe, you mentioned 20% more hours being – of television being produced at your studio versus last year. Where are those hours going? How should we think about the monetization of those? And what is kind of – how are you viewing a normalized growth level for that production? Thanks.

Mike, when I look at C7, and as I said, about 50% of what we're doing now is based on C7. The numbers between C3 and C7 are quite large, and they're growing larger every day as people get more and more choices and doing that. So the numbers that will come into the marketplace will be much higher, and this will be sound money. Basically, advertisers have been sort of getting those days for free in a lot of cases, and that's just not fair unless you're a movie company that is really time sensitive on what you're doing. So, I think the shift to that will bring new dollars into the marketplace, and certainly it will mean we will be counted more. There will be more viewers counted, and then you get beyond that, beyond C7, we have talked about, you know, dynamic ad insertion. Those numbers are growing quite a bit too literally where maybe beyond C7 you get 15%, 20% more viewers, which is another area of potential great growth coming up for us. So the idea is to capture all this, and I think it bodes well for the future.

And, Mike, on the 20% more hours, obviously, look, we're doing more for CBS, CW, Showtime, as well as All Access. So first, obviously, we want to fill up the pipe as much as we can with our own content. But beyond that, again, we have the capacity to produce for others. And so that's good, they're all going to be profitable for us. So the theory being is the more and more stuff, intellectual property you own, it gives us licensing opportunities, it gives us subscription opportunities, and it gives us advertising opportunities, the three revenue types that drive our future. So it is the best ROI we can have, and so that's what the fuel is and that's why we always say first and foremost we're going to continue to invest in content.

If I could, if we look at the 20% though, it's a pretty big number for an important part of the business.

Yes.

But in terms of your ability to increase that productivity, is 20% a run rate number? Is it somewhat unusual? Maybe how should we think about what you could do?

It's still early, Mike. Again, Star Trek, we're developing those episodes right now for Star Trek. So once All Access gets some more original programming, it will obviously slow down from that 20-plus percent. But again, I do think, again, there's much more capacity to do more because the way it works, there will be a show runner, a writer, a producer. It will be a whole separate team that's doing it. We have to make sure that the outlets are there. So we have much more capacity in there. And again, the financial economics will easily be justified, but just for our own platforms, obviously that will slow down over time. But we're still in the earlier innings of the investment.

We obviously have a great team of executives, and Joe was saying we can expand our ability to do programming by bringing in producers and writers who are on the outside, and you bring them in, and that happens every year depending on the amount of production you have going on. In addition, on the network side, because of the strength of the international marketplace primarily, and also domestic syndication in SVOD, we can do more original programming during the year. So as reruns don't do quite as well, we plug originals in. And invariably, because of international domestic syndication, they can make money as well. That goes back to our summer strategy where we started producing original dramas, where we hadn't done before and we started with Under the Dome three or four years ago, and they're all profitable. So as part of that uptick in production, it's all profitable.

Great, thank you.

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

We'll go next to Doug Mitchelson with UBS.

Thanks so much, so maybe just a series of quick questions, one by one. First, just to confirm, following up on what Alexia was asking about, I think Turner specifically said that going into 2Q they saw an air pocket in the national TV ad market, then it got better the last few weeks. Scripps today said the scatter market has gotten quite a bit better the last few weeks. Is that the rhythm that you saw, or did you see strength the whole way through?

Doug, it's Joe. Look, I think the demand is there. Again, it's for the content. It's the beachfront property theory. I think we're seeing strong demand across the board, and scatter pricing is up double digits. And so we're seeing that continue. So we even see the slowdown in uptick over here.

And, Les, this time every year when you figure out what your new schedule is going to look like, you're usually able to give us some visibility on what the entertainment cost growth will be for this schedule in the forward season. Any sense you can give us for next season based on the mix that you've come up with?

It's still a little too early. We're still looking at pilots. We haven't even had our first scheduling meeting. I have an idea of three or four of the shows that are going to be slotted in there. But generally speaking, Doug, the amount that we're spending is usually not up very much. It's usually low singles, and we're able to recoup that revenue. So it's not at all a concern.

And the last question for me, just help with the U.S. syndication market. You mentioned in the press release putting several shows into syndication later in the year. We've gotten some feedback occasionally that the U.S. scatter market – syndication market is a little spotty. I think on this call you've mentioned it's healthy. I just was hoping for more details on the health of the U.S. syndication market right now.

Look, Doug, I just think again we're talking about off-network premium content, first-cycle availabilities, and if you're one of the hundreds of cable networks out there looking for that kind of premium, this is where we fish. And so we're feeling very good about that because again just go back to the business model of what they need. They have very healthy margins, but that stability in scheduling that gives them advertising revenue opportunities, gives them affiliate fee opportunities. So there are a lot of cable network. They talk about originals because that's the sexy thing to do. But their bread and butter is still off-network premium content, and guess what, we have three top shows coming to market later this year.

Thanks so much.

Thanks, Doug, next question.

We'll go next to John Janedis with Jefferies.

