Good day everyone, and welcome to the ViacomCBS Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Executive Vice President of Investor Relations, Mr. Anthony DiClemente. Please go ahead sir..

Good morning everyone. Thank you for taking the time to join us for our fourth quarter and full-year 2019 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO; and Chris Spade, our CFO.

Please note that in addition to our press release, we have trending schedules containing supplemental information available on our website. We also have an accompanying slide presentation that you can use in order to follow along with our remarks.

I want to refer you to the second slide in the presentation and remind you that certain statements made on this call are Forward-Looking Statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC.

Today's remarks will focus on adjusted results, reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release or on our website. Now, I will turn the call over to Bob..

Maverick and the next SpongeBob movies Sponge On The Run. So Viacom's CBS is a must have partner so all types of distributors, no question. We are also a must buy for advertisers. Our leadership in U.S. reached across linear and digital combined is clear. Our advanced advertising capabilities continue to scale.

They are in high demand and were a key driver of our domestic cable networks ad growth in Q4 and 2019. Among other things, this sets us up for a strong upfront.

Especially as we apply Viacom’s advanced ad business plus CBS’s massive audience reach, and as we continue to expand our premium digital video inventory, which is already amongst the largest in the industry. In content licensing tool ViacomCBS is a critical partner.

I mentioned before the extensive library of IP we now have, an importantly with a single content licensing sales force now in place, we can extract incremental benefit through the packaging of film and television.

Tailoring offerings to better meet client needs, helping take share, while simultaneously being able to support our owned and operated platforms in both linear and streaming.

In content licensing, we are also focused on continuing to unlock the value of our quickly scaling third-party studio production business, while there are some working capital headwinds in this business in 2020 this is a fundamentally profitable business that we expect to deliver $1.3 billion in revenue for the year with double-digit margins and virtually no risk.

It also allowed key franchises to reach more consumers and serve as a component of a multifaceted franchise development and growth strategy.

And since most of this business is essentially a rental model versus a sale, it also enables us to grow our content in IP library for the long-term in an economically efficient way, which means we are also building asset value.

Put it all together and you'll begin to see you why will you believe why ViacomCBS can become the most important content partner in the media ecosystem. Finally, our third strategic priority for 2020 is to accelerate our momentum in streaming. Let me explain how we are approaching the opportunities in the space.

Very importantly, it starts with building on a unique and strong foundation we already have in streaming, in ad supported, we have the leading free streaming TV service in Pluto TV with over 22 million monthly active users in the U.S. up 75% year over year and we expect to exit 2020 with approximately 30 million MAUs domestically.

In Pay our subscription offerings account for more than 11 million domestic subscribers up 50% year-on-year and we expect this to grow to approximately 16 million subscribers as we exit 2020. The growth we have achieved so far is overwhelmingly in the U.S., but we are making early strides to expand internationally.

Pluto is already in the UK, Germany, Austria and Switzerland and it’s launching in Latin America next month. On the Pay side, All Access is available in Canada and Australia and our Paramount plus [indiscernible] products are also live in numerous territories. But our streaming foundation is not just usage, it is also financial.

In 2019, our domestic streaming and digital video business, which includes subscription revenue and digital video advertising had approximately $1.6 billion in revenue. We see this as a key metric for ViacomCBS and anticipated growing between 35% and 40% this year with relatively modest incremental operating expenses.

Of course, the opportunity is much, much larger and pursuing that opportunity ViacomCBS will take a differentiated approach that builds on our running start, plays to our strength and fulfills unmet audience and partner needs.

Our going forward approach to streaming is rooted in the belief that the streaming world will evolve similarly to the linear world that means it will have three broad pay and premium pay segments and just like in a linear world, we will have streaming product for each. By having robust offerings in each segment.

We will also have the ability to migrate consumers across them through promotion and bundling, which creates advantages in subscriber acquisition retention and lifetime value. Our free new offering is Pluto TV and our premium pay offering is Showtime OTT.

To complete our portfolio, we will take CBS All Access and expand it to be a robust and compelling offering to serve the broad pay streaming segment. This offer will we affirm and expand the value of entertainment, news and sports content through on demand and live experiences for audiences around the world.

Built on the foundation of CBS All Access, including the technology, content and subscriber base, adding substantial content assets in film and television plus the power of world renowned brands to create in effect a combined house of brand product.

More specifically, we will add significant content from Nickelodeon, Comedy Central, MTV, BET and Smithsonian in addition to popular films from the paramount library, and we will do this at scale to the tune of approximately 30,000 episodes of TV and up to 1000 movies.

