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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[_] 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 1-9553
VIACOM INC.
(Exact Name Of Registrant As Specified In Its Charter)
DELAWARE 04-2949533
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation Or Organization) Identification Number)
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1515 Broadway
New York, NY 10036
(212) 258-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Class A Common Stock, $0.01 par value New York Stock Exchange
Class B Common Stock, $0.01 par value New York Stock Exchange
6.75% Senior Notes due 2003 American Stock Exchange
7.75% Senior Notes due 2005 American Stock Exchange
7.625% Senior Debentures due 2016 American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title Of Class)
Indicate by check mark whether 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. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of March 19, 2001, 137,458,566 shares of Viacom Inc. Class A Common
Stock, $0.01 par value ("Class A Common Stock"), and 1,644,694,576 shares of
Viacom Inc. Class B Common Stock, $0.01 par value ("Class B Common Stock"),
were outstanding. The aggregate market value of the shares of Class A Common
Stock (based upon the closing price of $46.87 per share as reported by the New
York Stock Exchange on that date) held by non-affiliates was approximately
$2,049,856,075 and the aggregate market value of the shares of the Class B
Common Stock (based upon the closing price of $46.60 per share as reported by
the New York Stock Exchange on that date) held by non-affiliates was
approximately $70,957,111,400.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Viacom Inc.'s Notice of the 2001 Annual Meeting and Proxy
Statement to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended (the Proxy
Statement) (Part III).
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Part I
Item 1. Business.
Background
Viacom Inc. (together with its subsidiaries unless the context otherwise
requires, the "Company" or "Viacom") is a diversified worldwide entertainment
company with operations, during 2000, in seven segments:
. CABLE NETWORKS: The Cable Networks segment operates MTV: MUSIC
TELEVISION(R), SHOWTIME(R), NICKELODEON(R), NICK AT NITE(R), VH1 MUSIC
FIRST(R), TV LAND(R), TNN: THE NATIONAL NETWORK(TM) and CMT: COUNTRY MUSIC
TELEVISION(TM), among other program services.
. TELEVISION: The Television segment consists of the CBS(R) and UPN(R)
television networks, 39 owned broadcast television stations, and the
Company"s television production and syndication business, including KING
WORLD PRODUCTIONS(TM) and PARAMOUNT TELEVISION(TM).
. INFINITY: The Infinity segment operates 184 radio stations through
INFINITY BROADCASTING(R), and outdoor advertising properties through
INFINITY OUTDOOR(TM) and TDI(R).
. ENTERTAINMENT: The Entertainment segment includes PARAMOUNT PICTURES(R),
which produces and distributes theatrical motion pictures; PARAMOUNT
PARKS(R), which owns and operates five theme parks and a themed
attraction in the U.S. and Canada; and movie theater and music
publishing operations.
. VIDEO: The Video segment consists of an approximately 82% equity
interest in Blockbuster Inc., which operates and franchises
BLOCKBUSTER(R) video stores worldwide.
. PUBLISHING: The Publishing segment publishes and distributes consumer
books and related multimedia products, under such imprints as SIMON &
SCHUSTER(R), POCKET BOOKS(TM), SCRIBNER(R) and THE FREE PRESS(TM).
. ONLINE: The Online segment provides online music and children"s
destinations through Internet sites related to MTV: MUSIC TELEVISION,
NICKELODEON, NICK AT NITE, VH1 MUSIC FIRST, and CMT: COUNTRY MUSIC
TELEVISION, as well as SonicNet.com, and NickJR.com. In addition,
CBS.com offers a broad range of informational, entertainment, news and
promotional services. Effective January 1, 2001, the Company will
present its online businesses as part of the Cable Networks and
Television segments.
The Company was organized in Delaware in 1986 for the purpose of acquiring
the stock of a predecessor. In 1994, the Company acquired Paramount
Communications Inc. and Blockbuster Entertainment Corporation. On August 10,
1999, Blockbuster Inc. ("Blockbuster") (NYSE: BBI) sold to the public 31
million shares of its Class A common stock at $15 per share. The Company,
through its ownership of all of the 144 million shares of Blockbuster Class B
common stock outstanding, retains approximately 82% of the total equity value
in, and approximately 96% of the combined voting power of, Blockbuster. In
1999, the Company announced that it intended to split-off Blockbuster by
offering to exchange all of its shares of Blockbuster common stock for shares
of the Company's common stock. The split-off was subject to approval by the
Company's Board of Directors and an assessment of market conditions. The
Company no longer has any plans for the split-off of Blockbuster.
During 2000 and in the first quarter of 2001, the Company took several
important steps to secure its position as a leading global media and
entertainment company. Significant transactions included the following:
. On May 4, 2000, CBS Corporation ("CBS") merged with and into the
Company. At the time of the merger, the Company issued 1.085 shares of
its Class B Common Stock for each share of CBS common stock and 1.085
shares of its Series C Preferred Stock for each share of CBS Series B
preferred stock. The total purchase price of approximately $39.8 billion
represents the issuance of 825.5 million shares
I-1
of Viacom Class B Common Stock, 11,004 shares of Viacom Series C
convertible preferred stock (which were subsequently converted into 11.0
million shares of Viacom Class B Common Stock), the estimated fair value
of CBS stock options which were assumed by issuing Viacom options, and
estimated transaction costs. In addition, Viacom assumed approximately
$3.7 billion of CBS debt.
. As a result of its merger with CBS, the Company acquired an approximate
64.2% equity interest in Infinity Broadcasting Corporation ("Infinity
Broadcasting"). On February 21, 2001 Infinity Broadcasting merged with
and into a wholly owned subsidiary of the Company. In connection with
the merger, the Company issued 0.592 of a share of Viacom Class B Common
Stock for each issued and outstanding share of Infinity Broadcasting
Class A common stock resulting in the issuance of approximately 232
million shares of Viacom Class B Common Stock.
. On August 24, 2000, Infinity Broadcasting completed the acquisition of
18 radio stations from Clear Channel Communications Inc. for $1.4
billion. The acquisition resulted in Infinity Broadcasting expanding
into five new top 50 radio markets and owning over 180 radio stations.
During June 2000, Infinity Broadcasting completed the acquisition of
Giraudy SA, one of France's largest outdoor advertising companies, for
approximately $400 million. Infinity Broadcasting also acquired SMA
Societa Manifesti ed Affissione S.p.A, one of the leading Italian
outdoor media sales companies, for approximately $90 million.
. On November 3, 2000, the Company announced an agreement to acquire BET
Holdings II, Inc. ("BET"), which operates the BET: BLACK ENTERTAINMENT
TELEVISION(R) and BET ON JAZZ(R) cable networks. On January 23, 2001,
the Company completed its acquisition of BET for a total purchase price
of approximately $3.0 billion, which principally represents the issuance
of approximately 43.4 million shares of Viacom Class B Common Stock and
the assumption by the Company of approximately $590 million in debt.
Beginning in the first quarter of 2001, BET will be reported in the
Cable Networks segment.
As of March 19, 2001, National Amusements, Inc. ("NAI"), a closely held
corporation that owns and operates approximately 1,400 movie screens in the
U.S., the U.K. and South America, beneficially owned approximately 68% of the
Company's Class A Common Stock, and approximately 11% of the Company's 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. Sumner M. Redstone, the controlling shareholder of NAI, is the
Chairman of the Board and Chief Executive Officer of the Company.
The Company's principal offices are located at 1515 Broadway, New York, New
York 10036 (telephone 212/258-6000).
For additional information about principal acquisitions and divestitures,
see Notes 3 and 5 to the Consolidated Financial Statements.
Viacom Segments
Cable Networks
The Company owns and operates advertiser-supported basic cable television
program services through its MTV Networks ("MTVN") division and premium
subscription television program services through Showtime Networks Inc. ("SNI")
in the U. S. and internationally.
Generally, the Company's cable networks are offered to customers of cable
television operators, distributors of direct-to-home satellite services ("DTH")
and other multichannel distributors. Cable television is currently the
predominant means of distribution of the Company's program services in the U.S.
Internationally, the predominant distribution technology varies territory by
territory.
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MTV Networks. In the U.S., MTVN's owned and operated program services
include MTV: MUSIC TELEVISION ("MTV"), MTV's spin-off, MTV2: MUSIC
TELEVISION(TM) ("MTV2"), NICKELODEON, NICK AT NIGHT, TV LAND, VH1 MUSIC FIRST
("VH1"), CMT: COUNTRY MUSIC TELEVISION ("CMT"), and TNN: THE NATIONAL NETWORK
("TNN").
MTV's programming consists of music videos and events, augmented by music
and general lifestyle information, comedy and dramatic series, animated
programs, news specials, interviews, documentaries and other youth-oriented
programming appealing primarily to an audience aged 18 to 24. At December 31,
2000 according to the Nielsen Media Research report, MTV reached approximately
77.3 million domestic subscriber households. MTV2, a 24-hour, seven-days-a-
week spin-off of MTV, offers a "freeform" music format which features music
videos from a broad range of musical genres and artists. MTVN also operates
"The Suite from MTV Networks" ("The Suite"), a package of digital television
program services, which currently consists of MTV2 and five other music
related services, and NOGGIN(R) and two other program services from
NICKELODEON. The Suite is offered through DBS distributors and cable operators
offering digital technology. During 2000, MTVN also offered THE BOX(R) MUSIC
NETWORK, a 24-hour, all music basic cable channel, with technology allowing
selection of music videos on a market-by-market basis. On December 31, 2000,
THE BOX MUSIC NETWORK was integrated into MTV2. At December 31, 2000, MTV2,
with the integration of the subscribers of THE BOX MUSIC NETWORK, had
approximately 30.0 million domestic subscriber households (based on subscriber
counts provided by each distributor of the service, including cable, DTH and
other multichannel programming providers).
NICKELODEON combines acquired and originally produced programs in a pro-
social, non-violent format comprising two distinct program units tailored to
age-specific demographic audiences: NICKELODEON, targeted to audiences ages 2
to 11 (which includes NICK JR.(R), a program block designed for 2 to 5 year
olds, and such popular shows as RUGRATS, BLUE'S CLUES and SPONGEBOB
SQUAREPANTS); and NICK AT NITE, which attracts primarily audiences ages 18 to
54 and offers mostly situation comedies from various eras, including I LOVE
LUCY, THE DICK VAN DYKE SHOW, THE MARY TYLER MOORE SHOW and TAXI. At December
31, 2000, according to the Nielsen Media Research report, NICKELODEON/NICK AT
NITE reached approximately 79.8 million domestic subscriber households.
NICKELODEON licenses its brands and characters for and in connection with
merchandise, home video and publishing worldwide. NICKELODEON MOVIES(R)
develops a mix of story- and character-driven projects based on original ideas
and NICKELODEON programming, such as the feature films SNOW DAY, released
theatrically on February 11, 2000, and RUGRATS IN PARIS: THE MOVIE, released
in fourth quarter 2000 by PARAMOUNT PICTURES, as well as a BLUE'S CLUES
direct-to-video movie BLUE'S BIG MUSICAL. Additionally, the Company publishes
monthly NICKELODEON MAGAZINE(TM). NICKELODEON GAS GAMES AND SPORTS FOR
KIDS(R), a cable program service packaged as part of The Suite, features
children's game shows and sports programming for viewers ages 6 to 11, and
includes a related online service. NICKELODEON owns and operates theme park
attractions and touring shows under its NICKELODEON RECREATION(TM) unit and
interactive public attractions and television production studios under its
NICKELODEON STUDIOS(R) unit located at Universal Studios Florida. NICKELODEON
also produces original animation at its NICKTOONS(R) Animation Studio in
Burbank, California.
