Ladies and Gentlemen:

This letter responds to comments #3 – 9 received by CBS Corporation ("CBS" or the "Company") from the staff of the Division of Corporation Finance (the "Staff") of the Securities and Exchange Commission (the "Commission") by letter dated August 22, 2018 (the "Comment Letter"), with respect to the Form 10-K for the fiscal year ended December 31, 2017, filed with the Commission on February 20, 2018 (the "10-K"), and with respect to the Form 10-Q for the period ended June 30, 2018, filed with the Commission on August 2, 2018 (the "10-Q").  The Staff has granted the Company an extension in responding to comments #1, #2 and #10 in the Comment Letter.

For your convenience, each response is prefaced by the exact text of the Staff's comment in bold text.  All references to page numbers, captions and defined terms correspond to the 10-K or the 10-Q unless otherwise specified.

3.

We note that your definition of free cash flow excludes discretionary contributions to prefund your pension plans.  Since free cash flow is typically calculated as cash flow from operations adjusted by capital expenditures, and your definition of free cash flow differs from the typical definition per Question 102.07 of the April 2018 C&DI on non-GAAP measures, please revise the title of this measure in future filings.

To address the Staff's comment, the Company will revise the title of this measure to "Adjusted Free Cash Flow" in future filings.

4.

Publicly available information indicates that you have a licensing agreement with beIN for CBS and The CW programming for the MENA region.  The beIN.net website indicates that beIN channel packages include the CBS Reality channel and provides contact information for beIN dealers in Sudan and Syria.  Additionally, you state on page I-4 of the 10-K that you own a 30% interest in a joint venture that owns and operates cable and satellite channels, which broadcast CBS programming, in the Middle East and Africa, regions that include Sudan and Syria. Sudan and Syria are designated by the Department of State as state sponsors of terrorism, and are subject to U.S. economic sanctions and/or export controls.  Please describe to us the nature and extent of any past, current, and anticipated contacts with Sudan and Syria, including contacts with their governments, whether through subsidiaries, affiliates, distributors, partners, customers, joint ventures or other direct or indirect arrangements.  Please also discuss the materiality of those contacts, in quantitative terms and in terms of qualitative factors that a reasonable investor would deem important in making an investment decision.  Tell us the approximate dollar amounts of revenues, assets and liabilities associated with those countries for the last three fiscal years and the subsequent interim period.  Address for us the potential impact of the investor sentiment evidenced by divestment and similar initiatives that have been directed toward companies that have operations associated with U.S.-designated state sponsors of terrorism.

In response to the Staff's comment, the Company respectfully advises the Staff that it has policies and processes to ensure compliance with U.S. economic sanctions and export control laws in connection with the international aspects of its business.  Set forth below are the limited contacts the Company has identified in the Republic of Sudan ("Sudan") or Syria during the last three fiscal years and the six months ended June 30, 2018 (the "relevant period"). The Company currently anticipates it may have these types of contacts in the future in accordance with applicable law. The Company does not have any agreements or arrangements with the governments of Sudan or Syria and has not identified any contacts with the governments in these countries, except with respect to newsgathering activities in Syria, as discussed below.  The contacts described in this response have not generated revenues material to the Company's business, either individually or in the aggregate, during the relevant period, as discussed below.  The Company has no assets (other than protected trademarks) or liabilities in or attributable to Sudan and Syria.  The Company does not own or control any entities or maintain any business offices or employees in these countries.

Content Licensing.  During the relevant period, the Company has engaged in a limited manner with third parties for the distribution of pre-existing and unaltered (other than in connection with permissible dubbing or subtitling, if any) television programs and motion pictures that contain multi-territorial rights, which in some cases include Sudan and/or Syria within such territories (the "Multi-Territorial Licenses").  The Company has not entered into licensing arrangements with any entity in Sudan or Syria or any entity that specifically targets the audiences of these two countries.

The Company respectfully advises the Staff that these content licensing activities are conducted pursuant to the exemptions for information and informational materials under the applicable U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") regulations.  For Syria, this exemption is set forth in the Syrian Sanctions Regulations ("SySR") at 31 C.F.R. § 542.211(b).  For Sudan, the Company respectfully notes that OFAC's broad sanctions against Sudan were revoked as of October 12, 2017, and the Sudanese Sanctions Regulations ("SSR"), 31 C.F.R. § 538, were removed in their entirety on June 29, 2018, 83 Fed. Reg. 30539; nonetheless, the exemption referred to above was set forth in the SSR at 31 C.F.R. § 538.212(c) prior to the comprehensive revocation.