It is differentiated offering will provide the powerful combination of live linear via over 200 local CBS stations, plus on demand content spanning news, sports, film, drama, reality, kids, and more with a global platform and infrastructure from which to market and scale it.

Importantly know that we have designed this offering to be compatible with the evolving distribution landscape. We see it as a value creating opportunity to further broaden our partnerships with traditional distributors, akin to our recent Comcast relationship expansion to CBS All Access.

And we also see it as a robust offering for distributors in the broader OTT space including mobile. Obviously we will be sharing much more information in the month ahead, but we are already hard at work across check, content, branding, marketing and more to bring this evolve product to life, and we will soften launch the product later this year.

As we execute on each of our priorities for 2020, maximizing the power of our content, unlocking new value from our biggest revenue lines and accelerating our momentum in steaming we are positioning ViacomCBS to deliver significant shareholder value. At the same time, we are making non-operating moves to unlock meaningful value.

These include the divestiture of non-core assets like the sale of Black Rock, which we are in the market with as we speak. In addition to other opportunities, we are currently evaluating. The proceeds of these transactions will be used to delever our balance sheet, buyback stock and further strength in the financial position of the Company.

With that, I'll turn it over to Chris to report on our fourth quarter and full-year results, and to provide detailed 2020 guidance..

Thank you, Bob, and good morning everyone. It is great to be here for our first ViacomCBS earnings call. As you know, our merger was effective December 4th, so our fourth quarter and full-year 2019 results largely reflects with Viacom and CBS would have delivered as separate company.

2020 will express the power of our combination with some of the greatest assets in media and an efficient growth strategy underway.

We are strongly equipped to capitalize on our position as a preeminent global content company, and by maximizing free cash flow from our traditional businesses, while prudently investing in our growth areas we will create long-term value for our shareholders and our stakeholders.

First, I'm going to outline our reporting segments and key revenue types. Then I will give you more details about our fourth quarter and full-year 2019 results. Finally, I will provide further context about our 2020 guidance and capital allocation strategy.

As you can see in our earnings presentation ViacomCBS comprises four business segments, TV entertainment, cable networks, filmed entertainment and publishing.

We are also presenting five key revenue types, advertising, affiliate, content licensing, theatrical and publishing and we are providing a breakdown of revenue by type within each of our business segments.

In addition, given the increased prominence of our streaming services, we are giving greater visibility into their performance by providing domestic revenue, subscribers and monthly active users for our fast-growing streaming and digital video business. Now let me give you more details about our fourth quarter results.

Q4 of 2019 was a transitional quarter. As a result, we had several merger related adjustments.

They include $589 million in programming charges, resulting from an evaluation by new management of our content strategies for the now combined company, $268 million in restructuring charges related to our synergy initiatives and $191 million in other merger related costs.

In addition, our fourth quarter operating results were primarily affected by several items, including declines in the pay TV universe and legacy Viacom rate resets, lower political spending following our record results in 2018, investments in and programming and the timing of content licensing sale.

Importantly, as Bob mentioned, we believe these areas of impact will be substantially mitigated in the combined company as we evolve our strategy to benefit from our collective asset base. We also delivered growth in a number of key areas during the fourth quarter, affiliate revenue increased 1% despite declines in the pay TV landscape.

The growth was driven by re-trans and reverse comp, which was up 25% and our subscription streaming revenue, which included a record quarter for subscriber growth at CBS All Access and a record month in December for streaming signups at Showtime.

At the same time, our domestic cable network advertising revenue was up at strong 9% benefiting from Pluto, which was an integral part of our advanced advertising offering. So you can see the advantages of our streaming strategy across our company as these services continue to scale on a full-year basis.

On a full-year basis our 2019 revenue showed healthy gains. We delivered total revenue growth of 2% with increases in advertising affiliate and content licensing.

Advertising was up 2% driven by CBS and broadcast and Super Bowl 53 and the NCAA Final Four in championship game as well as strong growth in digital advertising led by Pluto and CBS All Access, this growth was somewhat offset by FX headwinds as well as lower political advertising.

Affiliate revenue grew 3% benefiting from a 20% increase in re-trans and reverse comp as well as strong growth in subscription streaming revenue which offset linear declines in the pay TV ecosystem.

And content licensing was up 5% driven by growth in production for third-party streaming platform from our CBS and Paramount television studios as well as the licensing of our library programs.

In addition, our domestic streaming and digital video revenue in 2019 which includes subscription revenue and digital video advertising increased approximately 60% to $1.6 billion with growth across Pluto, CBS All Access and Showtime OTT.