TV LAND, a 24-hour, seven-days-a-week spin-off of NICK AT NITE, is
comprised of a broad range of well-known television programs from various
genres, including comedies, dramas, westerns, variety and other formats from
the 1950s through the 1980s, including THE HONEYMOONERS, THE ANDY GRIFFITH
SHOW, LEAVE IT TO BEAVER and CHARLIE'S ANGELS. At December 31, 2000, according
to the Nielsen Media Research report, TV LAND reached approximately 55.5
million domestic subscriber households.
VH1 presents music and related programming directed at an audience aged 25
to 49 with an emphasis on series which feature viewers' favorite music and
artists such as VH1 BEHIND THE MUSIC, STORYTELLERS, POP UP VIDEO, VH1 BEFORE
THEY WERE ROCK STARS and VH1 ALL ACCESS. In addition, VH1 airs music videos,
concerts, special events and musically themed movies. In April 2000, VH1 aired
DIVAS 2000: A TRIBUTE TO DIANA ROSS, followed in November 2000 with its debut
of the first MY VH1 MUSIC AWARDS, where nominees and winners were determined
by fans voting online. In December 2000, VH1 had
I-3
its most successful original movie premiere with A DIVAS CHRISTMAS CAROL. The
VH1 SAVE THE MUSIC(R) Foundation, in connection with VH1's cable television
and satellite affiliates, restored music education programs to 214 schools in
40 communities while also winning the Governors' Award from the Academy of
Television Arts & Sciences, the George Foster Peabody Award for broadcasting
and cable excellence and the Beacon Award presented by the Cable Television
Public Affairs Association. At December 31, 2000, according to the Nielsen
Media Research report, VH1 reached approximately 74.2 million domestic
subscriber households.
CMT is an advertiser-supported, 24-hour cable network which presents
country music videos, and related events, lifestyle and entertainment
programming. Its programming in 2000 included CMT All ACCESS, a monthly series
of concerts featuring country music artists, and special events such as CHICKS
MUSIC TELEVISION featuring a variety of programs showcasing the Dixie Chicks.
The Company offers CMT in the U.S. and, through a minority joint venture, in
Canada. At December 31, 2000, according to the Nielsen Media Research report,
CMT reached approximately 44.7 million domestic subscriber households.
TNN (formerly TNN: The Nashville Network(R)) is an advertiser-supported
general entertainment cable network with a focus on popular lifestyle and
entertainment programming. The Company offers TNN in the U.S. and, as a non-
advertiser supported service, in Canada. At December 31, 2000, according to
the Nielsen Media Research report, TNN reached approximately 79.2 million
domestic subscriber households and Mediastat reports TNN's Canadian
distribution at 6.3 million households. TNN's programming includes the highly
rated series WWF RAW IS WAR, as well as popular movies and favorite off-net
television series such as STARSKY AND HUTCH and THE DUKES OF HAZZARD, and
sports, including professional bull-riding, motor sports, fishing and other
outdoor sports.
MTV FILMS(TM), in association with PARAMOUNT PICTURES, produced THE
ORIGINAL KINGS OF COMEDY which was released by PARAMOUNT PICTURES in 2000,
and, with PARAMOUNT PICTURES, is currently producing ORANGE COUNTY. MTV FILMS
also produced SAVE THE LAST DANCE, with PARAMOUNT PICTURES, released in
January 2001. MTV has also launched lines of home videos, consumer products
and books, featuring MTV programming and personalities. In addition, MTV
pursues broadcast network and first-run syndication television opportunities
through MTV PRODUCTIONS(TM).
Internationally, MTVN owns and operates, participates in as a joint
venturer, and licenses third parties to operate, MTVN program services,
including MTV and NICKELODEON programming. The MTVN international program
services are described in the chart that follows. Most of the MTVN
international program services are regionally customized to suit the local
tastes of their young adult viewers by the inclusion of local music,
programming and on-air personalities, and use of the local language. MTV
Networks Europe is Europe's most widely distributed cable and satellite
network comprising 16 individual music channels, including MTV (9 regionalized
services), VH1 (3 services), MTV2, MTV Extra(TM), MTV Base, and VH1
Classic(TM). The network currently reaches more than 90 million households in
Europe via a combination of satellite, cable, and terrestrial distribution.
MTVN, in exchange for cash and advertising time or for promotional
consideration only, licenses from record companies music videos for exhibition
on MTV, MTV2, VH1, CMT and other MTVN program services. MTVN has entered into
multi-year global or regional music video licensing agreements with certain of
the major record companies. These agreements generally cover a three to five
year period and contain provisions regarding video debut and exclusivity for a
limited number of music videos in the U.S. MTVN also is negotiating and
expects to renew or initiate additional global or regional license agreements
with the other major record companies and independent labels. However, there
can be no assurance that such renewals or agreements can be concluded on
favorable terms (see "Viacom Segments--Competition--Cable Networks").
MTVN derives revenues principally from two sources: the sale of time on its
own networks to advertisers and the license of the networks to cable
television operators, DTH and other distributors. The sale of MTVN advertising
time is affected by viewer demographics, viewer ratings and market conditions
for advertising time. Adverse changes to any of these factors could have an
adverse effect on revenues. In addition, continued consolidation among cable
operators could have an adverse effect on MTVN's license fee revenue (see
"Viacom Segments--Competition--Cable Networks").
I-4
International MTVN Program Services
The following table sets forth information regarding MTVN program services
operated internationally:
Launch/
Regional Commencement
Program Service Territory Ownership Feeds/Language(1) Date
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MTV Europe 40 territories, 100% by the 9 Regional Feeds Various: August
(includes MTV: including all EU states, Company (U.K., Netherlands, 1987-2000.
Music Television Eastern and Central Scandinavia, Poland,
and MTV Base, Europe, South Africa, Spain, France,
MTV Extra and certain countries in the Central, South and
MTV2) former Soviet Union, the European) all in or
Middle East, Egypt, mainly in English
Faroe Islands, Israel, (except for Central
Liechtenstein, Malta and presented in German,
Moldova Poland presented in
Polish and South
presented in Italian)
MTV Latin Latin America, the 100% by the 3 Regional Feeds in October 1993
America Caribbean, Brazil and Company Spanish
the U.S.
MTV Brasil Brazil Joint Venture Portuguese October 1990
(with Abril
S.A.)
MTV Asia Taiwan, certain Joint Venture English, Mandarin, April 1995
provinces in China*, (with PolyGram Bahasa Indonesian,
Brunei, Thailand, N.V.) Tagalog, Hindi, and
Singapore, Philippines, Korean
Indonesia, Malaysia,
Vietnam, Hong Kong*,
South Korea*, Papua New
Guinea, India, Sri
Lanka, Bangladesh, Nepal
and Pakistan
MTV Australia Australia Licensing English March 1997
Arrangement
(with Optus
Vision Pty
Limited)
MTV Russia Russia Joint Venture Russian September 1998
(with Russia
Partners
Company, L.P.,
Biz
Enterprises
and others)
MTV Japan Japan Joint Venture Japanese January 1, 2001
with @Japan
Media K.K. and
others)
Nickelodeon Latin America, Brazil 100% by the Spanish, Portuguese December 1996
Latin America and the Caribbean Company and English
Nickelodeon Nordic region (including 100% by the Swedish, Norwegian and February 1997
Nordic* Sweden, Norway, Denmark Company Danish
and Finland)
Nickelodeon U.K. Joint Venture English September 1993-
U.K.* (with British Nick
Sky September 1999-
Broadcasting Nick Jr.
Limited)
Nickelodeon Australia Joint Venture English October 1995
Australia (with XYZ
Entertainment
Pty Ltd.)
Nickelodeon Spain 100% by the Spanish March 1999
Spain* Company
Nickelodeon Japan, CIS/Baltic 100% by the Japanese, Russian, November 1998
Global Network Republics, India, Company Magyar, English,
Ventures(2) Poland*, Hungary*, Polish and Romanian
Africa*, Malaysia, New
Zealand, Romania,
Indonesia, Philippines,
Singapore, Turkey,
Bangladesh, Nepal and
Malta
VH1 U.K./VH1 All EU states, the 100% by the English September 1994
Export/ VH1 Middle East, Africa, Company
Classic Scandinavia, Israel,
Malta, Moldova, South
Africa and Eastern
Europe
VH1 Germany Germany and Austria 100% by the German May 1995
Company
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* Denotes program services that are not 24 hours-a-day/seven-days-a-week.
(1) All MTV and VH1 program services include English language music videos.
(2) Nickelodeon Global Network Ventures consists of eleven different services
with customized programming for targeted markets.
I-5
Showtime Networks Inc. SNI owns and operates three commercial-free, premium
subscription television program services in the U.S.: SHOWTIME, offering
recently released theatrical feature films, original motion pictures and
series, family entertainment, and boxing and other special events; THE MOVIE
CHANNEL(R), offering recently released theatrical feature films and related
programming; and FLIX(R), featuring theatrical feature films primarily from
the 70s, 80s and 90s as well as selected other titles. At December 31, 2000,
SHOWTIME, THE MOVIE CHANNEL and FLIX, in the aggregate, had approximately 28.4
million subscriptions in the 50 states and certain U.S. territories. SUNDANCE
CHANNEL(R), a joint venture (among SNI, an affiliate of Robert Redford and
Universal Studios) managed by SNI, is a commercial-free premium subscription
television program service in the U.S., dedicated to independent film,
featuring top-quality American independent films, documentaries, foreign and
classic art films, shorts and animation, with an emphasis on recently released
titles.
SNI also owns and operates several multiplexed versions of SHOWTIME and THE
MOVIE CHANNEL in the U.S., including SHOWTIME BEYOND(R), a genre-based channel
featuring sci-fi, horror and fantasy programming, and SHOWTIME EXTREME(R), a
genre-based channel featuring action/adventure programming. On March 1, 2001,
SNI launched SHOWTIME NEXT(TM), a channel targeting 18-24 year-olds, SHOWTIME
WOMEN(TM), focusing on women in front of and behind the camera, and SHOWTIME
FAMILYZONE(TM), a channel featuring no R-rated programming. SNI also transmits
a high definition television version of SHOWTIME. In addition, SNI jointly
owns an advertiser-supported basic television program service in Spain named
SHOWTIME EXTREME(R) with Media Park, S.A., a leader in thematic channel
production based in Barcelona. At the end of 2000, SNI entered into a joint
venture with Zone Vision Enterprises, Limited, a UK company, for the
production and distribution of an advertiser-supported action-oriented basic
television program service in Turkey. The channel was launched in January 2001
under the name SHOWTIME(TM).
SNI also provides special events, such as sports and musical events, to
licensees on a pay-per-view basis. SHOWTIME EVENT TELEVISION(TM) is a pay-per-
view distributor of these special events, including boxing events. This unit
has produced and distributed seven of the top ten pay-per-view events of all
time, including the top two: Tyson vs. Holyfield I and Holyfield vs. Tyson II.
SHOWTIME EVENT TELEVISION has also been instrumental in bringing other events
to the viewing public, such as DORITOS PRESENTS DREW CAREY'S IMPROV ALL STARS,
as well as numerous music concerts, including THE LAST KISS, SPICE GIRLS IN
CONCERT--WILD!, THE BACKSTREET BOYS, TINA TURNER and THE ROLLING STONES.
