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Article by DailyStocks_admin    (07-08-08 08:06 AM)

The Daily Magic Formula Stock for 07/08/2008 is Viacom Inc. According to the Magic Formula Investing Web Site, the ebit yield is 10% and the EBIT ROIC is >100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


Dailystocks.com makes NO RECOMMENDATIONS whatsoever, and provides this for informational purpose only.

BUSINESS OVERVIEW

BACKGROUND

Viacom Inc. (together with its consolidated subsidiaries unless the context otherwise requires, the "Company" or "Viacom") is a diversified worldwide entertainment company with operations in the following segments:

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CABLE NETWORKS: The Cable Networks segment consists of MTV Music Television®, Nickelodeon®, Nick at Nite®, VH1®, MTV2™, TV Land®, Spike TV®, CMT®: Country Music Television™, Comedy Central®, BET®, BET Jazz™, and Showtime®, among other program services.

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TELEVISION: The Television segment consists of the CBS® and UPN® Television Networks, the Company's 39 owned broadcast television stations, and its television production and syndication business, including King World® Productions and Paramount Television™.

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RADIO: The Radio segment owns and operates 183 radio stations in 41 United States markets through Infinity Radio®.

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OUTDOOR: The Outdoor segment through Viacom Outdoor® displays advertising on media, including billboards, transit shelters, buses, rail systems (in-car, station platforms and terminals), mall kiosks and stadium signage.

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ENTERTAINMENT: The Entertainment segment includes Paramount Pictures®, which produces and distributes theatrical motion pictures; Simon & Schuster , which publishes and distributes consumer books under imprints such as Simon & Schuster®, Pocket Books®, Scribner® and The Free Press™; Paramount Parks®, which is principally engaged in the ownership and operation of five theme parks and a themed attraction in the United States and Canada; and movie theater and music publishing operations.

For the year ended December 31, 2004, contributions to the Company's consolidated revenues from its segments were as follows: Cable Networks 29%, Television 38%, Radio 9%, Outdoor 8% and Entertainment 18%. Intercompany revenue eliminations, as a percentage of total revenues, were 2% for the year ended December 31, 2004. The Company generated approximately 16% of its total revenues from international regions in 2004. For the year ended December 31, 2004, approximately 60% and 23% of total international revenues of $3.7 billion were generated in Europe and Canada, respectively.

During 2004, the Company announced that it would pursue the tax-free split-off of Viacom's approximately 81.5% interest in Blockbuster Inc. ("Blockbuster") (NYSE: BBI) through an exchange offer. In 2004, the Company completed the exchange offer under which Viacom accepted 27,961,165 shares of Viacom common stock in exchange for the 144 million shares of Blockbuster that Viacom owned. Each share of Viacom Class A and Class B Common Stock accepted for exchange by Viacom was exchanged for 5.15 shares of Blockbuster common stock, consisting of 2.575 shares of Blockbuster class A common stock and 2.575 shares of Blockbuster class B common stock. Blockbuster is presented as a discontinued operation for all periods presented herein.

During 2004, the Company acquired 97.8% of VIVA Media AG, a youth entertainment media company based in Germany, for a total purchase price of $393.6 million. In December 2004, the Company acquired a 10% interest in Spanish Broadcasting System, Inc. ("SBS") and warrants for approximately another 5% interest in SBS, in exchange for the Company's 93.3 FM radio station serving the San Francisco market. Also, in December 2004, the Company announced its agreement to purchase CBS Sacramento, California affiliate, KOVR-TV 13, for $285 million, subject to regulatory approval.

For additional information about significant acquisitions see Note 5 to the Consolidated Financial Statements.

As new technologies for delivering content and services evolve, the Company is pursuing opportunities to distribute content to consumers through various media including the Internet, mobile devices, video-on-demand, interactive television and video games. In December 2004, the Company acquired the remaining outstanding interest that it did not already own in SportsLine.com, Inc., a leading online sports media company, and, in January 2005, announced its strategic partnership with Microsoft to extend the reach of MTV Music Television, VH1, CMT: Country Music Television and Comedy Central across a number of digital entertainment products and platforms.

The Company competes with many different entities and media in various markets worldwide. In addition to competition in each business, the Company competes for opportunities in the entertainment business with other diversified international entertainment companies such as Time Warner, News Corporation, Sony Corporation, Clear Channel Communications, The Walt Disney Company and NBC Universal.

As of March 1, 2005, National Amusements, Inc. ("NAI"), a closely held corporation that owns and operates approximately 1,425 movie screens in the United States ("U.S."), the United Kingdom ("U.K."), South America and Russia and manages 21 movie screens in the U.S. and the U.K., beneficially owned Class A Common Stock of the Company representing approximately 71% of the voting power of all classes of the Company's Common Stock, and approximately 12% of the Company's Class A Common Stock and Class B Common Stock on a combined basis. Owners of the Company's Class A Common Stock are entitled to one vote per share. The Company's Class B Common Stock does not have voting rights. 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 was organized in Delaware in 1986 for the purpose of acquiring the stock of a predecessor. The Company's principal offices are located at 1515 Broadway, New York, New York 10036 (telephone 212/258-6000).

VIACOM BUSINESS SEGMENTS

Cable Networks (29%, 27% and 25% of the Company's consolidated revenues in 2004, 2003 and 2002, respectively)

The Company owns and operates advertiser-supported basic cable television program services through MTV Networks ("MTVN") and Black Entertainment Television ("BET") and premium subscription television program services through Showtime Networks Inc. ("SNI") in the U.S. and internationally.

Generally, the Company's cable networks, which target various demographics, are offered for a fee to cable television operators, distributors of direct-to-home satellite services ("DTH") and other multichannel distributors. Cable television and DTH are currently the predominant means of distribution of the Company's program services in the U.S. Internationally, distribution technology varies region by region.