These contracts have not generated revenues material to the Company's business, either individually or in the aggregate. It is not practicable to provide the specific revenues associated with Sudan and Syria in connection with the Multi-Territorial Licenses because those license fees generally are not allocated to particular countries within an authorized territory; however, the aggregate revenues under the Multi-Territorial Licenses that include Sudan and/or Syria as well as other countries in the applicable licensed territories represented .03% or less of the Company's consolidated revenues in each of the past three fiscal years and for the six months ended June 30, 2018.

 

The Company respectfully submits that it does not believe that the limited television program and motion picture licensing, newsgathering activities and intellectual property protection activities described in this response, or the immaterial revenues generated from these activities, give rise to material investment risks for the Company's stockholders, including material risks relating to the Company's reputation or valuation. The Company believes that its investors understand that the Company likely will have limited contacts with Sudan and Syria due to the international reach of the Company's content licensing and newsgathering activities, particularly as CBS News is an established leader in covering breaking news around the world.  For the reasons set forth above, and in the context of the Company's overall size and business scope, it is the Company's view that a reasonable investor would not consider the activities described in the Company's response as quantitatively or qualitatively important in making an investment decision.

 

5.	We note certain advertising contracts have guarantees of audience member views.  Please clarify if these guarantees are treated as variable consideration in determining your transaction price.  Refer to ASC 606-10-32-5 and 606-10-50-20.

 

6.

Please identify the specific products and/or services transferred to your customers within your affiliate agreements.  Tell us which products and/or services you have combined with others for the purposes of determining your performance obligations and which you have treated as a separate performance obligation.  Tell us if you believe these arrangements contain a functional license of intellectual property and if this is the predominant item to which royalties relate.  Please also describe the judgments used in determining both the timing of satisfaction and amounts allocated to each performance obligation.  To the extent applicable, tell us how you considered any minimum guarantees.  Refer to ASC 606-10-50-12 and 606-10-50-17.

7.	Please tell us your basis for recognizing revenue on a relative fair value basis for affiliate arrangements with fixed fees.

For the Company's affiliate arrangements with fixed fees, primarily consisting of agreements with network affiliates, the Company recognizes revenues based on the relative fair value of its performance obligations (which is a proxy for relative standalone selling price as defined in ASC 606-10-32-29) over the term of the agreement. Such relative fair value (i.e., standalone selling price) is determined using two factors: (i) the value established in the network affiliate's market according to the number of subscribers in the market and the price per subscriber it may charge to its customer (the MVPD) for retransmission fees and (ii) the value of the Company's programming.

8.	Please tell us if you consider your retransmission arrangements to be functional licenses of intellectual property and if you are applying the guidance for sales-based or usage-based royalties.  Please refer to ASC 606-10-50-12.

As discussed in the Company's response to comment #6, the Company respectfully advises the Staff that retransmission arrangements are considered to be licenses of functional intellectual property because the performance obligations in the contracts, which have standalone functionality, consist of multiple licenses of programming being delivered on a continuous basis throughout the term of the agreement. The Company is applying the guidance for sales-based or usage-based royalties, because the transaction price is determined based on the number of subscribers to the customer's service applied to an agreed upon contractual rate.  Please refer to the Company's response to comment #6 above for additional details and proposed expanded disclosure to clarify disclosures required under ASC 606-10-50-12.

To clarify the disclosures required under ASC 606-10-50-12 regarding the performance obligations identified in its program licensing contracts, the Company will expand its disclosure in future filings as proposed below (additional language is underlined and deleted language is struck out).

For licenses of internally-produced television programming, each individual episode delivered represents a separate performance obligation and Rrevenues from the licensing of internally-produced television programming are recognized when the content episode is made available to the licensee for exhibition and the license period has begun. 

In addition, to clarify the disclosures required under ASC 606-10-50-17 regarding the judgments applied in determining the timing of satisfying performance obligations and allocation of transaction price, the Company will expand its disclosure in future filings as proposed below (additional language is underlined and deleted language is struck out). As discussed above, judgments are not required for determining the timing of satisfaction of performance obligations.

For license agreements containing multiple deliverables, revenues are allocated based on the relative standalone selling price of each program episode of a television series, which is based on licenses for comparable series within the marketplace.

Please direct any questions that you have with respect to the foregoing or if any additional supplemental information is required by the Staff, please contact me at 212-403-1314 or by email at DEShapiro@wlrk.com.

                                                                                                    

 

cc:	Lawrence P. Tu (CBS Corporation)
	Jonathan H. Anschell (CBS Corporation)
	Richard J. Parrino (Hogan Lovells US LLP)
	Kevin K. Greenslade (Hogan Lovells US LLP)

 

 

 

 

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