The costs of acquiring premium television rights to programming and
producing original motion pictures and series are the principal expenses of
SNI. In order to exhibit theatrical motion pictures on premium subscription
television, SNI enters into commitments to acquire rights, with an emphasis on
acquiring exclusive rights for SHOWTIME and THE MOVIE CHANNEL, from major or
independent motion picture producers and other distributors. SNI's exhibition
rights cover the U.S. and may, on a contract-by-contract basis, cover
additional territories. SNI has the exclusive U.S. premium subscription
television rights to all PARAMOUNT PICTURES' feature films theatrically
released beginning January 1, 1998, as well as non-exclusive rights to certain
titles from PARAMOUNT PICTURES' film library (see "Viacom Segments--
Entertainment"). SNI also has significant theatrical motion picture license
agreements with other motion picture producers and distributors, including
Metro-Goldwyn-Mayer Studios Inc. ("MGM"), Artisan Pictures Inc., and Buena
Vista Television (a subsidiary of The Walt Disney Company) for Dimension Films
theatrical pictures, covering motion pictures initially theatrically released
through dates ranging from December 31, 2001 to December 31, 2008. Theatrical
motion pictures that are licensed to SNI on an exclusive basis are generally
exhibited first on SHOWTIME and THE MOVIE CHANNEL after an initial period or
"window" for theatrical, home video and pay-per-view exhibition and before the
period commenced for standard broadcast television and basic cable television
exhibition. Many of the motion pictures which appear on FLIX have been
previously available for standard broadcast and other exhibitions (but are
shown on FLIX unedited and commercial-free).
SNI also arranges for the development, production, acquisition and, in many
cases, distribution of original programs, series and motion pictures. SNI's
original series include RESURRECTION BLVD., the first English-language U.S.
dramatic television series that predominantly features Hispanics both in front
of and behind the
I-6
camera, and SOUL FOOD, a series (based on the theatrical motion picture of the
same name) that follows the struggles, rivalries and triumphs of a multi-
generational African-American family. SNI's original motion pictures have
received numerous industry awards over the years, including the prestigious
Golden Globe Award for "Best Mini-Series or Motion Picture Made for
Television" for 2000. As part of its original programming strategy, SNI
premiered 30 original motion pictures on SHOWTIME in 2000, and expects to
premiere approximately 35 original motion pictures in 2001. The producers of
some of SNI's original motion pictures are given an opportunity to seek a
theatrical release prior to such pictures' exhibition on SHOWTIME or THE MOVIE
CHANNEL. If the producers are not successful in obtaining such a theatrical
release, these pictures then premiere in the U.S. on SHOWTIME or THE MOVIE
CHANNEL. SNI has entered into and plans to continue to enter into co-
financing, co-production and/or co-distribution arrangements with other
parties to reduce the net cost to SNI for its original motion pictures. In
2000, Hallmark Entertainment Distribution LLC, PARAMOUNT TELEVISION and MGM
were the predominant co-producers, co-financiers and co-distributors of SNI's
original motion pictures, programs and series for that calendar year.
BLOCKBUSTER and SNI have an agreement whereby BLOCKBUSTER will license from
SNI the exclusive domestic home video rights to up to 180 SNI original motion
pictures and other programs over the period from April 1, 2000 through March
31, 2005.
Cable Networks Joint Ventures. COMEDY CENTRAL(R), a joint venture of the
Company and Home Box Office ("HBO"), a unit of AOL Time Warner Inc., is an
advertiser-supported basic cable television program service which features
comedy programming, including SOUTH PARK. The Company is a joint venturer in
GULF DTH ENTERTAINMENT LDC, a satellite direct-to-home platform offering the
following channels in the Middle East: MTV, VH1, NICKELODEON, TV LAND and THE
PARAMOUNT COMEDY CHANNEL(TM). A joint venture between NICKELODEON and Sesame
Workshop (formerly Children"s Television Workshop) operates NOGGIN, a 24-hour,
seven-days-a-week, non-commercial children's educational program service,
distributed by digital cable and satellite, which includes a related online
service. NOGGIN's purpose is to educate and entertain 2 to 12 year olds.
NOGGIN's programming line-up includes a mix of live action, news, animated and
puppet shows, including many acclaimed series such as Sesame Street, Electric
Company and BLUE'S CLUES after their initial network runs. MTV Polska, a joint
venture between MTV Networks BV, the Dutch subsidiary of MTV Networks Europe,
and UPC Programming BV, was established to create, produce and broadcast two
new channels: MTV Polska, and VH1 Polska. MTV Polska is broadcast by cable and
satellite throughout Poland.
Television
The Television segment consists of the CBS and UPN television networks, 39
owned broadcast television stations, and the Company's television production
and syndication business.
Television Networks. The CBS TELEVISION NETWORK(TM) through CBS NEWS(TM),
CBS SPORTS(TM) and CBS ENTERTAINMENT(TM) distributes a comprehensive schedule
of news and public affairs broadcasts, sports and entertainment programming,
and feature films to more than 200 domestic affiliates, 16 of the Company's
owned and operated television stations, and to certain overseas affiliated
stations. The affiliates serve, in the aggregate, all 50 states and the
District of Columbia, reaching virtually every television home in the United
States. The CBS TELEVISION NETWORK is responsible for sales of advertising
time for its network broadcasts.
CBS NEWS operates a worldwide news organization, providing the CBS
TELEVISION NETWORK and the CBS RADIO NETWORK(R) with regularly scheduled news
and public affairs broadcasts, including 60 MINUTES, the pioneering news
magazine now in its 33rd year, and its offspring, 60 MINUTES II, the CBS
EVENING NEWS WITH DAN RATHER, 48 HOURS, THE EARLY SHOW, FACE THE NATION, THE
SATURDAY EARLY SHOW and CBS NEWS SUNDAY MORNING--as well as special reports.
CBS NEWS maintains 18 news bureaus and offices around the world, in addition
to its headquarters operations in New York City. CBS Radio News serves more
than 2000 radio stations with hourly newscasts, instant coverage of breaking
stories, special reports, updates, features, customized reports and news feed
material. Among its many features
I-7
are "World News Roundup," and "The World Tonight." CBS News Productions, the
off-network production company created by CBS NEWS, produces original
nonfiction programming for domestic and international outlets, including the
cable television, home video, CD-ROM, audio-book and in-flight markets, as
well as schools and libraries.
CBS SPORTS broadcasts comprehensive regular-season golf and college
basketball lineups on network television, in addition to the NFL's American
Football Conference schedule and championship games. CBS SPORTS' 2000-2001
broadcast schedule was highlighted by Super Bowl XXXV. Among the events CBS
SPORTS airs are THE NFL TODAY; NCAA basketball, including the men's Final Four
and championship games; golf, including the Masters and PGA Championship; the
U.S. Open Tennis Championships; college football; CBS SPORTS SPECTACULAR,
including track and field and gymnastics, and NCAA championships, including
the College World Series. Extending its franchises off the field, CBS SPORTS
has launched a licensing program that will showcase its logo on apparel and
sports equipment and has formed a marketing unit to develop licensing,
merchandising, multimedia and other business opportunities for advertisers and
event organizers.
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, new television movies and mini-
series, theatrical films, specials, children's programs, daytime dramas, game
shows and late-night broadcasts. In the past year, the Company introduced to
U.S. audiences the highly successful reality-based SURVIVOR series. CBS
ENTERTAINMENT has introduced two dramas in the 2000-2001 season, CSI: CRIME
SCENE INVESTIGATION and THE DISTRICT, and a new comedy YES, DEAR. Its shows
include EVERYBODY LOVES RAYMOND, BECKER, THE KING OF QUEENS, JUDGING AMY,
TOUCHED BY AN ANGEL, JAG and FAMILY LAW. The division presents two movie
franchises, a lineup of specials that includes THE GRAMMY AWARDS, THE CMA
AWARDS and THE KENNEDY CENTER HONORS, and THE LATE SHOW WITH DAVID LETTERMAN.
The CBS Daytime lineup and the drama THE YOUNG AND THE RESTLESS have been
rated number one in the daypart by Nielsen Media Research for 12 consecutive
years.
In 1997, the Company acquired a 50% interest in the UNITED PARAMOUNT
NETWORK(R) ("UPN") from BHC Communications, Inc. ("BHC"), a subsidiary of
Chris-Craft Industries, Inc. In March 2000, BHC sold to the Company the
remaining 50% interest in UPN for $5 million. After the May 2000 merger with
CBS, pursuant to which the Company acquired the CBS TELEVISION NETWORK, the
Federal Communications Commission (the "FCC" or the "Commission") ordered the
Company to come into compliance with its rule prohibiting a single entity from
operating two networks within 12 months of the merger closing date. The FCC
subsequently proposed to eliminate this rule. (See "Viacom Segments--
Regulation--Broadcasting").
At December 31, 2000, UPN provided 23 hours of programming a week,
including two-hour prime-time programming blocks five nights per week, to
affiliates in 177 U.S. television markets, reaching approximately 96% of all
U.S. television households, including secondary affiliates. Nineteen of the
Company's owned television stations and two stations which the Company
programs pursuant to local marketing agreements ("LMAs") are affiliates of
UPN.
Television Stations. The Company owns 39 television stations, all of which
operate under licenses granted by the FCC pursuant to the Communications Act
of 1934, as amended (the "Communications Act"). The licenses are renewable
every eight years. In addition to these 39 owned stations, the Company
operates two additional commercial television stations--(WTVX-TV in West Palm
Beach--Ft. Pierce, FL and WLWC-TV in Providence, RI--New Bedford, MA),
pursuant to LMAs.
The Company's television stations are located in the 12 largest, and 18 of
the top 20, television markets in the United States. Consistent with the 1999
liberalization of the FCC's local ownership rules, the Company has duopolies
in 6 major markets: Philadelphia (market #4), Boston (market #6), Dallas
(market #7), Detroit (market #9), Miami (market #16) and Pittsburgh (market
#20). The 39 owned stations reach approximately 48% of all U.S. television
households, which equals approximately 41% of U.S. television households under
the FCC
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national ownership limitation. The FCC's order approving the merger of Viacom
and CBS requires that the Company be in compliance with the FCC's national
ownership limitation of 35% by May 4, 2001. The Company has challenged the
rule in federal court and is seeking a stay of the requirement to come into
compliance with the limit pending judicial review of the national ownership
cap (See "Viacom Segments--Regulation--Broadcasting").
The stations produce news and broadcast public affairs and other
programming to serve their local markets and offer CBS or UPN television
network and syndicated programming. Many of the Company's television stations
currently operate Web sites which promote the stations' talent and
programming, and provide news, information and entertainment, as well as other
services.
Currently, broadcast signals are, for the most part, transmitted in analog
form. However, in April 1997, the FCC assigned each existing television
station a six MHz channel to be used for the broadcast of digital television.
The FCC adopted a time schedule under which stations are required (absent
conditions beyond their control) to construct digital transmission facilities
and begin digital operations. The schedule has staggered deadlines depending
upon a station's market size and whether the station is affiliated with a
major broadcast television network (CBS, ABC, NBC, or FOX). Under the
schedule, the Company was required to construct digital transmission
facilities for its eight CBS network affiliated stations in the top ten
markets by May 1, 1999, and by November 1, 1999, for its seven CBS network
affiliated stations in the 11th through 30th markets. The Company is required
to construct digital facilities for the five CBS network affiliated stations
in markets below the top 30, as well as for its UPN network affiliated
stations in all markets, by May 1, 2002. The Company is currently transmitting
digital broadcasts for CBS network affiliated owned and operated stations in
New York, Los Angeles, Philadelphia, San Francisco, Boston, Dallas (low
power), Detroit, Pittsburgh and Baltimore. The Company is currently
transmitting digital broadcasts for UPN network affiliated owned and operated
stations in Dallas and Detroit.
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Television Stations
The table below sets forth the 39 television stations owned by the Company
and the two television stations operated by the Company pursuant to LMAs.