MTV Networks. In the U.S., MTVN's owned and operated program services include MTV Music Television ("MTV"), MTV2, Nickelodeon, Nick at Nite, TV Land, VH1, Spike TV ("Spike"), CMT: Country Music Television ("CMT"), Comedy Central and MTV U™, among others. Subscriber numbers for MTVN are based on Nielsen Media Research® reports.

MTVN derives revenues principally from two sources: the sale of time on its own networks to advertisers and the receipt of subscription fees from 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 (see "Viacom Business Segments-Cable Networks Competition"). MTVN programming is comprised of programs that are acquired or originally produced by the Company.

MTV's programming consists of youth-oriented programs including music videos, music-based programming, music and general lifestyle information, reality-based programming, comedy and dramatic series, animated programs, news specials, interviews and documentaries. Recent programming highlights include The MTV Video Music Awards, Real World and Punk'd . At December 31, 2004, MTV reached approximately 87.5 million domestic subscriber households. MTV2 , a spin-off of MTV , features music videos from a broad range of musical genres. At December 31, 2004, MTV2 reached approximately 53.8 million domestic subscriber households. MTVN also operates "The Suite from MTV Networks" ("The Suite"), a package containing MTV2 and several digital television program services, including VH1 Classic and other music-related services including two Spanish-language music services. The Suite is available through DTH distributors and cable operators offering digital technology. VH1 presents music programming including music videos, long form programming, live music events, reality series, documentaries and other pop culture and lifestyle programming. At December 31, 2004, VH1 reached approximately 86.9 million domestic subscriber households. CMT presents country music-related original programming, live concerts and events, as well as country music videos. At December 31, 2004, CMT reached approximately 76.5 million domestic subscriber households. MTV U offers to students on U.S. college campuses a blend of music, news, sports and college-specific programming.

Nickelodeon programming consists primarily of originally produced programs appealing to audiences ages 2 to 11, which includes Nick Jr® , a program block designed for 2 to 5 year olds, and popular shows such as Dora the Explorer, The Fairly OddParents and SpongeBob SquarePants . Nick at Nite is telecast in the evening and night-time hours, appeals primarily to audiences ages 18 to 49 and offers mostly situation comedies from various eras and original programming. At December 31, 2004, each of Nickelodeon and Nick at Nite reached approximately 88.5 million domestic subscriber households. Nickelodeon licenses its brands and characters for and in connection with merchandise, home video and publishing worldwide.

Comedy Central features comedy programming including The Daily Show with Jon Stewart and Chappelle's Show . At December 31, 2004, Comedy Central reached approximately 86.3 million domestic subscriber households. TV Land is comprised of a broad range of well-known television programs including comedies, dramas, westerns, variety, other formats from the 50s through today and original programming. At December 31, 2004, TV Land reached approximately 84.9 million domestic subscriber households. Spike is the first entertainment network for men, appealing primarily to male audiences with a focus on original series, sports entertainment and animated series. At December 31, 2004, Spike reached approximately 88.1 million domestic subscriber households. In 2005, the Company plans to launch LOGO™ , a gay and lesbian themed network, and MTV World™ , a domestic program service with channels comprised of programming that is originally produced and programming derived from MTV's international program services. MTV Films® and Nickelodeon Movies™ produce and acquire the rights to feature films, all of which were released by Paramount Pictures during 2004. Generally, Paramount Pictures incurs the production and marketing costs of films produced by MTV Films or Nickelodeon Movies and released by Paramount Pictures. MTV Films or Nickelodeon Movies receives a participation based on the performance of these films and producer fees.

Internationally, MTVN owns and operates, participates in as a joint venturer, and licenses third parties to operate, approximately 80 MTVN program services including MTV, VH1, Nickelodeon, Spike, Paramount Comedy™, The Box™, CMT, Game One™, Viva™, TMF™ and TV Land . These program services reach audiences in Canada, Asia, Europe, Australia, Latin America, the Caribbean and Africa. Most of the MTV international program services are regionally customized for the particular youth viewers through 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 49 individual music, kids and comedy channels. As of November 2004, the leading MTVN program services reached more than 151 million households and 144 million households in Europe and Asia, respectively, and approximately 121 million households in the rest of the world (including the U.S.) through a combination of DTH, cable, and terrestrial distribution. The Company actively pursues the development or acquisition of program services in international markets. During 2004, the Company acquired 97.8% of Viva Media AG, a German-based television company with six channels across Europe; launched VH1 in Latin America, and Nickelodeon in Italy; expanded MTV's and Nickelodeon's presence in China; and, in February 2005, launched MTV base™ , a pan-African music television channel.

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 programming services. MTVN has entered into global music video licensing agreements with certain major record companies. MTVN also has entered into global or regional license agreements with certain independent record companies. MTVN expects to renew or initiate additional global or regional license agreements with these and other record companies. However, there can be no assurance that such renewals or agreements can be concluded and, if so, on favorable terms.

MTVN operates Internet sites that appeal to the current audiences of its various television program services, as well as to other online audiences, including numerous music Web site destinations around the world. These Web sites provide entertainment and information and serve as an additional outlet for sales of Company-licensed and third-party merchandise. In January 2005, MTVN's Web sites attracted over 17.8 million U.S. monthly unique visitors according to Comscore Media Metrix, a leading online audience research measurement service. These Internet sites derive revenue from a combination of advertising and sponsorships, subscription services and e-commerce. MTVN currently obtains much of its Web site content from record labels, music publishers and artists. Certain of these providers have started charging fees for their content. If providers charge significant fees for their content, or otherwise alter or discontinue their relationship with MTVN's Web sites, then the respective Web site's content offering and business could be adversely affected. In 2005, the Company plans to launch a digital music service that may offer permanent digital downloads, interactive subscription radio, conditional downloads and on-demand streaming, among other features.