Our solid end of year performance across these three key services gives us strong starting point for 2020 and provides the necessary momentum to scale the future growth of these businesses. Turning to free cash flow. Our 2019 adjusted free cash flow was 1.2 $4 billion, which excludes $366 million of restructuring and merger related payments.

These results were affected by higher content investments across our businesses, including more original series produced for our own platform as well as for third-party and the expansion of our film slate. In addition, we had higher cash taxes of $437 million in 2019 including $250 million.

That was driven by tax regulations finalized in 2019 and the absence of the cash tax benefit that we had in 2018. Now let me go into more detail about our 2020 outlook.

As you heard in our first full-year of ViacomCBS, we expect to grow across key metrics with total revenue up mid single-digit adjusted OBIDA in the range of 5.8 billion to 6.1 billion and adjusted diluted EPS from continuing operations in the range of $5.15 to $5.50 cents.

Our 2020 outlook also assumes the realization of about $250 million of our $750 million of cost synergy targets before consideration of onetime cost to achieve them. Our new target came after five months of detailed work on our integration program.

We now see that we will achieve more than the $500 million that we identified during our due diligence period from incremental opportunities across areas where Viacom and CBS have the most overlap. Namely duplicative organizational areas, vendor sourcing, and to a lesser extent real estate consolidations.

We expect to achieve our cost synergy target over three years with an incremental $350 million in 2021 and the balance of $150 million to be substantially realized in 2022.

For 2020 adjusted free cash flow, we have line of sight to significant improvements, which will enable us to achieve adjusted free cash flow in the range of $1.8 billion to $2 billion.

The growth in free cash flow will be fueled by the key revenue drivers we see this year, including re-trans and reverse comp as well as political advertising from the presidential election.

We will also drive free cash flow by strategically reprioritizing our content spending to high growth areas across our businesses, which will substantially improve our working capital. And we anticipate a cash benefit of approximately $200 million from the $250 million in cost synergies that we expect to deliver this year.

In 2021, there are several items that will drive approximately $500 million of additional free cash flow. They include the tailwind from continued strategy driven working capital improvements, further realization of merger integration synergies, and the benefit of having the Super Bowl partly offset by the absence of political.

Now let me give you more detail on our 2020 revenue drivers. We expect to deliver increases across all four of our segments and all five of our revenue types in 2020. In advertising, excluding the Super Bowl and political spending, we anticipate domestic advertising revenue to grow in the low-single digits, as we go to market with expansive U.S.

reach across linear and digital platform, scaled advanced advertising and ease of buying across our portfolio. In addition, political spending is shaping up to be a record, which will further lifts our results.

In affiliate, we expect our domestic revenue to grow in the low-single digit, as we go-to-market with our unified broadcast and cable portfolio, we see continued strength in re-trans and reverse comp and our subscription streaming services on a combined basis, which will more than offset pay TV pressures.

In content licensing, 2020 is shaping up to be a good year.

We will benefit from our deal to license South Park and we will see more opportunities to leverage our vast library bundle our film and TV programming for domestic and international licensing and ramp-up production for third-party backed by the growing capabilities of our studios, as others pull back from the marketplace, leading to greater demand for premium content.

In theatrical, we are thrilled with Sonic and we feel great about our upcoming expanded film slate. And in publishing, we have a strong lineup of titles from bestselling and big name authors including Stephen King, Jerry Seinfeld and Ruth Ware. Looking at metrics beyond our reported financials.

We are guiding on domestic streaming and digital video revenue, which we expect to increase by 35% to 40% in 2020, off a base of $1.6 billion in 2019. This assumes domestic streaming subscribers reach approximately $16 million and domestic Pluto MAUs reach approximately $30 million by the end of the year.

It is important to review our 2020 quarterly cadence. This year's first quarter will be compared against last year's results which included the Super Bowl. In the second quarter, we will realize the licensing revenue for South Park.

In the third quarter affiliate renewals that we have already completed will take effect, which will give a lift to our revenue and in the fourth quarter we anticipate we will have what is already looking to be at record performance for political advertising. Turning to capital allocation. We ended 2019 with $18.7 billion of debt.

When you take into account the $750 million a full run rate merger related cost synergies, our debt to adjusted OIBDA ratio calculates to three times excluding the synergies, it was 3.4 times.

Looking forward, we remain committed to our investment grade in rating with a target of achieving a leverage ratio of 2.75 times taking these synergies into account. As Bob noted, we continue to make progress on the sale of Black Rock. We have completed the initial preparation work with CBRE and are in the market.

We anticipate the sale to close in 2020 and we expect to use the proceeds from this transaction for a mix of debt reduction and opportunistic share repurchases. Since the merger closed, we have declared a quarterly dividend of $0.24 per share and repurchased 2.5 million shares of our stock.