Market Type/ Network
Station and Metropolitan Area Served(1) Rank(2) Channel Affiliation
- --------------------------------------- ------- ------- -----------
WCBS-TV............................................. 1 VHF/2 CBS
New York, NY
KCBS-TV............................................. 2 VHF/2 CBS
Los Angeles, CA
WBBM-TV............................................. 3 VHF/2 CBS
Chicago, IL
KYW-TV.............................................. 4 VHF/3 CBS
Philadelphia, PA
WPSG-TV............................................. 4 UHF/57 UPN
Philadelphia, PA
KPIX-TV............................................. 5 VHF/5 CBS
San Francisco, CA
WBZ-TV.............................................. 6 VHF/4 CBS
Boston, MA
WSBK-TV............................................. 6 UHF/38 UPN
Boston, MA
KTVT-TV............................................. 7 VHF/11 CBS
Dallas-FT. Worth, TX
KTXA-TV............................................. 7 UHF/21 UPN
Dallas-FT. Worth, TX
WDCA-TV............................................. 8 UHF/20 UPN
Washington, DC
WKBD-TV............................................. 9 UHF/50 UPN
Detroit, MI
WWJ-TV.............................................. 9 UHF/62 CBS
Detroit, MI
WUPA-TV............................................. 10 UHF/69 UPN
Atlanta, GA
KTXH-TV............................................. 11 UHF/20 UPN
Houston, TX
KSTW-TV............................................. 12 VHF/11 UPN
Seattle-Tacoma, WA
WCCO-TV............................................. 14 VHF/4 CBS
Minneapolis-St. Paul, MN
Satellites:
KCCO-TV(3)........................................ CBS
Alexandria, MN
KCCW-TV(4)........................................ CBS
Walker, MN
WTOG-TV............................................. 15 UHF/44 UPN
Tampa-St. Petersburg, Sarasota, FL
WFOR-TV............................................. 16 VHF/4 CBS
Miami-Ft. Lauderdale, FL
WBFS-TV............................................. 16 UHF/33 UPN
Miami-Ft. Lauderdale, FL
KCNC-TV............................................. 18 VHF/4 CBS
Denver, CO
KMAX-TV............................................. 19 UHF/31 UPN
Sacramento-Stockton-Modesto, CA
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Market Type/ Network
Station and Metropolitan Area Served(1) Rank(2) Channel Affiliation
- --------------------------------------- ------- ------- -----------
KDKA-TV........................................... 20 VHF/2 CBS
Pittsburgh, PA
WNPA-TV........................................... 20 UHF/19 UPN
Pittsburgh, PA
WJZ-TV............................................ 24 VHF/13 CBS
Baltimore, MD
WNDY-TV........................................... 25 UHF/23 UPN
Indianapolis, IN
WWHO-TV........................................... 34 UHF/53 UPN/WB(5)
Columbus, OH
KUTV-TV........................................... 36 VHF/2 CBS
Salt Lake City, UT
Satellite:
KUSG-TV(6)...................................... CBS
St. George, UT
WGNT-TV........................................... 40 UHF/27 UPN
Norfolk, Portsmouth, Newport News, VA
WUPL-TV........................................... 41 UHF/54 UPN
New Orleans, LA
KAUT-TV........................................... 45 UHF/43 UPN
Oklahoma City, OK
KEYE-TV........................................... 60 UHF/42 CBS
Austin, TX
KSCC-TV(7)........................................ 65 UHF/36 UPN
Wichita-Hutchinson, KS
WFRV-TV........................................... 69 VHF/5 CBS
Green Bay-Appleton, WI
Satellite:
WJMN-TV(8)...................................... 177 CBS
Escanaba, MI
WHDF-TV(9)........................................ 81 UHF/15 UPN
Huntsville-Decatur-Florence, AL
The following two stations are operated by the Company pursuant to LMAs:
WTVX-TV........................................... 44 UHF/34 UPN/WB(10)
West Palm Beach-Ft. Pierce, FL
WLWC-TV........................................... 50 UHF/28 UPN/WB(11)
Providence, RI-New Bedford, MA
- --------
(1) Metropolitan Area Served is Nielsen Media Research's Designated Market
Area.
(2) Market Rank based on September 2000 Nielsen Media Research U.S.
Television Household Estimates as provided by BIA Media Access.
(3) KCCO-TV is operated as a satellite station of WCCO-TV.
(4) KCCW-TV is operated as a satellite station of WCCO-TV.
(5) WWHO-TV's primary affiliation is with the UPN network. The station has a
secondary affiliation with the WB network.
(6) KUSG-TV is operated as a satellite station of KUTV-TV.
(7) KSCC-TV is operated by Clear Channel Broadcasting, Inc. ("CCB") pursuant
to an LMA. On February 24, 2001, pursuant to a contractual right, the
Company notified CCB that it would require CCB to acquire the station.
(8) WJMN-TV is operated as a satellite station of WFRV-TV.
(9) The Company owns an attributable 17.5% interest in WHDF-TV.
(10) WTVX-TV's primary affiliation is with the UPN network. The station has a
secondary affiliation with the WB network.
(11) WLWC-TV's primary affiliation is with the UPN network. The station has a
secondary affiliation with the WB network.
I-11
Television Production and Syndication. The Company, through CBS ENTERPRISES
(including KING WORLD PRODUCTIONS and CBS BROADCAST INTERNATIONAL), PARAMOUNT
TELEVISION, SPELLING TELEVISION(R) (including BIG TICKET TELEVISION(R)) and
VIACOM PRODUCTIONS acquires or produces, and distributes programming worldwide
including series, miniseries, specials and made-for-television movies
primarily for broadcast on network television, and first-run and off-network
syndicated programming.
The Company's current network programming includes ED (NBC); FRASIER (NBC);
BECKER (CBS); DIAGNOSIS MURDER (CBS); JAG (CBS); SOME OF MY BEST FRIENDS
(CBS); SABRINA, THE TEENAGE WITCH (WB); MOESHA (UPN); SEVEN DAYS (UPN); THE
PARKERS (UPN); STAR TREK: VOYAGER (UPN); CHARMED (WB); 7TH HEAVEN (WB); THAT'S
LIFE (CBS); and GIRLFRIENDS (UPN). Generally, a network will license a
specified number of episodes for exhibition on the network in the U.S. during
a license period. The bulk of remaining distribution rights, including foreign
and off-network syndication rights, are typically retained by the Company. The
episodic network license fee is normally less than the costs of producing each
series episode; however, in many cases, the Company has been successful in
recouping a portion of its costs through domestic syndication of episodes
after their network runs or by obtaining international sales through its
licensing operations. Foreign sales are generally concurrent with U.S. network
runs. Generally, a series must have a network run of at least three or four
years to be successfully sold in domestic syndication.
In off-network syndication, the Company distributes such series as CAROLINE
IN THE CITY; EARLY EDITION; FRASIER; MOESHA; SABRINA, THE TEENAGE WITCH; 7TH
HEAVEN; SISTER, SISTER; SPIN CITY; STAR TREK: VOYAGER and TOUCHED BY AN ANGEL.
Outside the U.S., PARAMOUNT PICTURES INTERNATIONAL, WVI FILMS B.V. and CBS
BROADCAST INTERNATIONAL distribute U.S. network series programming.
The Company produces and/or distributes programming for first-run
syndication which it sells directly to television stations in the U.S. on a
market-by-market basis. The Company's first-run syndicated programming
includes such shows as ENTERTAINMENT TONIGHT, ENTERTAINMENT TONIGHT WEEKEND,
HOLLYWOOD SQUARES, INSIDE EDITION, JEOPARDY!, JUDGE JOE BROWN, JUDGE JUDY,
JUDGE MILLS LANE, MARTHA STEWART LIVING, MAXIMUM EXPOSURE, THE MONTEL WILLIAMS
SHOW, THE OPRAH WINFREY SHOW, QUEEN OF SWORDS, REAL TV, RELIC HUNTER and WHEEL
OF FORTUNE.
The Company produces and/or distributes original television programming to
basic cable program services (such as the television series ANY DAY NOW,
BEYOND CHANCE and THE DIVISION, on Lifetime), including services in which the
Company has an interest, such as NICK AT NITE, TV LAND and VH1 in the U.S. and
PARAMOUNT COMEDY CHANNEL in U.K. and Spain. It also produces and/or
distributes for premium subscription services programming such as SOUL FOOD,
RESURRECTION BLVD. and THE CHRIS ISAAK SHOW. The Company also co-produces
and/or distributes original television programming for foreign television
exhibition, including such shows as HOPE ISLAND, HIGHER GROUND, LARGO WINCH
and TRIBE.
The recognition of revenues for license fees for completed television
programming in syndication and on basic cable is similar to that of feature
films exhibited on television with license fees recorded as revenue in the
year that programming is available for exhibition which, among other reasons,
may cause substantial fluctuation in the Televsion segment's operating
results. At December 31, 2000, the unrecognized revenues attributable to
television program license agreements were approximately $622 million,
compared to approximately $462 million at December 31, 1999.
Infinity
Infinity's operations are focused on the out-of-home media business with
operations in radio broadcasting through INFINITY BROADCASTING, and outdoor
advertising through INFINITY OUTDOOR and TDI. The
I-12
Radio Stations and Outdoor Displays table sets forth selected information with
regard to Infinity's radio stations and outdoor displays in the top 25 U.S.
radio markets. Infinity characterizes its radio and outdoor advertising
businesses as out-of-home because a majority of radio listening, and virtually
all viewing of outdoor advertising, takes place in automobiles, transit
systems, on the street and other locations outside the consumer's home.
Infinity's strategy generally is to acquire out-of-home media properties in
the largest markets.
Infinity Radio. INFINITY BROADCASTING, consisting of 184 radio stations
serving 41 markets, accounted for approximately 13% of total 2000 U.S. radio
advertising expenditures. The Company's stations ranked first or second, in
terms of 2000 pro forma radio revenues, in 30 out of the 41 markets in which
the Company operates stations. Approximately 91% of the Company's radio
stations are located in the 50 largest radio markets in the United States, and
62% and 97% of the Company's pro forma 2000 net radio revenues were generated
in the 10 and 50 largest U.S. markets, respectively. The Company believes that
this focus on large markets makes it more appealing to advertisers, enables it
to attract more highly skilled management, employees and on-air talent, and
enables it to more efficiently manage its business and generate higher levels
of cash flow than would be the case if it managed a larger number of smaller
stations. Infinity owns the CBS RADIO NETWORK, which is managed by Westwood
One, Inc.
Infinity's radio stations serve diverse target demographics through a broad
range of programming formats. This diversity provides advertisers with the
convenience to select stations to reach a targeted demographic group or to
select groups of stations and outdoor advertising properties to reach broad
groups of consumers within and across markets. This diversity also reduces its
dependence on any single station, local economy, format or advertiser.
Infinity seeks to maintain substantial diversity among its radio stations
in many respects. The geographically wide-ranging stations serve diverse
target demographics through a broad range of programming formats, such as
rock, oldies, news/talk, adult contemporary, sports/talk and country, and
Infinity has established leading franchises in news, sports, and personality
programming. The overall mix of each radio station's programming is designed
to fit the station's specific format and serve its local community. Infinity's
general programming strategy includes acquiring significant on-air talent and
the rights to broadcast sports franchises and news content for its radio
stations. This strategy, in addition to developing loyal audiences for its
radio stations, creates the opportunity to obtain additional revenues from
syndicating such programming franchises to other radio stations.
Outdoor Advertising. INFINITY OUTDOOR and TDI sell advertising space on
various media, including billboards, bulletins, buses, bus shelters and
benches, trains, train platforms and terminals throughout commuter rail
systems, mall posters and phone kiosks. Infinity has outdoor advertising
operations in more than 90 markets in North America, and all 50 of the largest
metropolitan markets in the United States, 14 of the 15 largest metropolitan
markets in Canada and all of the 45 largest metropolitan markets in Mexico.