BET: Black Entertainment Television. BET's owned and operated cable program services include BET and BET Jazz™ , and its digital services include BET Gospel® and BET Hip Hop®.

BET targets the African-American viewing audience by providing a broad mix of music, entertainment, sports, religious, news and public affairs programming, consisting of both original and acquired programs including 106 & Park: BET Top Ten Live and Club Comic View. BET Jazz , the only U.S. cable network devoted solely to jazz music, includes programming that consists of a mixture of in-studio performances, festivals, concerts, celebrity interviews and documentaries such as Journey With Jazz At Lincoln Center.

BET derives its revenue from the sale of advertising time on the networks and from subscription fees generated by license of the network to cable television operators, DTH and other distributors. As of December 31, 2004, according to the Nielsen Media Research report, BET reached approximately 79.4 million domestic subscriber households. BET Jazz derives its revenue principally from subscription fees generated by license of its network to cable television operators, DTH and other distributors. As of December 31, 2004, BET Jazz , billed approximately 9.7 million domestic subscriber households. Certain of BET and BET Jazz distribution agreements expired at the end of 2004. BET expects all of these agreements to be renewed or extended through multi-year carriage deals in 2005. If agreement renewals are not completed, BET and/or BET Jazz could lose subscribers.

BET Gospel and BET Hip Hop are BET's digital services. BET Gospel features gospel music programming, gospel artist performances and interviews, religious ministries, family programming and programming fare designed to provide spiritual fulfillment. BET Hip Hop features hip-hop and rap music videos, artists and performances. BET Event Productions® produces special musical events and festivals featuring various music genres. Its services include event management, venue selection, talent recruitment and sound, light and stage production including supporting the production needs of BET Jazz . BET Books, BET's book publishing division, publishes romance, inspirational and mainstream fiction books targeted to the African-American market. Its revenues are generated by book sales through a subscriber book club, retail outlets, discount stores and online book merchants.

BET has an approximately 42% interest in BET Interactive, LLC, a company which, through its Web site, BET.com , offers users content and interactive features for news, entertainment, community and other areas tailored to the unique interests and issues of African Americans. BET.com also provides program schedules for BET and BET Jazz , the latest music news, artist information, music offerings and interactive entertainment for BET's programs. In 2004, BET.com attracted approximately 750,000 U.S. monthly unique visitors, according to Nielsen/NetRatings.

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 series, original motion pictures, documentaries, boxing, concerts and other special events; The Movie Channel™ offering recently released theatrical feature films and related programming; and Flix® , offering theatrical feature films primarily from the 70s, 80s and 90s, as well as selected other titles. At December 31, 2004, Showtime, The Movie Channel and Flix , in the aggregate, had approximately 39.5 million subscriptions in the 50 states, certain U.S. territories and Bermuda. Sundance Channel® , a venture among SNI, which owns a 30% interest, an affiliate of Robert Redford and NBC Universal, is a commercial-free premium subscription television program service in the U.S., dedicated to independent film, featuring original programming, 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 different channels of Showtime and The Movie Channel in the U.S. which offer more and varied programming choices. In addition, SNI transmits high definition television feeds of Showtime and The Movie Channel and also makes versions of Showtime and The Movie Channel available on demand, enabling subscribers to watch individual programs at their convenience. SNI also provides special events, such as high-profile boxing events, to licensees on a pay-per-view basis through Showtime PPV™ . SNI also operates Web site SHO.com which promotes Showtime, The Movie Channel , and Flix programming, and provides information and entertainment and other services.

SNI derives revenue principally from the license of its networks to cable television operators, DTH and other distributors. The costs of acquiring premium television rights to programming and producing original motion pictures and series are the principal expenses of SNI. 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 typically covering the U.S. and Bermuda for varying durations. For example, for Paramount Pictures' feature films theatrically released beginning January 1, 1998, SNI has had the exclusive U.S. premium subscription television rights for certain windows (see "Viacom Business Segments-Entertainment"). SNI also arranges for the development, production and acquisition of original programs, series, documentaries and motion pictures. SNI's original series include Huff, Fat Actress and The L Word , among others. SNI has entered into and may from time to time enter into co-financing, co-production and/or co-distribution arrangements with other parties to reduce the net cost to SNI for its original programming. In addition, SNI has established a distribution arm to maximize revenue from the rights it retains in certain of its original programming.

Cable Networks Competition.

MTV Networks. MTVN competes for advertising revenue with other basic cable and broadcast television networks, radio, online 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's strategy is generally to differentiate its services to provide advertising buyers with an efficient way to reach viewers in particular demographic categories. For example, Nickelodeon generally provides advertisers with an efficient way to reach viewers 2 to 11 years old.

MTVN services compete with other cable services and broadcast television for the acquisition of popular programming. For example, programming blocks for children exhibited on broadcast television networks, including "Fox Kids," "Kids' WB," a Saturday morning block on ABC, and cable television program services specifically providing children-oriented programming, including the Cartoon Network, Disney Channel and ABC Family Channel, all compete with Nickelodeon for advertising revenue. In addition, Nickelodeon competes internationally with other television program services and blocks targeted at children for distribution over-the-air or by cable, DTH and other systems, and for distribution license fees and advertising revenue.

MTVN services compete for carriage by cable television operators, DTH and other distributors with other program services, as well as other uses of bandwidth, such as retransmission of free over-the-air broadcast networks, telephony and data transmission. A principal focus of competition is for distribution of MTVN's services that are not already distributed within a particular cable or DTH system. For such program services, distributors make decisions on the use of bandwidth based on various considerations, including amounts paid by programmers for launches, subscription fees payable by distributors, and appeal to the distributors' subscribers.

