CBS (CBS)

Operating Expenses

The following table presents the Company's consolidated operating expenses by type, net of intercompany eliminations, for the three months ended March 31, 2009 and 2008.

Operating expenses for the three months ended March 31, 2009 decreased $73.2 million, or 3%, to $2.31 billion.

Programming expenses for the three months ended March 31, 2009 increased $24.3 million, or 2%, to $1.09 billion primarily reflecting higher costs associated with cable programming.

Production expenses for the three months ended March 31, 2009 decreased $89.8 million, or 13%, to $588.0 million primarily due to lower production costs associated with lower syndication revenues, partially offset by the impact of the Writers Guild of America ("WGA") strike which reduced production costs in the first quarter of 2008.

Outdoor operations expenses for the three months ended March 31, 2009 decreased $24.9 million, or 8%, to $271.5 million primarily reflecting the impact of foreign exchange rate changes partially offset by higher transit costs in Europe.

Publishing operations expenses for the three months ended March 31, 2009 decreased $17.0 million, or 13%, to $118.6 million principally due to lower author royalty and production expenses driven by the decrease in revenues.

Other operating expenses for the three months ended March 31, 2009 increased $34.2 million, or 16%, to $249.2 million primarily reflecting increased costs associated with digital media, including the impact of the acquisition of CNET.

Operating Expenses

The table below presents the Company's consolidated operating expenses by type for the three months ended March 31, 2008 and 2007.

Operating expenses for the three months ended March 31, 2008 decreased slightly to $2.39 billion from $2.40 billion for the three months ended March 31, 2007.

Programming expenses for the three months ended March 31, 2008 decreased $102.6 million, or 9%, to $1.06 billion primarily due to lower costs resulting from the absence of the 2007 telecast of Super Bowl XLI on CBS Television Network and the timing of the Semifinals of the NCAA Men's Basketball Tournament, which aired during the second quarter of 2008 versus the first quarter of 2007. These decreases were partially offset by higher entertainment programming costs.

Production expenses for the three months ended March 31, 2008 increased $93.3 million, or 16%, to $677.8 million due principally to costs associated with the impact of the new international self-distribution arrangement for the CSI franchise partially offset by lower costs resulting from a delay in production due to the WGA strike and the cancellation of certain television series.

Outdoor operations expenses for the three months ended March 31, 2008 increased $25.6 million, or 9%, to $296.4 million primarily due to the impact of foreign exchange rate changes and higher transit and billboard lease costs.

Publishing operations expenses for the three months ended March 31, 2008 decreased $20.6 million, or 13%, to $135.6 million primarily reflecting lower production costs and royalty expenses driven by the decrease in revenues and the mix of titles.

Other operating expenses for the three months ended March 31, 2008 decreased $5.2 million, or 2%, to $215.0 million primarily reflecting lower expenses due to the divestitures of television stations.

-26-

Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
(Tabular dollars in millions, except per share amounts)

Operating Expenses

        The table below presents the Company's consolidated operating expenses by type:

        For 2007, operating expenses of $8.33 billion decreased 1% from $8.42 billion in 2006. For 2006, operating expenses of $8.42 billion increased 1% from $8.38 billion in 2005. The major components and changes in operating expenses were as follows:

•

Programming expenses represented 41% of total operating expenses in 2007, 40% in 2006 and 41% in 2005, and reflect the amortization of acquired rights of programs exhibited on the broadcast and cable networks, and television and radio stations. Programming expenses increased 1% to $3.39 billion in 2007 from $3.35 billion in 2006 reflecting higher costs associated with the 2007 telecast of Super Bowl XLI on CBS Television Network partially offset by lower expenses resulting from the absence of UPN. Programming expenses decreased 3% to $3.35 billion in 2006 from $3.45 billion in 2005 principally reflecting lower costs associated with primetime series on CBS Television Network, the shutdown of UPN and lower sports programming expenses at Radio.



•

Production expenses represented 28% of total operating expenses in 2007, 31% in 2006 and 29% in 2005, and reflect the costs and amortization of internally developed television programs, including direct production costs, residuals and participation expenses, and production overhead, as well as television and radio costs, including on-air talent and other production costs. Production expenses decreased 10% to $2.33 billion in 2007 from $2.59 billion in 2006 primarily reflecting lower costs associated with lower syndication revenues. Production expenses increased 8% to $2.59 billion in 2006 from $2.40 billion in 2005 primarily reflecting higher costs relating to the 2006 syndication sales of Frasier and CSI: Miami.



•

Outdoor operations expenses represented 14% of total operating expenses in each of the years 2007, 2006 and 2005, and reflect transit, billboard lease, maintenance, posting and rotation expenses. Outdoor operations expenses increased 1% to $1.18 billion in 2007 from $1.17 billion in 2006 primarily due to the unfavorable impact of foreign exchange rate changes and increased costs for maintenance and materials, partially offset by lower transit costs, principally reflecting the non-renewal of certain transit and street furniture contracts in New York City and Chicago. Outdoor operations expenses increased 3% to $1.17 billion in 2006 from $1.13 billion in 2005 principally reflecting higher transit and billboard lease costs partially offset by the absence of the impact of 2005 hurricanes.