Additionally, the Company has the exclusive rights to manage advertising space
within the London Underground and on more than 90% of the buses in London and
the United Kingdom, has the exclusive rights to transit advertising in the
Republic of Ireland and parts of Northern Ireland, and has a variety of
outdoor advertising displays in the Netherlands, France, Italy, Spain and
Finland.
The substantial majority of Infinity's revenues are generated from the sale
of local, regional and national advertising. The major categories of out-of-
home advertisers include: automotive, retail, healthcare, telecommunications,
fast food, beverage, movies, entertainment and services.
Infinity beneficially owns shares and vested warrants representing
approximately 18% of the common stock of Westwood One, Inc., which it manages
pursuant to a management agreement. Westwood One is one of the leading
producers and distributors of syndicated and network radio programming in the
U.S. and distributes syndicated and network radio programming to the Company's
radio stations as well as to competitors of Infinity.
Seasonal revenue fluctuations are common in the out-of-home media industry
and are primarily the result of fluctuations in advertising expenditures by
retailers. Infinity's revenues are typically lowest in the first quarter and
highest in the fourth quarter.
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Radio Stations and Outdoor Displays
The following table sets forth certain selected information with regard to
the Company's U.S. radio stations and outdoor displays in the top 25 U.S.
markets as of February 23, 2001:
2000 Market Rank Radio Outdoor
By Metro Area -------------------------------------------- --------------------------------
Market Population Stations AM/FM Format Display Type
- ------ ---------------- -------- ----- ----------------------------- --------------------------------
New York, NY............ 1 WCBS FM Oldies Bus, Bus Shelters, Rail, Kiosks,
WCBS AM News Billboards, Walls, Trestles,
WFAN AM Sports "Spectacular Signage,"
WINS AM News Bulletins, Posters, Mall Posters
WNEW FM Talk
WXRK FM Alternative Rock
Los Angeles, CA......... 2 KCBS FM Classic Rock Bus, Bus Shelters, Kiosks,
KFWB AM News Beach Panels, Bulletins, Walls,
KLSX FM Talk Posters, Mall Posters
KNX AM News
KROQ FM Alternative Rock
KRTH FM Oldies
KTWV FM Smooth Jazz
Chicago, IL............. 3 WBBM FM Contemporary Hit, Radio/Dance Bus, Bus Shelters,
WBBM AM News Bulletins, Posters, Mall Posters
WCKG FM Talk
WJMK FM Oldies
WSCR AM Sports/Talk
WUSN FM Country
WXRT FM Adult Alternative Rock
San Francisco, CA....... 4 KCBS AM News Bus, Bus Shelters, Rail, Cable
KFRC FM Oldies Cars, Bulletins, Walls, Posters,
KFRC AM Oldies Mall Posters
KITS FM Alternative Rock
KLLC FM Modern Adult Contemporary
KYCY AM Talk
KYCY FM Country
Philadelphia, PA........ 5 KYW AM News Bus, Bus Shelters, Rail,
WIP AM Sports Bulletins, Mall Posters,
WOGL FM Oldies
WPHT AM Talk
WYSP FM Active Rock
Dallas--Fort Worth, TX.. 6 KHVN AM Gospel Bus, Bulletins, Mall Posters
KLUV FM Oldies
KOAI FM Smooth Jazz
KRBV FM Rhythmic Contemporary Hits
KRLD AM News/Talk
KVIL FM Adult Contemporary
KYNG FM Talk
Detroit, MI............. 7 WKRK FM Talk Bus, Bus Shelters, Bulletins,
WOMC FM Oldies Posters, Mall Posters
WVMV FM Smooth Jazz
WWJ AM News
WXYT AM Talk/Sports
WYCD FM Country
Boston, MA.............. 8 WBCN FM Alternative Bus, Rail, Mall Posters
WBMX FM Modern Adult Contemporary
WBZ AM News/Talk/Sports
WODS FM Oldies
WZLX FM Classic Rock
Washington, D.C......... 9 WARW FM Classic Rock Bus, Rail, Mall Posters
WHFS FM Alternative Rock
WJFK FM Talk
WPGC FM Urban Contemporary
WPGC AM Gospel
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2000 Market Rank Radio Outdoor
By Metro Area ------------------------------------- --------------------------------
Market Population Stations AM/FM Format Display Type
- ------ ---------------- -------- ----- --------------------- --------------------------------
Houston, TX............... 10 KIKK FM Country Bulletins, Mall Posters
KIKK AM Business
KILT FM Country
KILT AM Sports
Atlanta, GA............... 11 WAOK AM Gospel Bus, Bus Shelters, Rail,
WVEE FM Urban Contemporary Bulletins, Posters, Mall Posters
WZGC FM Classic Rock
Miami-Ft. Lauderdale, FL.. 12 -- -- -- Bulletins, Mall Posters
Seattle-Tacoma, WA........ 14 KBKS FM Country Bus, Bulletins, Mall Posters
KMPS FM Country
KYCW AM Adult Contemporary
Hit Radio
KYPT FM 80's Pop Rock
KZOK FM Classic Rock
San Diego, CA............. 15 KPLN FM Classic Rock Bus, Bus Shelters, Bulletins,
KYXY FM Adult Contemporary Posters, Mall Posters
Phoenix, AZ............... 16 KOOL FM Oldies Bus Shelters, Bulletins,
KZON FM Alternative Rock Posters, Mall Posters
KMLE FM Country
Minneapolis, MN........... 17 WCCO AM News/Talk Bus, Bulletins, Mall Posters
WLTE FM Adult Contemporary
WXPT FM Modern Adult
Contemporary
KSGS AM Urban Adult
Contemporary
Nassau-Suffolk, NY........ 18 -- -- -- Bus, Bulletins
St. Louis, MO............. 19 KEZK FM Soft Rock Bulletins, Posters, Mall Posters
KMOX AM News/Talk/Sports
KYKY FM Adult Contemporary
Hot
Baltimore, MD............. 20 WBGR AM Gospel Mall Posters
WBMD AM Religion
WJFK AM Talk
WLIF FM Lite Music
WQSR FM Oldies
WWMX FM Hot Adult
Contemporary
WXYV FM Contemporary Hit
Radio
Tampa-St. Petersburg, FL.. 21 WLLD FM Rhythmic Contemporary Bulletins, Mall Posters
Hit Radio
WQYK FM Country
WQYK AM Sports/Talk
WYUU FM Oldies
WRBQ FM Country
WSJT FM Smooth Jazz
Pittsburgh, PA............ 22 KDKA AM News/Talk Bus, Bulletins, Mall Posters
WBZZ FM Contemporary Hit
Radio Top 40
WDSY FM Country
WZPT FM Hot Adult
Contemporary
Denver, CO................ 23 KDJM FM Jammin' Oldies Bus Benches, Bulletins, Posters,
KIMN FM Adult Contemporary Mall Posters
KXKL FM Oldies
Cleveland, OH............. 24 WNCX FM Classic Rock Bulletins, Mall Posters
WDOK FM Soft Adult
Contemporary
WQAL FM Hot Adult
Contemporary
WZJM FM Jammin' Oldies
Portland, OR.............. 25 KVMX FM Modern Adult Bulletins, Mall Posters
Contemporary
KINK FM Adult Album
Alternative
KKJZ FM Smooth Jazz
KUFO FM Album Oriented Rock
KUPL FM Country
KUPL AM Classic Country
I-15
Entertainment
The Entertainment segment's principal businesses are PARAMOUNT PICTURES,
which produces and distributes motion pictures; PARAMOUNT PARKS, which
operates five regional theme parks and a themed attraction in the U.S. and
Canada; FAMOUS PLAYERS(R), which operates movie theaters; and FAMOUS MUSIC(R).
Theatrical Motion Pictures. Through PARAMOUNT PICTURES, the Company
produces, finances and distributes feature motion pictures. Motion pictures
are produced by PARAMOUNT PICTURES, produced by independent producers and
financed in whole or in part by PARAMOUNT PICTURES, or produced by others and
distributed by PARAMOUNT PICTURES. Each picture is a separate and distinct
product with its financial success dependent upon many factors, among which
cost and public response are of fundamental importance. In general, motion
pictures produced or acquired for distribution by PARAMOUNT PICTURES are
exhibited in U.S. and foreign theaters followed by videocassettes, discs and
DVDs, pay-per-view television, premium subscription television, network
television, basic cable television and syndicated television exploitation.
During 2000, PARAMOUNT PICTURES produced or co-produced and theatrically
released 12 feature motion pictures in the U.S., including WONDER BOYS, RULES
OF ENGAGEMENT, MISSION: IMPOSSIBLE 2, SHAFT and WHAT WOMEN WANT; THE ORIGINAL
KINGS OF COMEDY produced by MTV FILMS in association with PARAMOUNT PICTURES;
and SNOW DAY and RUGRATS IN PARIS: THE MOVIE produced by NICKELODEON MOVIES in
association with PARAMOUNT PICTURES. PARAMOUNT PICTURES currently plans to
release approximately 17 films in 2001 (which release plans may change due to
a variety of factors), including DOWN TO EARTH, ENEMY AT THE GATES, ALONG CAME
A SPIDER, TOMB RAIDER, RAT RACE, DOMESTIC DISTURBANCE, FOUR FEATHERS, and
VANILLA SKY, and ZOOLANDER produced by VH1 FILMS(TM) in association with
PARAMOUNT PICTURES, SAVE THE LAST DANCE and ORANGE COUNTY produced by MTV
FILMS in association with PARAMOUNT PICTURES, and JIMMY NEUTRON-BOY GENIUS
produced by NICKELODEON MOVIES in association with PARAMOUNT PICTURES.
PARAMOUNT CLASSICS(TM), a division of PARAMOUNT PICTURES, released seven
films in 2000, including SUNSHINE, THE VIRGIN SUICIDES, YOU CAN COUNT ON ME
and THE GIFT. PARAMOUNT CLASSICS was established to handle the distribution of
specialized film product that may require alternative release strategies from
films generally distributed by PARAMOUNT PICTURES. PARAMOUNT CLASSICS
currently plans to release approximately six titles in 2001 (which release
plans may change due to a variety of factors).
In seeking to limit PARAMOUNT PICTURES' financial exposure, the Company has
pursued a strategy with respect to a number of films of entering into
agreements to distribute such films produced and/or financed, in whole or in
part, with other parties. The parties to these arrangements include studio and
non-studio entities, both domestic and foreign. In various of these
arrangements, the other parties control certain distribution and other
ownership rights.
PARAMOUNT PICTURES generally distributes its motion pictures for theatrical
release outside the U.S. and Canada through United International Pictures
("UIP"), a company owned by the Company and an affiliate of Universal Studios,
Inc. ("Universal"). Pursuant to an agreement, UIP will continue to distribute
each studio's films through 2006. PARAMOUNT PICTURES distributes its motion
pictures on videocassette and disc in the U.S. and Canada through PARAMOUNT
HOME ENTERTAINMENT(TM) and outside the U.S. and Canada, generally through
PARAMOUNT HOME ENTERTAINMENT INTERNATIONAL. Commencing April 2000, PARAMOUNT
HOME ENTERTAINMENT INTERNATIONAL started releasing pictures in DVD format in
Europe and Japan. PARAMOUNT PICTURES' feature films initially theatrically
released in the U.S. on or after January 1, 1998 are exhibited exclusively (to
U.S. premium subscription television) on SHOWTIME and THE MOVIE CHANNEL.
PARAMOUNT PICTURES also distributes its motion pictures for premium
subscription, free and basic cable television release outside the U.S. and
Canada and licenses its motion pictures to residential and hotel/motel pay-
per-view, airlines, schools and universities.
I-16
During 2000, PARAMOUNT PICTURES INTERNATIONAL entered into an agreement
with DBS Satellite Services for pay television distribution rights in Israel
for current films, library films and television products and PARAMOUNT
PICTURES INTERNATIONAL and WVI FILMS B.V. entered into an agreement with Movie
Television Inc. for free television distribution rights in Japan for current
motion picture and television product. This latter agreement also includes
free television distribution rights in Japan for various motion picture and
television library product.