Certain major record companies that supply music content to various MTVN program services also operate music-based program services, including Viewsic, which is owned by Sony Music Japan. The Universal Music Group has announced its intention to launch three music channels in 2005 to be carried on the EchoStar direct broadcast satellite platform. These music-based program services, as well as general entertainment and other program services, compete with MTVN's program services for distribution by cable, DTH and other systems, and for distribution license fees and advertising revenues.

BET: Black Entertainment Television. BET properties generally face competition for advertising revenue from other African-American targeted media, including other cable networks that target BET's African-American audience such as TV One, African-American-oriented radio stations, magazines such as Ebony, Black Enterprise, Jet and Essence, and African-American-oriented broadcast television as well as with other media, generally. In addition, BET, BET Jazz, BET Gospel and BET Hip Hop compete with other cable programming services for available channel space as well as other uses of bandwidth and for subscriber fees from cable, DTH and other distributors.

For 2004, according to information from the Nielsen Media Research report (December 28, 2003-December 26, 2004), the Company's basic cable networks had the following percentage shares in the total day ad supported cable networks category: approximately 42% (for viewers ages 2-24), 36% (for viewers ages 2-34), 30% (for viewers ages 12-34) and 21% (for viewers ages 18-49).

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 theatrical motion pictures and the production, acquisition and packaging of original series, original motion pictures and other original programs; and (ii) the offering of prices, marketing and advertising support and other incentives to cable, DTH and other distributors for carriage so as to favorably position and package SNI's premium subscription television program services to subscribers. Home Box Office, Inc. is the dominant company in the U.S. premium subscription television category, offering two premium subscription television program services, HBO and Cinemax. SNI competes with Home Box Office, Inc. but has a significantly smaller share of the premium subscription television category. Starz Entertainment Group, L.L.C. owns Starz!, another premium subscription television program service, which features recently released theatrical motion pictures and competes with SNI's and Home Box Office, Inc.'s premium program services.

The terms and favorable renewal of agreements with distributors for the distribution of the Company's basic and premium cable networks are important to the Company. Consolidation among multichannel video programming distributors makes it more difficult to reach favorable terms and could have an adverse effect on revenues. In addition, consolidation among distributors has increased the intensity of competition among program suppliers for carriage at favorable rates, terms and conditions. Companies that are vertically integrated (and accordingly, own both cable programming networks and multichannel video program distributors, such as Time Warner, Comcast Corporation and News Corporation, among others) may put the Company in a competitively disadvantaged position with respect to distributing the Company's cable networks, particularly regarding subscriber fees, channel placement or availability, and marketing and promotional activities, which can have an adverse impact on revenues. These companies can use their distribution platforms to immediately establish market presence for their own programming.

Television (38%, 37% and 39% of the Company's consolidated revenues in 2004, 2003 and 2002, respectively)

The Television segment consists of the CBS and UPN Television Networks, the Company's owned broadcast television stations, and its television production and syndication businesses.

Television Networks. The CBS Television Network™ through CBS Entertainment™, CBS News™ and CBS Sports™ distributes a comprehensive schedule of news and public affairs broadcasts, sports and entertainment programming, and feature films to more than 200 domestic affiliates reaching throughout the U.S., including 20 of the Company's owned and operated television stations, and to certain overseas affiliated stations. The CBS Television Network primarily derives revenues from the sales of advertising time for its network broadcasts.

CBS Entertainment is responsible for acquiring or developing and scheduling the entertainment programming presented on the CBS Television Network, which includes primetime comedy and drama series, reality-based programming, made-for-television movies and miniseries, theatrical films, specials, children's programs, daytime dramas, game shows and late-night programs. CBS News operates a worldwide news organization, providing the CBS Television Network and the CBS Radio Network™ with regularly scheduled news and public affairs broadcasts, including 60 Minutes and The Early Show , as well as special reports. CBS News Productions, the off-network production company created by CBS News, produces original nonfiction programming for domestic and international outlets, including the CBS and UPN Television Networks, cable television, home video, CD-ROM, audio-book and in-flight markets, as well as schools and libraries. CBS News also provides CBS Newspath, a television news syndication service that offers daily news coverage, sports highlights and news features to CBS affiliates and other subscribers worldwide. CBS News also produces BET Nightly News for BET and news inserts for MTV U, MTV's college network. CBS Sports broadcasts include The NFL Today , certain NCAA championships, including the Final Four, golf, including the Masters Tournament and the PGA Championship, the U.S. Open Tennis Championships, regular-season golf and college football and basketball line-ups on network television, in addition to the NFL's American Football Conference regular season schedule, the Post Season Divisional Playoff games and the AFC championship game. In November 2004, CBS Sports entered into a six-year rights extension with the NFL to broadcast the AFC beginning in 2006 and including two Super Bowls. Extending its franchises off the field and court, CBS Sports has activated its marketing rights for the 2003-2013 NCAA Championships, including coordination of licensing, merchandising, related multimedia and television, and other related business opportunities.

At December 31, 2004, the UPN Television Network provided to its affiliates 13 hours of programming a week. UPN's programming is provided to its affiliates in 182 U.S. television markets which comprise approximately 96.2% of all U.S. television households, including secondary affiliates. Eighteen of the Company's owned television stations are affiliates of UPN.

Through CBS.com and CBSNews.com , the Company operates Web sites that collectively received more than 1.5 billion pageviews in 2004 and, according to Nielsen/NetRatings, attracted an average audience of 7.7 million U.S. monthly unique visitors. CBS.com produces Web sites for CBS Entertainment programs and is responsible for the CBS Television Network's promotional Web sites, online subscription services, fantasy leagues and interactive voting technology. CBSNews.com is a multimedia provider of continuous, in-depth news and information and produces Web sites for all CBS News programs. Both sites provide links to CBS.SportsLine.com , a provider of online sports content, services and merchandise on a domestic and international basis, operated by SportsLine.com, Inc., which was acquired by the Company in December 2004. These Company Internet sites derive revenue from a combination of advertising and sponsorships, subscription services and e-commerce.