•

Publishing operations expenses, which represented 7% of total operating expenses in 2007, and 6% in both 2006 and 2005, reflect cost of book sales, royalties and other costs incurred with respect to publishing operations. Publishing operations expenses for 2007 increased 9% to $590.1 million from $539.2 million in 2006 reflecting higher production costs and royalty expenses resulting from the increase in revenues and the mix of titles. Publishing operations expenses for 2006 increased 3% to

II-7

Management's Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

$539.2 million from $525.0 million in 2005 reflecting higher production, return, and freight and delivery costs partially offset by lower royalty expenses.

•

Other operating expenses, which represented 10% of total operating expenses in 2007, 9% in 2006 and 10% in 2005, primarily include distribution expenses incurred with respect to television product, costs associated with digital media, and compensation. Other operating expenses increased 7% to $835.0 million in 2007 from $777.5 million in 2006 due to higher television distribution costs and higher costs associated with digital media. Other operating expenses decreased 10% to $777.5 million in 2006 from $862.1 million in 2005 primarily reflecting lower home entertainment distribution costs due to the switch from self-distribution in 2005 to third party distribution in 2006, partially offset by higher costs associated with digital media investment and expansion.

Operating Expenses

        The table below presents the Company's consolidated operating expenses by type:

        For 2007, operating expenses of $8.33 billion decreased 1% from $8.42 billion in 2006. For 2006, operating expenses of
$8.42 billion increased 1% from $8.38 billion in 2005. The major components and changes in operating expenses were as follows:

•

Programming
expenses represented 41% of total operating expenses in 2007, 40% in 2006 and 41% in 2005, and reflect the amortization of acquired rights of programs exhibited
on the broadcast and cable networks, and television and radio stations. Programming expenses increased 1% to $3.39 billion in 2007 from $3.35 billion in 2006 reflecting higher costs
associated with the 2007 telecast of Super Bowl XLI on CBS Television Network partially offset by lower expenses resulting from the absence of UPN.
Programming expenses decreased 3% to $3.35 billion in 2006 from $3.45 billion in 2005 principally reflecting lower costs associated with primetime series on CBS Television Network, the
shutdown of UPN and lower sports programming expenses at Radio.




•

Production
expenses represented 28% of total operating expenses in 2007, 31% in 2006 and 29% in 2005, and reflect the costs and amortization of internally developed
television programs, including direct production costs, residuals and participation expenses, and production overhead, as well
as television and radio costs, including on-air talent and other production costs. Production expenses decreased 10% to $2.33 billion in 2007 from $2.59 billion in 2006
primarily reflecting lower costs associated with lower syndication revenues. Production expenses increased 8% to $2.59 billion in 2006 from $2.40 billion in 2005 primarily reflecting
higher costs relating to the 2006 syndication sales of Frasier and CSI: Miami.




•

Outdoor
operations expenses represented 14% of total operating expenses in each of the years 2007, 2006 and 2005, and reflect transit, billboard lease, maintenance, posting
and rotation expenses. Outdoor operations expenses increased 1% to $1.18 billion in 2007 from $1.17 billion in 2006 primarily due to the unfavorable impact of foreign exchange rate
changes and increased costs for maintenance and materials, partially offset by lower transit costs, principally reflecting the non-renewal of certain transit and street furniture contracts
in New York City and Chicago. Outdoor operations expenses increased 3% to $1.17 billion in 2006 from $1.13 billion in 2005 principally reflecting higher transit and billboard lease costs
partially offset by the absence of the impact of 2005 hurricanes.




•

Publishing
operations expenses, which represented 7% of total operating expenses in 2007, and 6% in both 2006 and 2005, reflect cost of book sales, royalties and other costs
incurred with respect to publishing operations. Publishing operations expenses for 2007 increased 9% to $590.1 million from $539.2 million in 2006 reflecting higher production costs and
royalty expenses resulting from the increase in revenues and the mix of titles. Publishing operations expenses for 2006 increased 3% to

II-7

Management's Discussion and Analysis of

Results of Operations and Financial Condition (Continued)

(Tabular dollars in millions, except per share amounts)

$539.2 million
from $525.0 million in 2005 reflecting higher production, return, and freight and delivery costs partially offset by lower royalty expenses.