As the year progresses, we will continue to evaluate the use of excess cash for opportunistic share buy backs. In regards to M&A, we remain focused on our transformational ViacomCBS deal and we will only consider acquisitions that are creative and tightly linked to our strategy.

This disciplined approach is exemplified by our agreement - by our 49% stake in MIRAMAX for $375 million, which gives us exclusive long-term distribution rights to MIRAMAX’s catalog of 700 titles, including a number of award winning films and will enable us to further maximize our programming library.

So in summary, ViacomCBS is well positioned to grow for the long-term. We are maximizing cash flow from our legacy businesses while driving growth in streaming and expanding our reach to new audiences.

We now have an even stronger position in the Pay TV landscape as well as in advertising, particularly in advanced advertising and in 2020 we will begin to reap the return from the investments we have already made, especially in film and our streaming offerings.

So as we continue to execute on our growth strategy, we will grow free cash flow, capitalize on the benefits of our combination and create value for shareholders. We are poised a strong year in 2020 which will deliver growth across our unified Company and set us up for consistently strong performance in the years to come.

With that, we can open the line for questions..

Thank you. At this time, we will be conducting a question-and-answer session. [Operator instructions] Thank you. And our first question will be coming from the line of Alexia Quadrani with JP Morgan..

Hi thank you very much. Just two questions. First, looking at your guidance for 2020 that you have provided.

I'm curious about how much conviction you have in those numbers, and you have had a little bit of time since the merger closed, and I'm wondering if you feel that this is really a conservative number and you know trying to get a sense if we are at the bottom here for the estimates for 2020. And then I have a follow-up..

Yes, sure. Alexia. This is Bob. We have done a lot of work since the close and we have absolute conviction in our guidance, as Chris articulated in her prepared remarks as we look at 2020, we see specific catalysts as the year unfolds.

So yes, we feel very good about our guidance on the top-line, on the earning side and on the adjusted free cash flow side..

And then just a follow-up on your comment about investment spending, content spending in general. You have obviously a lot of assets that you are investing in with CBS All Access, Showtime.

You know just really focusing more on Showtime, I guess? How do you balance where are you going to put the content spending or investment spending in? And how are you thinking about Showtime specifically, in terms of what is the right amount of content spends for that service?.

Yes. So as you said it was actually two parts - that makes a three part question. Let me take Showtime and then talk about the general question. Look, over the years Showtime has made strong progress elevating its brand, deepening its original programming lineup, expanding its reach through OTT.

That said, it was a working capital headwind for the company in 2019 and the time is right to improve ROI by evolving that programming mix. To be clear, Showtime will continue to be an important home of scripted shows like Billions, Homeland, The L Word, Penny Dreadful and the investments we made in 2019 will clearly pay dividends in 2020.

At the same time, Showtime does have traction in other formats shows like [indiscernible] and Circus and we see an opportunity to lean more in this direction. And there are new ViacomCBS assets to bring to table starting with RuPaul and with more to come.

Also, Bellator Alignments a natural fit with Showtime combat sports positioning and I believe a compelling value equation opportunity in its own right. And the show BEP plus rebranding that we talked about, we think that is a home run in attracting incremental subs. So it is really a multifaceted approach to improving content ROI here.

Beyond that, it is worth noting that there are some market dynamics in 2020, which should be positive for Showtime. As you know, some competitors have lost key distributors. That should help Showtime takes share, particularly in linear.

As we mentioned OTT momentum has been picking up, strong sub growth in the past two months and slightly longer-term ViacomCBS broader streaming strategy will be additive to Showtime subs overtime as it introduced to the new consumer funnel.

So we are excited about the next leg of journey of this culture defining brand, and we look forward to it growing its contribution to ViacomCBS.

Now, just quickly in terms of how we decide where to put the product, let me start with a high level reminder of what our strategy is and that is to maximize the value of our content by reaching the largest addressable audience. And that is across every segment of platform using our assets and others.

There is four reasons why this is the right strategy for ViacomCBS. First, it makes the most of our greatest strength, which is our content engine and our place in the content industry, which is an industry that is growing.

Second, it allows us to build on our leadership positions across segments, including genres, demos, formats, while giving us new opportunities to grow brand, franchises, and audience. Third, it allows us access to the largest potential revenue pool and that is key to balancing adjusted free cash flow delivery and asset value creation.

And fourth, it gives us flexibility to adapt as the market and consumer habits continue to evolve. So how do we decide what goes where? Let me start with a key fact. The depth and strength of our talent base means we make must watch content for all platforms.