Television Stations. The Company owns 39 broadcast television stations, all of which operate under licenses granted by the Federal Communications Commission ("FCC") pursuant to the Communications Act of 1934, as amended (the "Communications Act"). The licenses are renewable every eight years. The Company's television stations are located in the 7 largest, and 15 of the top 20, television markets in the U.S. The Company owns two television stations within the same designated market area in eight major markets. Such duopolies are in: Los Angeles (market #2), Philadelphia (market #4), Boston (market #5), San Francisco-Oakland-San Jose (market #6), Dallas-Fort Worth (market #7), Detroit (market #10), Miami (market #17) and Pittsburgh (market #22). The stations produce news and broadcast public affairs, sports 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' programming, and provide news, information and entertainment, as well as other services. In December 2004, the Company announced that it agreed to purchase, subject to regulatory approval, CBS affiliate, KOVR-TV in Sacramento, California, which, along with its owned UPN affiliate in that market, KMAX-TV, would create its ninth duopoly. In February 2005, the Company announced the sale of its UPN affiliates, WNDY-TV , serving Indianapolis, Indiana, and WWHO-TV , serving Columbus, Ohio, subject to regulatory approval.

The Company's owned and operated television stations reach approximately 45% of all U.S. television households and approximately 39% of U.S. television households as measured by the FCC's television national audience reach limitation under which a VHF television station is deemed to reach 100% of the television households in its market and a UHF television station is deemed to reach 50% of the television households in its market. The FCC's ownership rules limit the Company's national audience reach to 39% of all U.S. television households. (See "Viacom Business Segments-Regulation-Broad casting-Ownership Regulation").

CEO BACKGROUND

Mr. Andelman is an attorney associated with the law firm of Lourie & Cutler, P.C. in Boston, Massachusetts since 1964. Mr. Andelman also serves as a director and treasurer of Lourie & Cutler. He is also a director of National Amusements.

Mr. Califano is Chairman of the Board and President of The National Center on Addiction and Substance Abuse at Columbia University, a position he has held since 1992. Mr. Califano has served as Adjunct Professor of Public Health at Columbia University's Medical School and School of Public Health since 1992 and is a member of the Institute of Medicine of the National Academy of Sciences. He was senior partner of the Washington, D.C. office of the law firm Dewey Ballantine from 1983 to 1992. Mr. Califano served as the United States Secretary of Health, Education and Welfare from 1977 to 1979, and he served as President Lyndon B. Johnson's Assistant for Domestic Affairs from 1965 to 1969. He is the author of 11 books. Mr. Califano is also a director of Midway Games Inc. and Willis Group Holdings Limited.

Mr. Cohen has been Chairman and Chief Executive Officer of The Cohen Group, a business consulting firm, since January 2001. Prior to founding The Cohen Group, Mr. Cohen served as the United States Secretary of Defense from January 1997 to 2001. He also served as a United States Senator from 1979 to 1997, and as a member of the United States House of Representatives from 1973 to 1979.

Mr. Countryman has been Chairman Emeritus of the Liberty Mutual Group since 2000. He served as Chairman of Liberty Mutual Group from 1986 to 2000 and as Chief Executive Officer from 1986 to 1998. Mr. Countryman is also Chairman of the Dana Farber Cancer Institute and President of the United Ways of New England. Mr. Countryman is also a director of Bank of America Corporation, the Liberty Mutual Group and NSTAR.

Mr. Gifford has been Chairman Emeritus of Bank of America Corporation since February 2005. He was Chairman and Chief Executive Officer of BankBoston prior to its 1999 merger with Fleet Financial Group and became President and Chief Operating Officer of the combined companies. Mr. Gifford became Chief Executive Officer of FleetBoston Financial in 2001 and Chairman in 2002. Mr. Gifford is also a director of Bank of America Corporation and NSTAR.

Mr. Goldberg has been President of Mandy Films, Inc. and Panda Productions, Inc., both television and film production companies, since 1984. He was President of Twentieth Century Fox from 1987 to 1989. In addition, from 1972 to 1984, he partnered with producer Aaron Spelling to launch various television series and made-for-television movies. Prior to that, Mr. Goldberg served as Vice President of Production at Screen Gems (now Columbia Pictures Television) from 1969 to 1972. During the years 1961 to 1969, he served in various positions with the ABC Network, advancing to Head of Programming.

Mr. Gordon served as President and Chief Executive Officer of the National Association for the Advancement of Colored People (NAACP) from June 2005 to March 2007. In December 2003, Mr. Gordon retired from Verizon Communications where he had served as President, Retail Markets Group since June 2000. Prior to that, Mr. Gordon served as Group President, Enterprise Business with Bell Atlantic Corporation (Verizon's predecessor) since December 1998. He served as Group President, Consumer and Small Business Services of Bell Atlantic from 1993 to August 1997, and as Group President, Retail, from August 1997 to December 1998. Mr. Gordon is also a director of Tyco International Ltd.

MANAGEMENT DISCUSSION FROM LATEST 10K

Mr. Andelman is an attorney associated with the law firm of Lourie & Cutler, P.C. in Boston, Massachusetts since 1964. Mr. Andelman also serves as a director and treasurer of Lourie & Cutler. He is also a director of National Amusements.

Mr. Califano is Chairman of the Board and President of The National Center on Addiction and Substance Abuse at Columbia University, a position he has held since 1992. Mr. Califano has served as Adjunct Professor of Public Health at Columbia University's Medical School and School of Public Health since 1992 and is a member of the Institute of Medicine of the National Academy of Sciences. He was senior partner of the Washington, D.C. office of the law firm Dewey Ballantine from 1983 to 1992. Mr. Califano served as the United States Secretary of Health, Education and Welfare from 1977 to 1979, and he served as President Lyndon B. Johnson's Assistant for Domestic Affairs from 1965 to 1969. He is the author of 11 books. Mr. Califano is also a director of Midway Games Inc. and Willis Group Holdings Limited.