Thanks. I've got one for Joe, one for Les. Joe, just back to your point around beachfront property, do you think there's a decoupling in ad demand between cable and network television given reach? And where do you think the market is in terms of the shift of demand from digital back to TV? And then for Les, on the programming front, your renewal rate of the primetime lineup has improved over the past couple of years, particularly for new shows and much better than peers. So what's changed in terms of the process? And does that allow for less pilots for the network itself and more modest programming expense growth than what I maybe consider the broader industry is experiencing?

John, it's Joe. I'll go first. On your question about advertising, I think yes. I think, look, I think you're seeing different tiering packages going on at subs, so for cable nets. And I think the reach will separate the men from the boys, as Les said in his prepared remarks. And again, I think we stand out even more than that. And so I do think there will be a shift of those dollars on where they go to find those eyeballs because again, we'll have more reach just based on the distribution platform of that. And when you start talking about digital, I think obviously that will be competitive with cable. But compared to us, there's obviously going to be a shift, a flight to quality is what the way we like to say it. You know what you're going to get when you have an ad on CBS's schedule. It's that strength and stability, so advertisers should pay a premium for that. And so I think we're seeing lots of instances where I think people are absolutely shifting. We're not saying they're doing it and cutting digital entirely, but clearly a shift of the mix between digital and re-looking at that allocation, if you will, gives us a big opportunity from where we sit.

John, I've been doing scheduling a long time, and it gives me an advantage of not only looking at this season but looking two, three years out in advance. And this year, you're right. We did less pilots because we picked up 18 shows that are coming back. And that stability allows us to do fewer pilots than most of our competitors, and also target those pilots. In other words, these pilots we sort of know going in where they might go, what could happen with them. Obviously some of them don't work. Some of them are terrible. But the good news is I know right now we have enough to – we're going to be in very good shape come two weeks from yesterday in Carnegie Hall. The planning process has been helpful, knowing what we know, the fact that we picked up those shows a couple of months ago gave us a very good head start and it also, as I said, targeted our pilots. So we only did eight dramas and eight comedies, which is a few less than we normally do. And, as a result, we've been able to control costs in addition to our returning shows, we're able to control costs on them as well by adding or subtracting certain elements to the show.

Thank you.

Thanks, John. Next question, please.

We'll go next to David Miller with Loop Capital Markets.

Yes. Hey, guys. Congratulations on the stellar results. Joe, thanks for calling out the scatter kind of bogey there with up double-digits. How does that translate in terms of right now, where is scatter over scatter versus where you were last year? Then I have a follow-up. Thanks.

Yes. It's up slightly, but it's all about, David, the upfront. The season is essentially over. We're sitting here May 4. It's over in a couple of weeks. So this is all about negotiating with advertisers about the upfront. So I think again, when we look back at the scatter, I think everyone would say the broadcast year, scatter was very strong. That's what leads us to believe that the upfront marketplace should be very strong. Because, remember, when they're buying in the upfront, they're buying at a discount to what they just were buying this month.

Yes. Right. Right. Okay. And then, Les, I could very well be wrong here in this assumption, but I get the sense that there's somewhat of a friendly debate going on within CBS about what you guys may want to do about the Thursday night football package, given that you have one more season left. I obviously understand the promotional mojo associated with the package. That being said, it does feel like the rights costs associated with the package are inordinately high. And I'm wondering, what has to happen for you to feel good about renewing the package and when do you think you'd make that decision? Thanks a lot.

Our Thursday night package, as I mentioned, is significantly stronger. It's frankly, the strongest one we've had in a number of years, and scheduling-wise it came in the first five weeks of the season, and we really like the hand we were dealt this year.

Yes.

Yes, yes, it is costly. However, we're anticipating that we want it to go on. We would be interested in renewing it. The NFL is still the best game in town, as you said. It adds all sorts of other things to a network lineup. Look at what NBC would be without Sunday night football and Thursday night football. It helps an awful lot to have that in primetime taken care of week-after-week. So we hope to continue. We love our relationship with the NFL and we'd like to renew it.

Okay, thank you very much.

Thank you, David. Next question, please.

We'll go next to Laura Martin with Needham & Company. Laura Martin - Needham & Co. LLC: Hi, guys. Maybe a couple digital questions. So one of the things you said in your prepared remarks, Les, is that you're ahead of the 8 million combined subs by 2020, and at the same moment you announced that you're going to bundle together for the first time Showtime OTT and CBS All Access. So can you talk about the economics of that and if you're already ahead of your goals, why would you presumably price discount by bundling the two together?

We are ahead of our goals and we said we have two terrific offerings here. Why not put them out together? They will be discounted, but not a great deal. Not a great deal. It just makes sense. It just makes sense to have them there together, and they're both topnotch products and it's not about pricing as much as convenience.

Yes. And, Laura, I would just add, obviously you talk about churn. That's what you've got to think. It reduces churn. So it's really, again, we're looking at net effective, not just the consumer who just comes and then leaves. We're looking that as a longer term where there's something in it for everybody, so you stay longer with the package. So we reduced churn that has a tremendous amount of value. Laura Martin - Needham & Co. LLC: Okay. That's helpful. And then moving philosophically to Facebook and Snap. These guys are basically saying, because we cover both, they really want to do rev share for the premium content companies. And philosophically, how do you feel about doing rev share for premium content on these massive, young, skewing young platforms that are digital and global?