In addition to premium subscription television, most motion pictures are
also licensed for exhibition on broadcast and basic cable television, with
fees generally collected in installments. All of the above license fees for
television exhibition (including international and U.S. premium television and
basic cable television) are recorded as revenue in the year that licensed
films are available for such exhibition, which, among other reasons, may cause
substantial fluctuation in PARAMOUNT PICTURES' operating results. At December
31, 2000, the unrecognized revenues attributable to such licensing of
completed films from PARAMOUNT PICTURES' license agreements were approximately
$1.0 billion, compared to approximately $1.2 billion at December 31, 1999. At
December 31, 2000, PARAMOUNT PICTURES had approximately 1,000 motion pictures
in its library. The Company also has a library of additional motion picture
titles, most of which comprise the SPELLING ENTERTAINMENT(TM) library.
Through PARAMOUNT PICTURES and various of its affiliates, the Company is a
joint venturer in a number of international program services, including THE
PARAMOUNT COMEDY CHANNEL(TM) in the U.K., an afternoon and nighttime
(including prime time) program service featuring comedies and films, which is
a joint venture with BSkyB. On March 1, 1999, the Company launched THE
PARAMOUNT COMEDY CHANNEL(R) in Spain, a wholly owned, 24-hour program service,
including a NICKELODEON program segment.
Theatrical Exhibition. The Company's movie theater operations consist
primarily of FAMOUS PLAYERS in Canada and United Cinemas International ("UCI")
in Europe, Latin America and Asia. At December 31, 2000, FAMOUS PLAYERS, a
wholly owned subsidiary of the Company, operated approximately 880 screens in
104 theaters across Canada. UCI, a 50%-owned joint venture of entities
affiliated with the Company and Universal, operated as of December 31, 2000,
approximately 970 screens in 113 theaters in the U.K., Ireland, Germany,
Austria, Spain, Japan, Italy, Poland, Argentina, Brazil, Panama and Taiwan.
As of November 29, 1999, WF Cinema Holdings, L.P. (a limited partnership in
which the Company owns a 50% interest and the other 50% is controlled by AOL
Time Warner Inc., "WF Cinema") entered into agreements (the "Asset
Agreements") with WestStar Cinemas, Inc., WestStar Real Estate, Inc., Colorado
Holdings LLC and WestStar Holdings, Inc. (collectively, "WestStar"), which
parties are the subject of a Chapter 11 Bankruptcy Code proceeding. Pursuant
to the Asset Agreements, WF Cinema agreed to purchase from WestStar various
theaters and related assets for a purchase price of $90 million (which was
paid during 2000) and other consideration. The theaters and assets which are
the subject of this transaction comprise in large part the assets that were
sold by WF Cinema (then known as Cinamerica Theaters L.P.) to WestStar in
1997. WF Cinema has disposed of or closed a number of the theaters that were
acquired and currently intends to dispose of or close some of the remaining
theaters. The Company and AOL Time Warner have agreed to guarantee certain
obligations of WF Cinema as part of these transactions. The Asset Agreements
were approved by the Bankruptcy Court on January 12, 2000, and the acquisition
by WF Cinema closed on January 28, 2000.
Music Publishing. The FAMOUS MUSIC publishing companies own, control and/or
administer all or a portion of the copyright rights to more than 100,000
musical works (songs, scores, cues). These rights include the right to license
and exploit such works, as well as the right to collect income generated by
such licensing and exploitation.
The majority of rights acquired by FAMOUS MUSIC are derived from (i) music
acquisition agreements entered into by PARAMOUNT PICTURES, PARAMOUNT
TELEVISION, SPELLING TELEVISION, MTVN and various other divisions of the
Company respecting certain motion pictures, television programs and other
properties produced by such units and (ii) music acquisition agreements
entered into directly by FAMOUS MUSIC with songwriters and music publishers,
including exclusive songwriting agreements, catalog purchases and music
administration agreements.
I-17
Parks. PARAMOUNT PARKS owns and operates five regional theme parks and a
themed attraction in the U.S. and Canada: PARAMOUNT'S CAROWINDS(R), in
Charlotte, North Carolina; PARAMOUNT'S GREAT AMERICA(TM), in Santa Clara,
California; PARAMOUNT'S KINGS DOMINION(TM), located near Richmond, Virginia;
PARAMOUNT'S KINGS ISLAND(TM), located near Cincinnati, Ohio; PARAMOUNT
CANADA'S WONDERLAND(R), located near Toronto, Ontario; and STAR TREK: THE
EXPERIENCE(R), at the Las Vegas Hilton, a futuristic, interactive environment
based on the popular television and movie series. Each of the theme parks
features attractions, products and live shows based on various intellectual
properties of the Company.
A substantial amount of the theme parks' income is generated during its
seasonal operating period. Factors such as local economic conditions,
competitors and their marketing/pricing actions, and extreme weather
conditions could negatively impact the business' overall profitability if they
come into play during the operating season.
Video
The Company operates in the home video business through its approximately
82% equity interest in Blockbuster Inc. As of December 31, 2000, the Company's
video segment, which included BLOCKBUSTER's home video, DVD and video game
rental and retailing operations operated or franchised approximately 7,700
stores in the U.S., its territories and 25 other countries. BLOCKBUSTER also
operates its Internet site, "blockbuster.com" and is exploring various forms
of electronic entertainment delivery including video-on-demand.
In its stores, which operate primarily under the highly recognized
BLOCKBUSTER brand name, BLOCKBUSTER offers video movies and video games
primarily for rental and also offers certain titles for purchase. BLOCKBUSTER
also offers DVDs for rental and for sale in most of its U.S. stores. In
addition, BLOCKBUSTER offers previously-viewed tapes and previously-viewed
video games for sale. During 2000, BLOCKBUSTER expanded its traditional video
rental service through an agreement with DIRECTV, Inc. ("DIRECTV"), a provider
of digital television entertainment service. Pursuant to this agreement,
BLOCKBUSTER is now marketing DIRECTV System equipment and DIRECTV(R)
programming packages in over 3,800 of BLOCKBUSTER's U.S. stores. Blockbuster
and DIRECTV have also announced that they plan to introduce a co-branded pay-
per-view service during 2001. BLOCKBUSTER also launched a movies-on-demand
service on a trial basis in four cities in December 2000. In addition, in
February 2001, BLOCKBUSTER entered into a strategic alliance with RadioShack
Corporation for the purpose of introducing a RadioShack store-within-a-store
concept inside BLOCKBUSTER.
BLOCKBUSTER acquires its VHS movies primarily pursuant to revenue-sharing
arrangements that were initially implemented in 1998 with the major motion
picture studios, including PARAMOUNT PICTURES. BLOCKBUSTER entered into these
arrangements in order to increase the quantity and selection of newly released
video titles and to satisfy its customers' demand for newly released videos
earlier. For titles acquired under these arrangements, revenue-sharing
generally allows BLOCKBUSTER to license videocassettes for minimal up-front
payments with a percentage of the U.S. rental revenues shared with the studios
over a contractually determined period of time. In addition to acquiring
products pursuant to revenue-sharing agreements, BLOCKBUSTER purchases certain
products that are not subject to revenue-sharing agreements, at wholesale
prices. BLOCKBUSTER also purchases "sell-through" titles, which are movies
that are released by the studios at relatively low initial prices in order to
generate consumer demand to purchase, rather than rent, them. Almost all DVDs
are also released by the studios at sell-through prices. In addition,
BLOCKBUSTER also acquires and offers a wide variety of independent and lower-
cost movies that are generally exclusively available for a specified period of
time at its stores. BLOCKBUSTER also rents video game consoles and DVD players
in most of its U.S. stores.
As with other retail outlets, there is a distinct seasonal pattern to the
home video and video games business, with particularly weaker business in
April and May, due in part to improved weather and Daylight Savings Time, and
in September and October, due in part to the start of school and the
introduction of new television programs.
I-18
Publishing
SIMON & SCHUSTER publishes and distributes consumer hardcover books, trade
paperbacks, mass-market paperbacks, children's books, audiobooks, electronic
books and CD-ROM products in the U.S. and internationally. SIMON & SCHUSTER's
flagship imprints include SIMON & SCHUSTER, POCKET BOOKS, SCRIBNER and THE
FREE PRESS. SIMON & SCHUSTER also develops special imprints and publishes
titles based on MTV, VH1, NICKELODEON and PARAMOUNT PICTURES products. SIMON &
SCHUSTER distributes its products directly and through third parties. SIMON &
SCHUSTER also delivers content and promotes its products on Internet sites
operated by various imprints or linked to individual titles.
In 2000, SIMON & SCHUSTER published 87 titles which were New York Times
bestsellers, including seven New York Times number one bestsellers. Best-
selling titles released in 2000 include "NOTHING LIKE IT IN THE WORLD" by
Stephen Ambrose, "JOE DIMAGGIO: THE HERO'S LIFE" by Richard Ben Cramer,
"BEFORE I SAY GOODBYE" by Mary Higgins Clark, "BLACKBIRD" by Jennifer Lauck,
"TALKING DIRTY WITH THE QUEEN OF CLEAN" by Linda Cobb, "ON WRITING" by Stephen
King, "AN INVITATION TO THE WHITE HOUSE" by Hillary Rodham Clinton, and
"OLIVIA" by Ian Falconer, as well as a number of RUGRATS and BLUE'S CLUE'S
books, featuring the popular NICKELODEON characters.
SIMON & SCHUSTER AUDIO(R) publishes audio editions of prominent works
published by SIMON & SCHUSTER and by other publishers, as well as the
PIMSLEUR(R) line of language instruction. Major titles released as audiobooks
in 2000 include "SHOPGIRL" by Steve Martin, "THE MILLIONAIRE NEXT DOOR" by
Thomas J. Stanley and William D. Danko, and "WHO MOVED MY CHEESE?" by Spencer
Johnson.
Titles published by SIMON & SCHUSTER INTERACTIVE(R) generally consist of
CD-ROM editions or product extensions of well-known book publishing properties
or titles associated with recognized authors and Company properties, including
such 2000 titles as "STAR TREK DEEP SPACE NINE: THE FALLEN," "SABRINA THE
ANIMATED SERIES: MAGICAL ADVENTURE" and "M&M'S: THE LOST FORMULAS."
SIMON & SCHUSTER ONLINE(TM), through "SimonSays.com," publishes original
content, builds reader communities, and promotes and sells SIMON & SCHUSTER's
books and products over the Internet. In 2000, SIMON & SCHUSTER ONLINE, in
conjunction with SCRIBNER, published Stephen King"s "RIDING THE BULLET," an
original story released exclusively in digital form.
International publishing includes the international distribution of
English-language titles through SIMON & SCHUSTER UK(TM) and SIMON & SCHUSTER
AUSTRALIA(TM) and other distributors, as well as the publication of local
titles by SIMON & SCHUSTER UK and SIMON & SCHUSTER AUSTRALIA.
The consumer publishing marketplace is subject to increased periods of
demand in the summer months and during the end-of-year holiday season. Major
new title releases drive a significant portion of SIMON & SCHUSTER's sales
throughout the year.
Consumer books are generally sold on a fully returnable basis, resulting in
significant product returns. In the international markets, the Company is
subject to global trends and local economic conditions.
Online
Through its 90% equity interest in THE MTVi GROUP, L.P. ("MTVi") and
through NICKELODEON ONLINE(TM), the Company operates Internet sites which are
targeted to the current audiences of its various MTV, VH1 and NICKELODEON
television program services worldwide, as well as to new online audiences. The
remaining 10% interest in MTVi is owned by Liberty Digital, Inc. In addition
to providing entertainment and information on such Web sites, the Company also
sells Company-licensed and third-party merchandise.