Mr. Cohen has been Chairman and Chief Executive Officer of The Cohen Group, a business consulting firm, since January 2001. Prior to founding The Cohen Group, Mr. Cohen served as the United States Secretary of Defense from January 1997 to 2001. He also served as a United States Senator from 1979 to 1997, and as a member of the United States House of Representatives from 1973 to 1979.

Mr. Countryman has been Chairman Emeritus of the Liberty Mutual Group since 2000. He served as Chairman of Liberty Mutual Group from 1986 to 2000 and as Chief Executive Officer from 1986 to 1998. Mr. Countryman is also Chairman of the Dana Farber Cancer Institute and President of the United Ways of New England. Mr. Countryman is also a director of Bank of America Corporation, the Liberty Mutual Group and NSTAR.

Mr. Gifford has been Chairman Emeritus of Bank of America Corporation since February 2005. He was Chairman and Chief Executive Officer of BankBoston prior to its 1999 merger with Fleet Financial Group and became President and Chief Operating Officer of the combined companies. Mr. Gifford became Chief Executive Officer of FleetBoston Financial in 2001 and Chairman in 2002. Mr. Gifford is also a director of Bank of America Corporation and NSTAR.

Mr. Goldberg has been President of Mandy Films, Inc. and Panda Productions, Inc., both television and film production companies, since 1984. He was President of Twentieth Century Fox from 1987 to 1989. In addition, from 1972 to 1984, he partnered with producer Aaron Spelling to launch various television series and made-for-television movies. Prior to that, Mr. Goldberg served as Vice President of Production at Screen Gems (now Columbia Pictures Television) from 1969 to 1972. During the years 1961 to 1969, he served in various positions with the ABC Network, advancing to Head of Programming.

Mr. Gordon served as President and Chief Executive Officer of the National Association for the Advancement of Colored People (NAACP) from June 2005 to March 2007. In December 2003, Mr. Gordon retired from Verizon Communications where he had served as President, Retail Markets Group since June 2000. Prior to that, Mr. Gordon served as Group President, Enterprise Business with Bell Atlantic Corporation (Verizon's predecessor) since December 1998. He served as Group President, Consumer and Small Business Services of Bell Atlantic from 1993 to August 1997, and as Group President, Retail, from August 1997 to December 1998. Mr. Gordon is also a director of Tyco International Ltd.

Mr. Kopelson has been Co-Chairman and President of Kopelson Entertainment, through which he produces films and finances the acquisition and development of screenplays, since 1979. Prior to that, he practiced entertainment and banking law, specializing in motion picture financing. He has been honored with a Best Picture Academy Award, a Golden Globe, and an Independent Spirit Award, and his films have generated 17 Academy Award nominations. Mr. Kopelson serves on the Executive Committee of the Producers Branch of the Academy of Motion Picture Arts and Sciences and is a member of the Advisory Board of the Rand Corporation Center for Middle East Public Policy.

Mr. Moonves has been President and Chief Executive Officer of the Company since January 2006. Previously, Mr. Moonves served as Co-President and Co-Chief Operating Officer of Former Viacom from June 2004 through December 2005. Prior to that, he served as Chairman and Chief Executive Officer of CBS Broadcasting since 2003 and as its President and Chief Executive Officer since 1998. Mr. Moonves joined former CBS Corporation in 1995 as President, CBS Entertainment. Prior to that, Mr. Moonves was President of Warner Bros. Television since July 1993. Mr. Moonves is also a director of KB Home.

Mr. Morris has been the Chairman and Chief Executive Officer of Universal Music Group since November 1995. In July 1995, he formed a joint venture with Universal Music Group for a full-service record label. Prior to that, Mr. Morris served as President and Chief Operating Officer of Warner Music U.S. commencing in 1994 and was soon after appointed Chairman. He served as President of Atlantic Records and Co-Chief Executive Officer of the Atlantic Recording Group from 1980 to 1994. Mr. Morris began his career as a songwriter, producer, and the founder of his own record label, which was acquired by Atlantic Records in 1978.

Ms. Redstone has been Vice Chair of the Board of the Company since June 2005, and President of National Amusements since January 2000. Prior to that, Ms. Redstone served as Executive Vice President of National Amusements since 1994. Ms. Redstone practiced law from 1978 to 1993, with her practice including corporate law, estate planning and criminal law. Ms. Redstone is a member of the Board of Directors and Executive Committee for the National Association of Theatre Owners, Co-Chairman and Co-President of MovieTickets.com, Inc., and Chairman and Chief Executive Officer of CineBridge Ventures, Inc. Ms. Redstone is a board member of several charitable organizations, including the Board of Trustees at Dana Farber Cancer Institute, the Board of Directors at Combined Jewish Philanthropies and the Board of Directors of the John F. Kennedy Library Foundation. Ms. Redstone is also a director of National Amusements, Midway Games Inc. (Chair) and Viacom (Vice Chair).

Mr. Redstone is the Company's Founder and has been Executive Chairman of the Board since January 2006. He was Chairman of the Board of Former Viacom from 1987 through 2005 and served as Chief Executive Officer of Former Viacom from 1996 through 2005. Mr. Redstone has also served as Chairman of the Board of National Amusements since 1986 and Chief Executive Officer of National Amusements since 1967. He served as President of National Amusements from 1967 through 1999. Mr. Redstone served as the first Chairman of the Board of the National Association of Theatre Owners and is currently a member of its Executive Committee. Mr. Redstone has lectured at a variety of universities, including Harvard Law School and Brandeis University, and in 1982 joined the faculty of the Boston University School of Law. Mr. Redstone graduated from Harvard University in 1944 and received a LL.B. from Harvard University School of Law in 1947. Upon graduation, Mr. Redstone served as Law Secretary with the United States Court of Appeals and then as a Special Assistant to the United States Attorney General. Mr. Redstone served in the Military Intelligence Division during World War II. While a student at Harvard, he was selected to join a special intelligence group whose mission was to break Japan's high-level military and diplomatic codes. Mr. Redstone received, among other honors, two commendations from the Military Intelligence Division in recognition of his service, contribution and devotion to duty. He is also a recipient of the Army Commendation Award. Mr. Redstone is also Chairman of the Board of National Amusements and serves as Executive Chairman of the board of directors and Founder of Viacom.