That said, we do have to assign where things go and we have three filters at guide that, we look at financial impact. We look at strategic impact and we take into account some partnership considerations. Now as you think about that, there are several other things I want you to keep in mind that starts with where we have strengths.

Whether it is a franchise, maybe mission impossible or a genre like procedurals. You will increasingly see us not licensed exclusively to third-parties in the U.S. We do look at these things across the house and we have a content council in place, help evaluate opportunities and make recommendations.

And we look at every content decision as just one window in time. These are assets we own and we expect to monetize them in different ways, in different places overtime. Quickly an example, Nickelodeon, you know it is number one kids brand, big hits like SpongeBob.

The reality is our linear platform only reaches 40% of kids today, but we can reach beyond that.

So what we are doing as an example with Nick, is we are putting a spinoff of SpongeBob on Netflix that will drive direct earnings, but also connect these characters with new fans, benefiting the franchise and related businesses like consumer products or future theatrical films.

And also maybe idea reverts back, because remember it is a rental, not a sale. So, but we give a lot of thought to this. We feel great about our strategy both specifically for Showtime and in general and you will see us deliver value with it in 2020 and beyond..

Thanks Alexia. Operator, we will take our next question..

Your next question is from the line of Jessica Ehrlich with Bank of America Securities..

Thank you. I have two questions. So the first one is on advertising, which you both alluded to as a growth area. So now as Joanne Ross is one of the best, if not the best advertising executives in the business and just can gives us more color on how different is your approach to market with all the networks under one advertising umbrella.

As you said, selling across traditional and targeted advertising.

Are you confident you can accelerate advertising growth overtime?.

Sure. Jessica. Look I'm extremely excited about our domestic ad picture. Let me start by commenting on the market. As you know it remains very strong both in Q4, now in Q1 which scatter premiums in both broadcast and cable with 25% to 35% above upfront.

Broadly speaking, the issue remains supply not demand and related to that we are all seeing strong and growing demand for premium digital video. Now if you look more at our performance, particularly in Q4, which I think is helpful to give you insight into where we see this going. Overall domestic ad revenues were flat.

Now that is driven in part by the fact that there was not a lot of political ad spend in the fourth quarter versus the fourth quarter of 2018. That was a midterm election year. And of course, we have a little decline in impressions but very strong pricing. But the real thing to look at is domestic cable at 9% growth with Pluto.

That is the strategy we have been pursuing over the last year and a half. It is a strategy of combining linear with our advanced marketing solutions. It is really resonating in the market and as promised it is delivering robust growth despite impression headwinds. It is allowing us to dramatically outperform all cable competitors.

And it is worth noting that AMS is now almost a fifth of our revenue in the quarter, including with CBS. So this is a real piece of business. Looking forward, it is why we are so excited about our position in the market as ViacomCBS, we are now the clear number one leader. We are number one on every download of linear.

And our AMS offering is even larger as we add CBS granted digital video, including CBS All Access, CBSN, which has grown super fast and more, which means our combined linear AMS sell something we know how to bring to market is even more robust. And as you pointed out, Jessica, our ad sales integration is moving very quickly.

I'm thrilled with Jo Ann's leadership. John Haley is the COO who knows the advanced ad space. I spent last weekend with the senior team. They are totally pumped and with a bunch of clients and I'm confident we are going to be extremely well received in this next upfront..

Thanks Jessica. Operator, let's take our next question..

Next question is from the line of Michael Morris with Guggenheim Securities..

Thank you. Good morning guys. Two questions. One on streaming and then one on the cable affiliates. First on streaming. Bob you talked about the expanded service and a little bit of a time between now and when that will be available to consumers.

Can you just talk about sort of what the hurdles are to having that up? And also, just any sense of urgency in terms of time-to-market given how competitive that space is becoming over the course of the year? And then second on cable affiliates, in the fourth quarter revenue was down about 8%.

Can you break down for us a little bit what the drivers were there? There is a number of pieces of Showtime in the legacy Viacom networks. You used to have some content in there, some VOD relationships. Maybe just help us with what the apples-to-apples comparison is? And how to think about those drivers into the New Year. Thanks..

Sure. Let me take the first one. And then Chris will take the second one. So look on streaming again. We are very excited about our strategy. We believe this combination of free, broad pay and premium pay is where the market will go.

And the fact that we have products in two of them, which is free and premium and very quickly we will get in the market with the third. Really, the middle one, we think makes a lot of sense. In terms of what we need to do, the reason we are so excited about this is it is not vaporware. We are filling from a position of strength.