I-19
MTVi has numerous music Web site destinations around the world, including
MTV.com, VH1.com, Country.com and SonicNet.com. In December 2000, MTVi's Web
sites attracted over 4 million unique visitors, according to Media Metrix, a
leading online audience research measurement service. MTV.com offers users the
latest music news, information on artists and MTV programs, and interactive
entertainment through convergence programs such as Direct Effect (DFX), Total
Request Live (TRL) and VJ for a Day. VH1.com offers users convergent
entertainment, music news, fan club information, daily polls and community
features.
MTVi currently obtains much of its content from record labels, music
publishers and artists. While MTVi obtains certain rights to some of such
content (such as performance rights of song composers and non-interactive
rights to digital transmission of recordings) pursuant to statutory compulsory
licenses, the royalties payable for such compulsory licenses are not yet
established or have not yet been negotiated. Other rights are not subject to
compulsory licenses and must be negotiated with the individual record labels
and other providers. If these providers begin to charge significant fees for
their content, or otherwise alter or discontinue their relationship with MTVi,
then MTVi's content offering and business, financial condition and operating
results could be adversely affected. In addition, because the laws relating to
online rights for music and other copyrighted works are evolving, it is
possible that parties from whom MTVi currently does not obtain licenses will
demand that MTVi obtain them and pay certain fees for usage (see "Viacom
Segments--Regulation--Intellectual Property").
NICKELODEON ONLINE operates Web sites that feature NICKELODEON properties,
including Nick.com, NickJR.com, TVLand.com, Nick-at-Nite.com, Gas.Nick.com and
Teachers.Nick.com. Nick.com is a leading Web site for kids, offering
convergent entertainment, online games, entertainment tools and services,
Internet radio, information on Nickelodeon celebrities and programs and other
content for kids. NickJR.com offers online content for parents and their pre-
school aged kids, including advice, parent-to-parent communities, e-commerce,
as well as a preschool area featuring interactive games, art, stories and
music. In December 2000, NICKELODEON ONLINE's Web sites attracted over 2.8
million unique visitors, according to Media Metrix.
In addition, the Company operates two Web sites, CBS.com and CBSNews.com,
which draw visitors from CBS TELEVISION NETWORK programming in all dayparts
(daytime, primetime and late night). CBS.com integrates local, national and
international news, weather, sports and information on CBS TELEVISION NETWORK
programming in one location. The site provides information on CBS
ENTERTAINMENT programming (including such features as David Letterman's "Top
Ten" list). In early 2001, as a result of the debut of CBS's reality show,
SURVIVOR: THE AUSTRALIAN OUTBACK, CBS.com reached its highest visitor levels
ever. The site also provides links to a number of sites in which the Company
owns an equity interest, including CBS MarketWatch, CBS SportsLine and CBS
HealthWatch.
CBSNews.com brings the coverage and reputation of CBS NEWS to the Internet,
including multimedia coverage of top stories, coverage of breaking news events
and information from CBS NEWS investigations.
During 2000, the Online segment included an investment in iWon, Inc., which
operates an Internet portal. Subsequent to December 31, 2000, the successor to
iWon will be included with the Company's other Internet investments. Effective
January 1, 2001, the Company will present its online businesses as part of the
Cable Networks and Television segments. Online revenues are primarily
generated by advertising revenues derived from online advertising and on-air
promotion and by the sale of merchandise.
The Company also operates Internet sites through its other businesses, such
as PARAMOUNT PICTURES, INFINITY BROADCASTING, BLOCKBUSTER, SHOWTIME and SIMON
& SCHUSTER, for the purpose of marketing and commerce. Such activity is not
reported as part of the Online segment.
Internet Investments: The Company holds minority investments in five public
Internet companies: Sportsline.com, Inc. (NASDAQ: SPLN), which publishes
several sports Internet sites including CBS.sportsline.com; MarketWatch.com,
Inc. (NASDAQ: MKTW), which publishes financial and market data Internet sites
including CBS.marketwatch.com; Hollywood Media Corp. (NASDAQ: HOLL), which
publishes entertainment content Internet sites, including hollywood.com;
Switchboard Incorporated (NASDAQ: SWBD),
I-20
which publishes local information directory Internet sites, including
switchboard.com; and Medicalogic/Medscape, Inc. (NASDAQ: MDLI), which
publishes consumer health Internet sites including
CBShealthwatch.medscape.com. Other Internet investments of the Company include
minority investments in Office.com, Inc., Content Commerce, L.P., RX.com, Inc.
and Wrenchead.com, Inc.
Competition
Corporate mergers consummated in recent years have resulted in greater
consolidation in the entertainment industries, which may also present
significant competitive challenges to several of the Company's businesses.
Cable Networks
MTV Networks. MTVN services compete with other basic cable program services
for channel space and compensation for carriage from cable television
operators, DTH and other multichannel distributors. MTVN also competes for
advertising revenue with other basic cable and broadcast television networks,
and radio and print media. For basic cable television networks such as the
MTVN services, advertising revenues derived by each program service depend on
the number of households subscribing to the service through local cable
operators and other distributors in addition to household and demographic
viewership as determined by research companies such as Nielsen Media Research.
MTVN services also compete with other cable services and broadcast television
for the acquisition of popular programming.
Certain major record companies have launched music-based program services
outside the U.S., including, but not limited to: Channel V, which is jointly
owned and operated in Asia and Australia by Star TV and four major record
labels; and Viva and Viva 2, German-language music channels distributed in
Germany and owned in large part by four major record labels. In addition to
the competition referred to above, MTVN's music-based program services compete
with other music-based television program services and blocks for distribution
by cable, satellite and other systems, and for distribution license fees and
advertising revenues.
Children-oriented programming blocks are currently exhibited on a number of
U.S. broadcast television networks, including, among others, "Fox Kids,"
"Kids' WB" and a Saturday morning block on ABC, all of which compete with
NICKELODEON for advertising revenue. There are also a number of other U.S.
cable television program services featuring children-oriented programming,
including the Cartoon Network, the Disney Channel and the Fox Family Channel.
In addition to the competition referred to above, NICKELODEON competes
internationally with other television program services and blocks targeted at
children for distribution by cable, satellite and other systems, and for
distribution license fees and advertising revenue.
Showtime Networks Inc. Competition among premium subscription television
program services in the U.S. is primarily dependent on: (i) the acquisition
and packaging of an adequate number of recently released quality motion
pictures and the production, acquisition and packaging of original motion
pictures, original series and other original programs; and (ii) the offering
of prices, marketing and advertising support and other incentives to cable
operators and other distributors for carriage so as to favorably position and
package SNI's premium subscription television program services to subscribers.
HBO is the dominant company in the U.S. premium subscription television
category, offering two premium subscription television program services, the
HBO service and Cinemax. SNI is second to HBO with a significantly smaller
share of the premium subscription television category. Starz Encore Media
Group (an affiliate of AT&T Corp.) owns the third principal premium
subscription television program service in the U.S., Starz!, which features
recently released motion pictures and competes with SNI's and HBO's premium
program services.
Television
The television broadcast environment is highly competitive. The principal
methods of competition in broadcast television are the acquisition of popular
programming and the development of audience interest
I-21
through programming and promotions in order to sell advertising at profitable
rates. Broadcast networks like CBS and UPN compete for audience, advertising
revenues and programming with other broadcast networks, independent television
stations, basic cable program services as well as other media, including
satellite television services, videocassettes, DVDs and the Internet.
Television stations compete for programming and for advertising revenues with
other stations in their respective coverage areas and, in some cases, with
larger station groups for programming, and in the case of advertising
revenues, with other local media. In addition, the CBS and UPN television
networks compete with other television networks to secure affiliations with
independently owned television stations in markets across the country, which
are necessary to ensure the effective distribution of network programming to a
nationwide audience.
Because an extended conversion to digital television broadcasting has begun
current and future technological developments may affect competition within
the television marketplace. Technological developments that compress digital
signals will increasingly permit the same broadcast, cable, or satellite
channel to carry multiple video and data services which could result in an
expanded field of competing services. Television broadcasters will continue to
operate their current stations while gradually building and operating digital
facilities concurrently on separate channels.
As a producer and distributor of programming, the Company competes with
studios, television networks and independent producers and syndicators to sell
programming both domestically and overseas.
Infinity
The Company's radio stations and outdoor advertising properties compete for
audience, advertising revenues and programming directly with other radio
stations and outdoor advertising companies, as well as with other media, such
as broadcast television, newspapers, magazines, cable television, the Internet
and direct mail, within their respective markets.
The radio and outdoor advertising industry is also subject to competition
from new media technologies that are being developed or introduced, such as
the delivery of audio programming by cable television systems, by satellite
and by terrestrial delivery of digital audio broadcasting. The FCC has
authorized spectrum for the use of a new technology, satellite digital audio
radio services, to deliver audio programming. Satellite digital audio radio
service will provide a medium for the delivery by satellite of multiple new
audio programming formats to local and national audiences. The FCC also has a
pending proceeding which contemplates the use of digital technology by
existing terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies. The FCC recently authorized a new "low power" radio
or "microbroadcasting" service with the intent of creating opportunities for
low cost neighborhood service on frequencies which would not interfere with
existing stations.
Entertainment
Theatrical Motion Pictures. The Company competes with other major studios
and independent film producers in the production and distribution of motion
pictures, videocassettes, discs and DVDs. PARAMOUNT PICTURES' competitive
position primarily depends on the quality of the product produced, its
distribution and marketing success, and public response. The Company also
competes to obtain creative talent and story properties which are essential to
the success of all of the Company's entertainment businesses.
Parks. During the last two years, the regional theme park industry has
experienced increased consolidation. The Company must now compete in a
business environment that is dominated by highly-capitalized, multi-park
entertainment corporations. In order to compete effectively, regional theme
park operators must differentiate their product by having access to the latest
entertainment intellectual property and brands and must reinvest capital to
maintain a fresh experience for their repeat-visitor base. The Company
believes that its intellectual properties enhance existing attractions and
facilitate the development of new attractions, which encourage visitors to the
PARAMOUNT PARKS theme parks and STAR TREK: THE EXPERIENCE at the Las Vegas
Hilton. The Company's theme parks also compete with other forms of leisure
entertainment.
I-22
Video
BLOCKBUSTER operates in a highly competitive environment. The Company
believes that BLOCKBUSTER's most significant competition comes from (i) video
stores and other retailers that rent or sell movies and (ii) providers of
direct delivery home viewing entertainment.
Video stores and other retailers that rent or sell movies include, among
others, (i) local, regional and national video stores; (ii) mass merchant
retailers; (iii) supermarkets, pharmacies and convenience stores; and (iv)
online retailers and mail order services. The Company believes that the
principal factors that BLOCKBUSTER faces in competing with video stores and
other retailers are (a) convenience and visibility of store locations; (b)
quality, quantity and variety of titles; (c) pricing; and (d) customer
service.