I think obviously we have to look at it. We have to look at it. It depends what the rev share is, and it would be silly of us to ignore Facebook and Snapchat and the way they want to do business. And we are opening to considering it. Once again, they do need premium content and that's what we do provide and we are open to any sort of deal. Laura Martin - Needham & Co. LLC: Okay, that's interesting. And then my last thing, I don't know if you're willing to give us this. You guys have now had the ad-free CBS All Access for some time. So we put in print that no one's going to pick that up. Are we wrong, Les? Does anybody actually picked up – like, are they paying to skip ads on CBS All Access?

Oh, yes. Oh, yes. There's a decent percentage that is doing it. It's $4 difference a month, but we're seeing some success with it. We're seeing some success with it. It's considerably less than 50%, but there are people that like it. You know, it's still only $9.99. We still think it's a very, very valid product for $9.99 ad-free. Laura Martin - Needham & Co. LLC: And you do keep a really good track of your demos. Like you said that one of your products, the news product, was 20 years younger. What is the demo on the CBS All Access these days, in terms of compared to the CBS primetime?

Yes. No, it tracks like news, Laura. It's about 20 years younger. It's almost 50-50 male female. So again, it's starting to replicate broad appeal, and that's why – that's will drive the programming strategy as well.

Yes. We're still – once again when we got football, obviously we will get somewhat more male. Star Trek will bring us even younger. The Good Fight was older more female. So all these things once again we're learning a lot. Laura Martin - Needham & Co. LLC: Okay. Perfect. Thanks, guys. Very helpful. Thanks.

Thank you, Laura.

Thank you.

Next question, please.

We'll go next to Steven Cahall with RBC.

Yes. Thank you. First on advertising, I was just wondering if you could talk about the opportunity to deliver targeted advertising, particularly whether you're on Hulu or YouTube or on All Access through the inventory that they're going to have or just through the advance of technology into digital. We have heard that's like a 20% higher CPM, so maybe when can we expect that to be a reasonable amount of ad inventory? And then secondly on the broadcast side, you talked about being disciplined in terms of looking at the market in terms of station M&A. Is there any point where you might see consolidation to a point where you need to do something defensive? I think we've seen one of your peers possibly have to think about that. So if the cap were to, say, go to 50%, is that something you have to think about? Thank you.

I'll answer the second question first, and – we don't view that. Look, these stations, the majority of their money is made by network content. It's still the best game in town. Once again, you're talking about a place where there is a battle over affiliates of a specific network group. We view the stations as a very profitable business. We like the business. If there is an opportunity for us to get something that makes sense for us, it is okay. But we don't feel a need to go out and acquire a large station group. Once again, they still have to come to us for our content. We still have the NFL. We still have Big Bang Theory. We still have NCIS. We still have 60 Minutes. So as this consolidation goes on, we're watching it with interest. We wouldn't mind owning more stations, but only if it's cost effective.

And, Steve, on your advertising question, yes, look, I think digital, it provides us an opportunity to grow our advertising revenue. And obviously we laid that out a little bit in – on one of our pillars, and so the more targeted you can be on these digital platforms, you get younger, right, you get more data about that real specific kind of point-of-purchase stuff. So obviously there should be a CPM increase, and we can just debate is 20% the right number or not, but I think again it positions us for even further growth, which again gives us confidence that we're going – we have larger audience targeted to more specific younger demos. So that – I don't know. That feels like upside to me.

Thank you.

All right. Thanks, Steve. Gwen, let's take one final question.

And we'll take our last question from Marci Ryvicker with Wells Fargo.

Thanks. Since we're sort of on the topic of Fox, if Fox and Blackstone actually win Tribune, Les, how do you feel about Fox more or less owning or running CBS affiliates? And then I guess somewhat related to this, has there been a situation where CBS has denied a transfer of the CBS affiliation between station groups?

Number one, we don't have a lot of Tribune stations. CBS stations are Tribune, so if Fox buys it, they can come to our affiliate meeting and they'll have a very good time there. They'll be very welcomed. I'll have Rupert up on stage with me. It'll be fine. So it won't affect us at all. We have never blocked a station sale from going through. We have negotiated when we had the opportunity, when some of the contracts said they had to negotiate. Although those usually aren't in contracts anymore because of what the marketplace is. But we deal with affiliates across the board and if we continue to do what we're doing, we see how much money stations are making, we know they are delivering back to us part of that money that they're getting in retrans, in reverse comp, but we also know they're dealing with great margins because of us. So anybody who buys stations, big, small, we are happy to be in business, and I think they're very pleased with being a CBS affiliate.

Got it. Thank you.

Thank you, Marci, and thank you, everyone, for joining us. Have a great day.

Thank you, everyone. That does conclude today's conference. We thank you for your participation.