As we said, we have about $1.6 billion in domestic streaming and digital ad revenue in 2019, that is up 60% from 2018. We have MAU's at the end of 2019, at $22 million, actually more than $22 million, and over $11 million domestic subs in pay. So that is a real foundation and we are taking that and we are building on the experience we already have.

We have benefit in terms of lessons learned in subscriber acquisition, insurance management. We understand what gets consumed in free and pay cause we have been looking at it for awhile. We are not launching something new, your question on tech.

We are working off of proven platforms and models and we know how to work with partners both in the traditional and OTT space. So when we look at our plan for 2020 in our guidance, 30 million MAU's for Pluto domestically and approximately $16 million subs for U.S. pay offering with streaming digital revenue growing 35% to 40%.

We feel very good about that. And again, we are in the market today and you are going to see us get deeper into them as the year goes on. So make no mistake. ViacomCBS would be very much in this game..

Hi Mike, it is Chris. Thanks for the question. So relative to the performance for cable affiliate revenue, Q4 we did see some Pay TV headwinds and we saw legacy Viacom rate resets. Looking ahead for 2020, we are going to market with our combined cable and broadcast portfolio.

We are seeing strong streaming performance and especially in Q1 we have Homeland and we have Star Trek the card out there. We also have new re-trans and reverse comp fields coming up later this year, that we feel very good about 2020 and we also have the headwinds that we expect and the market expects to happen in our 2020 guidance..

Okay. Thanks Mike. Operator, let's take our next question please..

Sure. Our next question is from the line of Ben Swinburne with Morgan Stanley..

Thanks good morning. Bob can you - if you just sort of step back, help us think about the programming costs growth of the content, investment appetite the company has over a longer period of time.

And I'm asking, I can't tell, but I think last year the combined companies cash spend on programming looks to be up, I don't know, 15% to 20% something like that. I'm not sure if that is exactly right, but it was up a lot.

I know you are talking about reallocating, reprioritizing, maximizing content ROI, but can you just help us understand, if you look at the entire company over a multiyear period, what is the right level of investment growth you think the business needs to achieve your goals? So I think that would help the market understand sort of where the longer term cash flow opportunity is in the business?.

Yes. So, thanks. So our strategy is about taking advantage of this now larger portfolio of assets to improve content, ROI and ensure that we are investing against growth opportunities and maximizing share and margins in more mature businesses.

You see that split in terms of linear television where as I said, our Comcast content spend is essentially flat 2019, but through grouping of networks, through shifting of mixes, we are going to get more effectiveness out of that. And again, we have a proven team that is getting more responsibility in that space. So, I feel very good about that.

At the same time, we are prioritizing investments in places where there is clear growth that is in streaming, that is in a Paramount this year as we continue to ramp the slate a bit and in the third-party studio business, which is a significant business with growth, essentially risk-free, and long-term asset value.

So, that is how we are looking at it overall and it is the combination particularly managing the mature businesses much more tightly that allows us for much more modest cash content, expense growth, as on a going forward basis, certainly 2019 to 2020, and then onwards than you have seen in the last couple of years.

So that is how we are thinking about it. Again, I look at the combined asset base of this Company. We have more than enough resource base to work with and we are absolutely going to get more out of it..

Okay. Thank you very much..

Operator, we will take our next question..

Our next question, our next question is from the line of Michael Nathanson with MoffettNathanson..

Thanks. I have to one similar bench question, which is at CBS legacy is a big source of pride about the number of original shows they make every year, you know it is about 94 shows last quarter. That is a doubling from like five years ago.

And I wonder, you know now you are one company, is there a different financial lens you are bringing to it, because you don't see the benefit of all that expense growth in the CBS P&L.

So I wonder now that you are in from outside, what are you doing differently financially to assess the ROI of that massive increase in spending of CBS?.

Yes, thanks. So when you look at the CBS studio as an example, there is really two components of it. There is product it is making for its owned and operated network. In that case CBS and the product it is making a for third-party clients, which were a range of different clients. The expense growth and cash obviously covers both.

As we look at it on the CBS network side, I think it is worth noting that in Q4 and continuing number one, most watched network in prime, five of the top 10 programs, five of the top six freshmen series. So the network continues to perform strongly.

That I was with Kevin last week and we were talking about CBS and they are actually spending less on pilots this year, because they feel very good about where the network is and therefore are able to be more prudent.

At the same time, whether it is the CBS studio or the Paramount studio, we continue to have ramping demand in that third-party studio production business.

Yes, that consumed some cash certainly in 2019, there is a bit of a cash headwind in 2020, but I want to reiterate it is a difference business, it is fundamentally profitable, it is low risk and we do build long-term asset value. So on a cash basis, we are continuing to invest a bit in that, but it is really a separate business.