With the development of new technologies, a significant competitive risk to
BLOCKBUSTER's video store business comes from direct broadcast satellite,
digital cable television and high-speed Internet access. In response to this
competition in 2000, BLOCKBUSTER entered the direct broadcast satellite market
through its alliance with DIRECTV (see "Viacom Segments--Video"). Direct
broadcast satellite, digital cable and "traditional" cable providers not only
offer numerous channels of conventional television, but they also offer pay-
per-view movies which permit a subscriber to pay a fee to see a selected
movie. Because of the increased availability of channels, direct broadcast
satellite and digital cable providers have been able to enhance their pay-per-
view business by (i) substantially increasing the number and variety of movies
they can offer their subscribers on a pay-per-view basis; and (ii) providing
more frequent and convenient start times for the most popular movies. Pay-per-
view allows the consumer to avoid trips to the video store for rentals and
returns of movies, which also eliminates the chance they will incur additional
costs for keeping a movie beyond its initial rental term. However, newly
released movies are currently made available by the studios for rental prior
to being made available for pay-per-view. Pay-per-view also does not allow the
consumer to start, stop and rewind the movie or fully control start times. As
a result, some digital cable providers and a limited number of Internet
content providers have begun implementing technology referred to as "video-on-
demand," which technology transmits movies on demand with interactive
capabilities such as start, stop and rewind. BLOCKBUSTER also began testing a
video-on-demand service in 2000 with its initial movies-on-demand trials. In
addition to competing with the video retail industry, video-on-demand competes
with other uses of cable and telephony infrastructure, such as the ability to
provide Internet access and basic telephone services, some of which may
provide higher returns for operators. In addition, video-on-demand providers,
including BLOCKBUSTER, may face competition from the studios, which are
considering implementing their own video-on-demand service.
Publishing
The consumer publishing business is highly competitive and has been
affected by consolidation trends. Recent years have brought a number of
significant mergers among the leading consumer publishers. The book superstore
has emerged as a significant factor in the industry contributing to the
general trend toward consolidation in the retail channel. There have also been
a number of mergers completed in the distribution channel.
The Company must compete with other publishers for the rights to works by
well-known authors and public personalities.
Online
The online industry is highly competitive and is rapidly evolving and
facing changing market conditions, including consolidation, alterations in
online advertising spending, slower growth in e-commerce and greater
difficulties in accessing public and private financing. Competition among
media and Internet companies pursuing online consumers is particularly
intense. The Company's online businesses compete for online consumers,
advertisers and content providers with leading news/information/entertainment
online sites, online portal services and broadcasters, traditional media,
retail and record companies and their respective Internet properties, and
I-23
online commerce companies. Rivalry for online consumers' attention and leisure
time, and associated advertising dollars and e-commerce expenditures by online
consumers, will continue to increase for all industry participants.
Web sites maintained by existing and potential competitors may be perceived
by online consumers, advertisers and content and other online vendors to be
superior to the Company's Web sites. In addition, with respect to MTVi's Web
sites, the major record companies, which control the vast majority of recorded
music, have started to engage in strategic arrangements, including business
combinations, with Internet and Internet-related businesses for the online
distribution and other commercialization of their music libraries and artist
relationships. As a result of these actions, the Company's online businesses
may not be able to maintain or increase online traffic levels on its Web
sites, which may negatively affect their advertising and e-commerce revenues.
Regulation
The Company's businesses are either subject to or affected by regulations
of federal, state and local governmental authorities. The rules, regulations,
policies and procedures affecting these businesses are constantly subject to
change. The descriptions which follow are summaries and should be read in
conjunction with the texts of the statutes, rules and regulations described
herein. The descriptions do not purport to describe all present and proposed
statutes, rules and regulations affecting the Company's businesses.
Intellectual Property
Domestic and international laws affecting intellectual property are of
significant importance to the Company.
WIPO Copyright Treaties. In 1996, delegates to the World Intellectual
Property Organization ("WIPO") adopted a proposed Copyright Treaty which will
take effect if ratified by 30 nations. As of December 2000, 22 countries,
including the U.S., had ratified the Copyright Treaty.
The proposed Copyright Treaty updates the Berne Convention, last revised in
1971, and addresses copyright protection for new technologies that have
emerged since that time. It is not possible to predict whether the Copyright
Treaty will take effect or how countries would implement the Treaty after
ratification. Because the Treaty includes important copyright protections for
the digital transmission of content, if ratified, the Treaty likely would have
a positive impact on the Company.
The U.S. implementing legislation, known as the Digital Millennium
Copyright Act ("DMCA"), which is effective whether or not WIPO is ultimately
ratified, affords important new copyright protections, including civil and
criminal penalties for the manufacture of, or trafficking in, devices that
circumvent copyright protection technologies such as encryption and
scrambling, and for the act of circumventing such technologies to gain
unauthorized access to a copyrighted work. The DMCA also amends the Copyright
Act by creating a new statutory license concerning certain rights related to
digital transmissions of sound recordings. The statute provides that new
statutory rates for each license will be set either through voluntary
negotiations between the interested parties or through Copyright Arbitration
Royalty Proceedings.
Copyright Term Extension. In October 1998, Congress passed legislation
extending the copyright term an additional twenty years. The extended term is
life of the author plus 70 years for authored works and 95 years for works-
made-for-hire. This extension puts the U.S. copyright term on par with the
European Community. Term extension should have a beneficial effect for the
Company over time, including with respect to important publishing properties
which otherwise would have passed into the public domain in the next several
years.
Compulsory Copyright License.
Multichannel Distributors Other Than DTH. The Copyright Act provides a
----------------------------------------
compulsory license for the retransmission of broadcast signals by
multichannel video distributors such as cable television, MMDS (Multipoint
Multichannel Distribution Systems) and SMATV (Satellite Master Antenna
Television)
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operators. The compulsory license rate paid to programmers for the
retransmission of distant broadcast signals by cable, MMDS and SMATV
operators is established by statute. There is no licensing fee for the
retransmission of local broadcast signals.
DTH. In November 1999, Congress enacted legislation to extend and reform
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the Satellite Home Viewer Act (SHVA). The original SHVA legislation created
a temporary compulsory license that allowed satellite carriers to import
distant broadcast signals to those homes that were unable to receive their
local broadcast signals. This distant signal compulsory license was set to
expire at the end of 1999. Through the SHVA legislation, Congress extended
the distant signal compulsory license until December 31, 2004, and set a
statutory compulsory license fee for these distant signals of $0.189 per
subscriber for superstations and $0.1485 per subscriber for networks. Up to
this point, the DTH compulsory license fee was set through negotiations and
binding arbitration. In addition, Congress created a new and permanent
compulsory license for the retransmission of local broadcast signals back
into the local market, the so-called "local-into-local" provision. Unlike
the distant signal compulsory license, the local signal compulsory license
is royalty-free.
First Sale Doctrine. The copyright "First Sale" doctrine provides that the
owner of a legitimate copy of a copyrighted work may use or dispose of it in
such manner as the owner sees fit, including by renting it. The First Sale
doctrine does not apply to sound recordings or computer software (other than
software made for a limited purpose computer, such as a video game platform)
for which the Copyright Act vests a rental right (i.e., the right to control
the rental of the copy) in the copyright holder. The repeal or limitation of
the First Sale doctrine (or conversely, the creation of a rental right vested
in the copyright holder) for audiovisual works or for computer software made
for limited purpose computers would have an adverse impact on the Company's
home video and game rental business. No such legislation is pending in
Congress at the present time. However, the Copyright Office is currently
conducting a study of the First Sale doctrine and it is unclear whether the
Office will recommend that Congress make any changes to the doctrine.
Cable Networks
Cable Rate Regulation. The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") directed the FCC to limit by
regulation cable system rates for the "basic service tier" ("BST") (including
retransmission consent and must carry broadcast signals and public,
educational and governmental channels) and the "cable programming service
tier" ("CPST") to a level not to exceed the rates that would be charged in the
presence of effective competition. Programming offered on a per-channel or
per-program basis is exempt from rate regulation.
Although all rate regulation of the CPST expired on March 31, 1999, local
franchising authorities continue to be responsible for regulating the BST. The
Company believes that cable rate regulation adversely affects its non-premium
cable program services which rely on cable operator license fee support, along
with advertising revenues, to maintain the quantity and quality of
programming. Rate regulation in this area tends to erode cable operator
incentives to invest in programming and particularly in start-up program
services.
Program Access. The "program access" provisions of the 1992 Cable Act
impose certain pricing and other restrictions on vertically integrated program
providers (those program services that are owned in whole or in part by cable
operators) with respect to the provision of their program services to
multichannel programming distributors, such as cable systems, SMATV systems,
MMDS operators and TVRO (TeleVision Receive Only) systems and DBS
distributors. Specifically, vertically integrated program services generally
are prohibited from entering into exclusive arrangements with cable operators
and from discriminating against cable competitors on programming price and
other terms. The program access provisions were intended to spur competition
to cable providers by facilitating the access of cable competitors to
programming owned by cable operators or their affiliates. The
Telecommunications Act of 1996 extended the program access rules to program
services in which common carriers that provide video programming have an
attributable interest.
The Company divested its cable systems in 1996 and, as a result, the
Company's wholly owned program services are no longer subject to the program
access rules. Legislation which would extend the program access
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provisions to non-vertically integrated program services, if enacted, could
adversely impact the Company's program services by reducing the Company's
flexibility to negotiate the most favorable terms available for the
distribution of its content. However, no such legislation is pending in
Congress at this time. The FCC, as directed by statute, will launch a rule
making proceeding, likely toward the end of the year, to determine whether the
existing prohibition against exclusive grants by vertically integrated program
services to cable operators should extend beyond 2002.
Programming. Under FCC rules, cable operators must eventually close caption
most of their programming on a phased-in basis, which began in January 1998.
As a practical matter, however, cable networks assume responsibility for these
closed captioning requirements. FCC rules also directed that all television
receiver models with screens 13 inches or larger be equipped with "V-chip"
technology as of January 1, 2000. This technology, which works in tandem with
television ratings (age and content markers), permits parents to block out
certain programming from their children. Most cable networks, including those
of MTVN and SNI, voluntarily encode their programming with television ratings.
In addition, the FCC in August 2000 adopted rules that require the top five
basic cable networks to air 50 hours per quarter of programming containing
audio descriptions of video for the visually impaired.
Broadcasting
General. Television and radio broadcasting are subject to the jurisdiction
of the FCC under the Communications Act of 1934, most recently amended by the
Telecommunications Act of 1996. The Communications Act prohibits the operation
of broadcasting stations except under a license issued by the FCC and empowers
the FCC, among other actions, to:
. issue, renew, revoke and modify broadcasting licenses;
. assign frequency bands; determine stations' frequencies, locations and
operating power;
. regulate some of the equipment used by stations;
. adopt other regulations to carry out the provisions of the
Communications Act;
. impose penalties for violation of such regulations; and
. impose annual fees as well as fees for processing applications and other
administrative functions.
Under the Communications Act, the FCC also regulates certain aspects of the
operation of cable television systems and other electronic media that compete
with broadcast stations.
License Assignments. The Communications Act requires prior approval for the
assignment of a license or transfer of control of a licensee. When passing on
an assignment or transfer application, the FCC is prohibited from considering
whether the public interest might be served by an assignment or transfer to
any party other than the assignee or transferee specified in the application.
License Renewals. Under the Communications Act, the FCC is authorized to
renew broadcast licenses for terms of up to eight years. The Communications
Act requires renewal of a broadcast license if the FCC finds that:
. the station has served the public interest, convenience and necessity;
. there have been no serious violations of either the Communications Act
or the FCC's rules and regulations by the licensee; and
. there have been no other serious violations that taken together
constitute a pattern of abuse.
In making its determination, the FCC may consider petitions to deny but
cannot consider whether the public interest would be better served by a person
other than the renewal applicant and competing applications for the same
frequency may be accepted only after the FCC has denied an incumbent's
application for renewal of license.
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Ownership Regulation. The Communications Act and FCC rules and regulations
also regulate broadcast ownership. The FCC has promulgated rules that, among
other matters, limit the ability of individuals and entities to own or have an
official position or ownership interest, known as an attributable interest,
above a specific level in broadcast stations as well as other specified mass
media entities. As discussed below, in August 1999, the FCC substantially
revised a number of its multiple ownership and attribution rules and clarified
some of those rules in January 2001. The FCC's various broadcas