•

Other
operating expenses, which represented 10% of total operating expenses in 2007, 9% in 2006 and 10% in 2005, primarily include distribution expenses incurred with
respect to television product, costs associated with digital media, and compensation. Other operating expenses increased 7% to $835.0 million in 2007 from $777.5 million in 2006 due to
higher television distribution costs and higher costs associated with digital media. Other operating expenses decreased 10% to $777.5 million in 2006 from $862.1 million in 2005
primarily reflecting lower home entertainment distribution costs due to the switch from self-distribution in 2005 to third party distribution in 2006, partially offset by higher costs
associated with digital media investment and expansion.

Operating Expenses

The following tables present the Company's consolidated operating expenses by type, net of intercompany eliminations, for the three and nine months ended September 30, 2007 and 2006.

32

Management's Discussion and Analysis of
Results of Operations and Financial Condition

Operating expenses for the three months ended September 30, 2007 decreased $66.9 million, or 3%, to $1.86 billion. For the nine months ended September 30, 2007, operating expenses decreased $30.8 million, or 1%, to $6.09 billion.

Programming expenses for the three months ended September 30, 2007 increased $41.0 million, or 7%, to $667.8 million reflecting higher sports and first-run programming costs. For the nine months ended September 30, 2007, programming expenses increased $111.9 million, or 5%, to $2.50 billion primarily reflecting higher sports programming costs principally attributable to the 2007 telecast of Super Bowl XLI on CBS Network, partially offset by lower expenses resulting from the absence of UPN.

Production expenses for the three months ended September 30, 2007 decreased $140.6 million, or 20%, to $566.2 million and for the nine months ended September 30, 2007 decreased $242.6 million, or 13%, to $1.69 billion, primarily reflecting lower costs associated with lower syndication revenues.

Outdoor operations expenses for the three months ended September 30, 2007 increased $1.5 million, or 1%, to $300.6 million and for the nine months ended September 30, 2007 increased $8.9 million, or 1%, to $865.8 million primarily due to the unfavorable impact of foreign exchange partially offset by lower transit lease costs, principally reflecting the non-renewal of certain transit and street furniture contracts in New York City and Chicago.

Publishing operations expenses for the three months ended September 30, 2007 increased $14.7 million, or 12%, to $141.0 million and for the nine months ended September 30, 2007 increased $52.4 million, or 14%, to $427.6 million primarily reflecting increased production costs and higher royalty expenses driven by the increase in revenues and the mix of titles.

Other operating expenses for the three months ended September 30, 2007 increased $16.5 million, or 10%, to $179.4 million and for the nine months ended September 30, 2007, increased $38.6 million, or 7%, to $611.9 million principally due to higher television distribution costs and higher costs associated with digital media.

Operating Expenses

The following tables present the Company's consolidated operating expenses by type, net of intercompany eliminations, for the three and six months ended June 30, 2007 and 2006.

31

Management's Discussion and Analysis of
Results of Operations and Financial Condition

For the three months ended June 30, 2007, operating expenses decreased $68.1 million, or 4%, to $1.84 billion. For the six months ended June 30, 2007, operating expenses increased $36.1 million, or 1%, to $4.24 billion.

Programming expenses for the three months ended June 30, 2007 decreased $89.8 million, or 12%, to $666.4 million primarily reflecting the absence of UPN and lower sports programming costs, principally associated with the timing of the semifinals of the NCAA Men's Basketball Tournament, partially offset by higher entertainment series costs. For the six months ended June 30, 2007, programming expenses increased $70.9 million, or 4%, to $1.83 billion primarily reflecting the 2007 telecast of Super Bowl XLI on CBS Network partially offset by lower expenses resulting from the absence of UPN.

Production expenses for the three months ended June 30, 2007 increased $12.6 million, or 2%, to $538.5 million primarily reflecting increased costs associated with higher home entertainment revenues, partially offset by lower costs from the absence of UPN. For the six months ended June 30, 2007, production expenses decreased $102.0 million, or 8%, to $1.12 billion primarily reflecting the absence of costs associated with the first quarter 2006 syndication sales of Frasier, partially offset by increased costs associated with higher home entertainment revenues.

Outdoor operations expenses for the three months ended June 30, 2007 increased $6.7 million, or 2%, to $294.4 million and for the six months ended June 30, 2007 increased $7.4 million, or 1%, to $565.2 million primarily due to the unfavorable impact of foreign exchange partially offset by lower transit lease costs, principally reflecting the non-renewal of transit and street furniture contracts in New York City and Chicago.

Publishing operations expenses for the three months ended June 30, 2007 increased $8.7 million, or 7%, to $130.4 million and for the six months ended June 30, 2007 increased $37.7 million, or 15%, to $286.6 million, primarily reflecting increases in cost of book sales driven by higher revenues.

Other operating expenses for the three months ended June 30, 2007 decreased $6.3 million, or 3%, to $212.3 million. For the six months ended June 30, 2007, other operating expenses increased $22.1 million, or 5%, to $432.5 million principally reflecting higher costs associated with digital media and higher marketing costs from the NCAA Men's Basketball Tournament due to higher revenues.