Mr. Salerno is a retired Vice Chairman and Chief Financial Officer of Verizon Communications Inc., a position he held from June 2000 to October 2002. Prior to that, Mr. Salerno served as Vice Chairman and Chief Financial Officer of Bell Atlantic Corporation (Verizon's predecessor) from August 1997. Prior to the merger of Bell Atlantic and NYNEX Corporation, Mr. Salerno served as Vice Chairman, Finance and Business Development of NYNEX from 1994 to 1997. Mr. Salerno was Vice Chairman of the Board of NYNEX and President of the NYNEX Worldwide Services Group from 1991 to 1994. Prior to the Separation, Mr. Salerno served as a director of Former Viacom from 1994 through 2005. Mr. Salerno is also a director of Akamai Technologies, Inc., The Bear Stearns Companies Inc., IntercontinentalExchange, Inc., Popular Inc. and Viacom.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Three and Nine Months Ended September 30, 2005 versus Three and Nine Months Ended September 30, 2004

Revenues

For the three months ended September 30, 2005, revenues of $5.9 billion increased 10% from $5.4 billion and for the nine months ended September 30, 2005, revenues of $17.3 billion increased 9% from $16.0 billion for the same prior-year period primarily driven by increases in advertising revenues, affiliate fees and feature film exploitation, partially offset by a decline in television license fees.

Advertising sales increased $266.8 million, or 9%, to $3.3 billion for the third quarter of 2005 and $620.7 million, or 6%, to $10.3 billion for the nine months ended September 30, 2005 reflecting growth in all of the Company's segments which generate advertising revenues: Cable Networks, Television, Radio and Outdoor. Cable Networks advertising revenues increased 17% for the third quarter and 20% for the nine-month period principally due to higher units sold and higher average domestic unit rates. Television advertising revenues increased 7% for the quarter and 2% for the nine months reflecting growth in CBS/UPN Networks primetime and for the quarter, sports. The increase for the nine months was partially offset by decreases at the Stations group due to the absence of the Super Bowl, lower political advertising spending and weakness in the local advertising market. Outdoor advertising growth primarily reflected an increase in North American properties of 6% for both the third quarter and nine-month periods and increases in Europe for the nine months.

Affiliate fees increased $55.9 million, or 9%, to $712.5 million for the third quarter and $172.6 million, or 9%, to $2.1 billion for the nine months ended September 30, 2005 primarily driven by rate increases and subscriber growth at MTVN and BET and subscriber growth at Showtime Networks.

Feature film exploitation revenues increased $271.0 million, or 57%, to $746.3 million for the third quarter and increased $528.1 million, or 36%, to $2.0 billion for the nine months ended September 30, 2005. The increase is primarily due to higher worldwide theatrical revenues, which more than doubled over the prior year periods, driven by contributions from War of The Worlds , increased home entertainment revenues and higher pay television revenues.

Television license fees decreased $24.2 million, or 6%, to $407.0 million for the third quarter and $110.5 million, or 10%, to $990.5 million for the nine months ended September 30, 2005. The decrease primarily reflected lower domestic syndication revenues due to the mix of available titles, partially offset by higher foreign syndication revenues. The nine months also reflected lower network revenues due to the absence of license fees for Frasier , which is no longer in production.

Publishing revenues decreased $13.4 million, or 6%, to $193.0 million for the third quarter and $13.6 million, or 3%, to $526.4 million for the nine months ended September 30, 2005, primarily due to lower sales in the Adult group, partially offset by higher sales in the Children's division for the nine-month period.

Other revenues, which include revenues from television and cable DVD and VHS sales, theme park operations and consumer products, increased $6.8 million, or 1%, to $552.9 million for the third quarter primarily reflecting 4% higher parks revenue from increased per capita spending and higher attendance and 2% higher home entertainment revenues. For the nine months ended September 30, 2005, other revenues increased $171.7 million, or 14%, to $1.4 billion, primarily reflecting 33% higher home entertainment revenues, principally from increased DVD sales.

International Revenues

The Company generated approximately 18% and 16% of its total revenues from international regions for the three and nine months ended September 30, 2005, respectively, and 15% and 14% for the three and nine months ended September 30, 2004, respectively.

Total Expenses

For the three and nine months ended September 30, 2005, total expenses included several non-recurring items. An impairment charge of approximately $18.9 million was recorded in connection with the sale of two TV stations. Hurricanes Katrina and Rita resulted in incremental expenses of $14.9 million, principally in Outdoor, Television and Cable Networks segments. In addition, Viacom recorded expenses of $17.3 million for the quarter and $18.9 million for the nine months, associated with its separation plans.

For the three months ended September 30, 2005, operating expenses increased $372.3 million, or 13%, to $3.2 billion. For the nine months ended September 30, 2005 operating expenses increased $849.9 million, or 10%, to $9.4 billion.

Production and program expenses for the third quarter increased $353.5 million, or 20%, to $2.1 billion and for the nine months, increased $617.3 million, or 11%, to $6.3 billion over the same prior-year periods. The increases in the three- and nine-month periods primarily reflected higher amortization of feature film production costs, higher participation and residual expenses, increases for original cable series and acquired cable programming, and the inclusion of VIVA . These increases were partially offset by lower network production due to the absence of Frasier production costs.