So but rest assured in general, we are looking at everything. We talked about Showtime, we are looking at CBS, we are doing a lot of work on the linear cable side. And as we are doing all that, we see a lot of opportunity in the streaming side and we are focused on improving content ROI and getting more out of this asset.

And that is what we will deliver in 2020..

Also, Michael I Just wanted to supplement that, if you look at the TV entertainment segment, our new segment, which is largely the CBS branded businesses, we did grow high single-digits for the full-year 2018 to 2019, 8%, which is a strong performance.

So from the standpoint of it, as we think about the CBS businesses going forward under the umbrella of the combined company now we will just even be further able to monetize our programming investments..

Okay.

And then one Bob international, you mentioned Pluto and the expansion, but what are you thinking about broadening out the subscription based businesses internationally? And when we have decisions?.

Sure. Look, streaming is clearly a global priority and our global operating footprint, which includes linear reach, content ownership, on the ground resources and relationships are unquestionably a valuable go-to-market advantage.

We are today in the early stages of entering international streaming on the free side, Pluto is already launched and growing rapidly in UK, Germany, Austria and Switzerland. Earlier this month, we announced that Pluto will launch in Latin America, Spanish speaking Latin America at the end of March, Brazil later.

And we will offer 80 channels in Latin America by year-end. Likewise, Noggin is also up in Latin America and we just announced that Apple is launching it in 40 international markets. CBS All Access is already in Canada and Australia and we have a Paramount plus service streaming in parts of Europe and Latin America where it has both TV and film.

So we are early days, but we are absolutely working the international space and we will update you as that plays out later in the year..

Thanks, Michael. Operator, next question..

The next question is from the line of Rich Greenfield with LightShed Partners..

Hey guys. Thanks for taking the questions. I got a couple of questions and a couple of follow-ups. First your peers are have been doing some uneconomic deals. If you look at what ESPN just did with SEC and UFC.

Wondering as you think about kind of the NFL negotiation that will play out this year, sort of are you prepared to do something that is "uneconomic"? Two on Nickelodeon, I think your ratings were down somewhere around 20% last year and it looked like it got a lot worse in Q4 and into early 2020 since the launch of Disney Plus.

Just wondering kind of what could you tell us about kind of your plans for the Nickelodeon network? And that sort of ties into the [Charlie Ervin] (Ph) question, which is, DISH was pretty clear yesterday and their call that if your ratings are down sharply, they are going to look for reductions in rate or they are going to simply drop programming, which they have been doing at an increasing rate.

Just wondering kind of how you think about the negotiation with DISH, which I think is coming up pretty shortly? And then Chris, I think on the question that somebody asked about cable affiliates being down 8%, you kind of talked about what was in the press release, but could you give some clarity of like what were subs down? What was the rate reset? Just adding some actual numbers to the decline would be helpful.

I think that is what the follow-up was trying to ask..

Lot in there Rich, but alright, let's do this quick. So the NFL, the NFL and CBS are longstanding partners as a combined company by ViacomCBS is even better positioned to deliver value to that franchise.

You know the NFL values are broadcast reach and high quality production and you know that the combined company adds young adult reach, both for linear and streaming as well as international capabilities, both of which are key to NFL development. And that is important to the league.

We are going to do some stuff around the NFL in the months ahead as we prep for Super Bowl 55 leveraging our platform. That is obviously a February 21 event. And to be clear, as a combined company, we absolutely have the financial resources to get a deal done and we do believe it is important to the company and I feel good about getting a deal done.

When it gets done? I don't know. We will see. That is really more of the NFL call on timing. With respect to Nickelodeon, if I look at our domestic cable portfolio. Overall, we actually have a pretty solid audience performance, 13 of our networks grew share in Q4 including Comedy, BET, Paramount Networks, Smithsonian.

Actually we see sequential improvement Q1 to-date the whole portfolio is up about 4%.

Nickelodeon continues to be a work in progress, it is far in a way number one in the space, but that is also why - and we do feel good about the slate of shows coming, but we have pivoted to a multi-platform variance of Nickelodeon, as part of building that brand for the future.

That combines, what we are doing in the linear network, what we are doing in our call it over the top space, what we are doing with third-parties and then how we are monetizing that broader audience, including through things like consumer products and for that matter film. So we are really attacking, the Nickelodeon opportunity in a multifaceted way.

I feel good about the progress Brian Robbins and his team are making. I feel good about the partnership with Paramount with the next SpongeBob movie coming in Q2. By the way we did a preview of that movie SpongeBob out of water last weekend and people are feeling very good about the film.