Distribution expenses decreased $5.9 million, or 2%, to $313.8 million for the third quarter of 2005, primarily reflecting lower feature film distribution costs. For the nine months ended September 30, 2005, distribution expenses increased $149.1 million, or 16%, to $1.1 billion primarily reflecting higher feature film distribution costs for theatrical releases and higher distribution costs associated with increased home entertainment sales of television and feature film DVDs.

Other operating expenses increased $24.7 million, or 4%, to $729.6 million for the third quarter and $83.5 million, or 4%, to $2.0 billion for the nine months ended September 30, 2005, primarily reflecting higher Outdoor expenses of 5% and 4%, respectively, principally associated with costs from the impact of hurricanes Katrina and Rita. The three and nine months of 2005 also included additional costs from SportsLine.com, Inc. acquired in December 2004.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, which include expenses incurred to provide back office support, occupancy, selling and marketing costs, increased 12% to $1.2 billion for the third quarter and increased 11% to $3.4 billion for the nine months ended September 30, 2005, primarily reflecting higher advertising, marketing, employee compensation, an impairment charge of $18.9 million from the sale of two TV stations and expenses associated with the Company's announced separation of $17.3 million for the third quarter and $18.9 million for the nine months ended September 30, 2005. The nine-month period also reflected additional costs from the acquisitions of VIVA and SportsLine.com, Inc., higher bad debt expense as the prior year included a reversal of bad debt reserves, partially offset by severance charges of $56.2 million recorded in the second quarter of 2004 due to management changes. Selling, general and administrative expenses as a percentage of revenues remained flat at 20% for the third quarter of 2005 and 2004 and was 20% for the nine months ended September 30, 2005 versus 19% for the same prior-year period.

Depreciation and Amortization

For the three months ended September 30, 2005, depreciation and amortization increased $1.9 million, or 1%, to $187.4 million and for the nine months ended September 30, 2005, decreased $8.1 million, or 1%, to $552.7 million.

Interest Expense

For the three months ended September 30, 2005, interest expense decreased slightly to $176.4 million from $176.7 million and for the nine months increased 1% to $539.6 million from $534.6 million. The Company had approximately $10.9 billion and $9.7 billion of principal amount of debt outstanding (including current maturities) as of September 30, 2005 and 2004, respectively, at weighted average interest rates of 6.1% and 6.5%, respectively.

Interest Income

For the three months ended September 30, 2005, interest income decreased $.9 million to $7.5 million and for the nine months ended September 30, 2005, increased $.6 million to $16.6 million.

Other Items, Net

For the three months ended September 30, 2005, Other items, net reflected a net loss of $.8 million principally consisting of foreign exchange losses of $2.0 million and losses of $10.5 million associated with securitizing trade receivables, partially offset by a gain of $11.7 million on the sale of investments. Other items, net of $12.9 million for the nine months ended September 30, 2005 principally reflected a gain of $64.6 million from the sale of Marketwatch.com, Inc. and a net gain of $11.9 million on the sale of other investments, partially offset by a non-cash charge of $26.5 million associated with other-than-temporary declines in the Company's investments, losses of $27.7 million associated with securitizing trade receivables and foreign exchange losses of $8.9 million.

Other items, net of $8.6 million for the three months ended September 30, 2004 principally reflected foreign exchange gains of $15.9 million, partially offset by losses of $5.4 million associated with securitizing trade receivables and a net loss on the sale of investments of $2.0 million. For the nine months ended September 30, 2004, Other items, net of $29.5 million principally reflected a gain on the sale of investments of $36.7 million and foreign exchange gains of $25.5 million, partially offset by a non-cash charge of $20.1 million associated with other-than-temporary declines in the Company's investments and losses associated with securitizing trade receivables of $12.6 million.

Provision for Income Taxes

The provision for income taxes represents federal, state and local, and foreign income taxes on earnings before income taxes. For the third quarter of 2005, the Company's effective income tax rate of 41.1% increased from 36.6% in the third quarter of 2004. For the nine months ended September 30, 2005, the Company's effective tax rate of 40.1% increased from 36.1% for the same prior-year period. The prior-year periods' effective income tax rates reflected the recognition of a tax benefit from the resolution of certain income tax audits.

Equity in Earnings (Loss) of Affiliated Companies, Net of Tax

Equity in earnings (loss) of affiliated companies, net of tax, reflects the operating results of the Company's equity investments.

Minority Interest, Net of Tax

Minority interest primarily represented the minority ownership of VIVA and certain international pay television companies.

Net Loss from Discontinued Operations, Net of Tax

Net loss from discontinued operations for the three and nine months ended September 30, 2005 and 2004 include the results of Famous Players prior to its disposition on July 22, 2005 and, for the 2005 periods, a net loss of $29.4 million on the transaction. Also included in the prior-year periods were the operating results of Blockbuster Inc. ("Blockbuster") which was split-off from the Company in 2004. For the three and nine months ended September 30, 2005, net losses from discontinued operations were $26.5 million and $46.9 million, respectively, versus net losses of $1.2 billion and $1.1 billion, respectively, for the same prior-year periods.

Net Earnings (Loss)

The Company reported net earnings of $708.5 million for the three months ended September 30, 2005 versus a net loss of $487.6 million for the comparable prior-year period and net earnings of $2.0 billion for the nine months ended September 30, 2005 as compared with net earnings of $976.7 million for the nine months ended September 30, 2004. Net earnings reflected revenue growth of 10% and 9%, respectively, for the three and nine months ended September 30, 2005, offset by higher expenses of 12% and 10%, respectively, the absence of a tax benefit of $38.8 million and $149.3 million for the three and nine months ended September 30, 2004, respectively, and earnings from Blockbuster, recorded in discontinued operations in the prior-year periods.

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