Obviously the NIC network, and our consumer products team are totally behind it. So Nick has a bright future and finally I would say back to the streaming discussion in our broader pay product, that is a house of brands Nickelodeon is going to feature prominently in that.

That is going to be good for the streaming product and it is going to be good for the Nickelodeon brand. Largely - I'm not going to comment on any particular renewal other than to say we have a track record of getting fields done. We have a stronger portfolio than ever, including leverage.

We haven't pulled with some of our clients and therefore, I feel good about our position..

And then Chris..

Thank you for the follow-up. So for the cable affiliates, the additional thing I will point out is that, what we saw happen in Q4 for cable affiliate trends was similar to what the industry experienced.

The other thing I will point out in general that as we look at Viacom and CBS is two separate companies and unifying to ViacomCBS, the pay TV landscape has been a headwind. But when we look at how our quarters will build, Q4 we had a tough quarter, as we head into Q1 and we think through Q2 our momentum will build.

So Q1 we are going to see some more of the affiliate headwinds we have experienced. We also will have some timing of licensing considerations and we do, as I alluded to earlier, I have some big shows in Q1 like Star Trek Cards and Homeland that are strongly performing for streaming and Q1.

But then as we go towards Q2, we will have the licensing delivery of South Park and momentum will build from there. So again, we will see the full power of ViacomCBS in 2020 and beyond. And I hark in back to Alexia's question that we have strong conviction in the guidance.

All of this is contemplated in the guidance and we will see momentum build as we go into 2020 and beyond..

Thanks, Rich. Operator, let's take our next question please..

Next question comes from the line of John Hodulik with UBS..

Great, thank you. Just a couple of follow-up to those questions. First I guess for Chris and maybe you just answered it, but the 2020 guidance contemplated an inflection in that U.S. cable affiliate trends.

And if so, does it include any new carriage from the virtual distributors? And Any updates there you can provide? And then maybe for Bob, you talked about modest increases in expenses as you launch the new broader D2C platform.

I mean, obviously you guys are starting from a different place, but, there has been some real dilution that comes with these types of launches. Any additional color on the size or maybe the categories of spending you might have there? Thanks..

Thanks John. It is Chris. So for 2020 guidance, we do assume similar to the industry the headwinds continuing, but from the standpoint of our guidance, we are expecting momentum to continue. So relative to what we are seeing back to your [VMDPT] (Ph) question, those deals don't come up until later in the year. So the effect on 2020 will not be that big.

It would really be an impact to 2021. And we feel very good about our positioning as we go to look at renewing those deals..

Let me add that and then hop to your streaming questions. So look, if you look at the U.S. affiliate landscape, there is no question that ViacomCBS is among, if not the most important supplier to linear. Remember we are number one on every demographic in linear. We have must see content in news, in sports, in entertainment.

And we have a model that gets deals done including having a range of partnership leverage, whether that is in advanced ad sales, doing more and more working with them in the broadband space, we started that with Pluto, Comcast just did that with All Access sets up box too. So we have a lot to work with there.

There may be winners and losers in the space, but we feel good about taking share and getting deals done. And again, you will see that track out in year we have already had a positive experience with one very large MVPD, who is not a walk in the park and negotiate with. Onto streaming. Two things I would say in relation to your question.

One is remember we are in this business today both in free and in the various pay segments we have been putting original content. You look at what All Access did with the Card. So it is not like we are ramping from nowhere. In fact, we are building momentum.

And in particularly as we do that and this is definitely from the Pluto side, remember, Pluto is very capital efficient. That is essentially a rev share model, not a invest in content and build it out. So as we launch in places like Latin America, you don't have this big working capital headwind. You have a model that scales with the business.

So, I'm very excited about our streaming plan. The financials are absolutely built into the guidance and the incremental capital is modest certainly by standards of what some other folks are doing. .

Okay thanks..

And with that, we are kind of running a little over. So I want to thank you for your questions. In closing, we couldn't be more excited about the road ahead, one where we will continue to unlock the power of this incredible combination, capitalizing on our position is one of the largest content producers and providers in the world.

We believe becoming the most important partner in the media ecosystem, creating valuable new businesses. We have the assets, we have the plan, we have the team, we will execute and we will deliver for you.

As we do know that we are 100% focused on shareholder value creation, we are committed to providing the transparency and disclosure you need to understand and track the value we are creating.

And before I sign off, I also want to thank the employees of ViacomCBS who have brought this company together in under three months and who will power our exciting future. And thanks to all of you for joining today. Thank you for your support. We look forward to talking to you soon..

Thank you everyone. That concludes our earnings call..

Thank you. You may now disconnect your lines at this time. Thank you for your participation..