Management's discussion and analysis of the results of operations and financial condition of CBS Corporation (together with its consolidated subsidiaries, unless the context otherwise requires, the "Company" or "CBS Corp.") should be read in conjunction with the consolidated financial statements and related notes. Descriptions of all documents incorporated by reference herein or included as exhibits hereto are qualified in their entirety by reference to the full text of such documents so incorporated or included. Please see Item 1A. Risk Factors in Part I of this report for the Cautionary Statement Concerning Forward-Looking Statements.

Overview

For 2008, CBS Corporation reported revenues of $13.95 billion, down 1% from $14.07 billion in 2007, an operating loss of $12.16 billion and a net loss of $11.67 billion, or a loss of $17.43 per diluted share. Results for 2008 include pre-tax non-cash impairment charges of $14.18 billion ($12.73 billion, net of tax), or $19.00 per diluted share, primarily to reduce the carrying value of the Company's goodwill and intangible assets. CBS Corp.'s 2008 operating results were negatively impacted by the weakened economy, mainly in the second half of the year. Many key advertisers significantly reduced their advertising spending, primarily at the local level, which contributed to a decline in advertising revenues of 8% for the year. The Company recorded restructuring charges of $136.7 million reflecting severance costs associated with the elimination of positions, contract terminations and other associated costs, which are expected to reduce its annual cost structure by approximately $220 million.

On June 30, 2008, the Company acquired CNET Networks, Inc. ("CNET"), a global interactive media company with entertainment, news and information Internet sites and brands including CNET, ZDNet, GameSpot, TV.com, mp3.com, CNETnews.com, UrbanBaby, CHOW, Search.com, BNET, MySimon and TechRepublic. The CNET acquisition expanded the Company's Internet presence worldwide. The Company's existing Internet brands, combined with those of CNET, reached approximately 226 million unique monthly visitors worldwide during December 2008.

Description of Business

CBS Corp. is comprised of the following segments: Television, Radio, Outdoor, Interactive and Publishing. Effective July 1, 2008, the Company combined its existing interactive businesses, which were previously reported in the Television segment, with those of CNET and realigned its management structure to create an Interactive segment. Prior period results have been reclassified to conform to this presentation.

CBS Corp. operates in the following segments:

º •
º TELEVISION: The Television segment consists of CBS Television, comprised of the CBS Television Network, the Company's owned television stations, its television production and syndication operations, and CBS College Sports Network; and Showtime Networks. Television revenues are generated primarily from advertising sales, television license fees and affiliate revenues. Television contributed 64% to consolidated revenues for the year ended December 31, 2008 and 65% to consolidated revenues for each of the years ended December 31, 2007 and 2006.

º •
º RADIO: The Radio segment owns radio stations in most of the large U.S. markets. Radio revenues are generated primarily from advertising sales. Radio contributed 11%, 12% and 14% to consolidated revenues for the years ended December 31, 2008, 2007 and 2006, respectively.

Management's Discussion and Analysis of Results of Operations and Financial Condition (Continued)

º •
º OUTDOOR: The Outdoor segment, principally through CBS Outdoor, displays advertising on media including billboards, transit shelters, buses, rail systems (in-car, station platforms and terminals), mall kiosks, stadium signage and in retail stores. Outdoor revenues are generated primarily from advertising sales. Outdoor contributed 16% to consolidated revenues for each of the years ended December 31, 2008 and 2007 and 15% to consolidated revenues for the year ended December 31, 2006.

º •
º INTERACTIVE: The Interactive segment, through CBS Interactive, is an online content network for information and entertainment with a portfolio of brands including CNET, CBS.com, CBSSports.com, Gamespot, TV.com, BNET and Last.fm. The results of CNET have been included in the Interactive segment since its acquisition in 2008. Interactive contributed 3% to consolidated revenues for the year ended December 31, 2008 and 1% for each of the years ended December 31, 2007 and 2006.

º •
º PUBLISHING: The Publishing segment consists of Simon & Schuster's consumer book publishing business with imprints such as Simon & Schuster, Pocket Books, Scribner and Free Press. Publishing contributed 6% to consolidated revenues for each of the years ended December 31, 2008, 2007 and 2006.

Consolidated Results of Operations-2008 vs. 2007 and 2007 vs. 2006

Revenues

    The tables below present the Company's consolidated revenues by type for
each of the years ended December 31, 2008, 2007 and 2006.


Revenues by Type
Year Ended                                       Increase/(Decrease)                     Increase/(Decrease)
December 31,            2008         2007           2008 vs. 2007            2006           2007 vs. 2006

Advertising sales    $  9,239.9   $ 10,060.9    $      (821.0 )     (8 )% $ 10,373.1    $     (312.2 )      (3 )%
Television license      1,939.4      1,382.2            557.2       40       1,606.8          (224.6 )     (14 )
fees
Affiliate revenues      1,185.1      1,117.7             67.4        6       1,069.6            48.1         4
Publishing                857.7        886.1            (28.4 )     (3 )       807.0            79.1        10
Home entertainment        234.0        201.9             32.1       16          83.4           118.5       142
Other                     494.3        424.1             70.2       17         380.3            43.8        12

   Total Revenues    $ 13,950.4   $ 14,072.9    $      (122.5 )     (1 )% $ 14,320.2    $     (247.3 )      (2 )%

                                                 Year Ended December 31,
            Percentage of Revenues by Type      2008        2007       2006

            Advertising sales                       66 %        72 %      72 %
            Television license fees                 14          10        11
            Affiliate revenues                       8           8         7
            Publishing                               6           6         6
            Home entertainment                       2           1         1
            Other                                    4           3         3

                  Total                            100 %       100 %     100 %

Management's Discussion and Analysis of Results of Operations and Financial Condition (Continued)

Advertising sales decreased 8% to $9.24 billion in 2008 from $10.06 billion in 2007 reflecting weakness in the television and radio advertising markets, the absence of the 2007 telecast of Super Bowl XLI on CBS Television Network, lower primetime ratings for the 2007/2008 broadcast season, partly as a result of the Writers Guild of America ("WGA") strike, which was settled in February 2008, and the impact of television and radio station divestitures. These decreases were partially offset by the acquisition of CNET and higher political advertising sales due to the 2008 presidential election. The Company derives a significant portion of its revenues from advertising sales, which are directly affected by the health of the economy. To the extent that the economic downturn continues, the Company will likely continue to experience softness in its advertising businesses during 2009. In 2007, advertising sales decreased 3% to $10.06 billion from $10.37 billion in 2006 reflecting the absence of UPN and the impact of radio and television station divestitures, which together reduced the Company's advertising sales by 3% for 2007 versus 2006. The decline in advertising sales also reflected lower political advertising sales and weakness in the radio advertising market. These declines were partially offset by the 2007 telecast of Super Bowl XLI on CBS Television Network and growth in advertising sales at Outdoor.

Television license fees increased 40% to $1.94 billion in 2008 from $1.38 billion in 2007 principally reflecting higher domestic and international syndication sales of the CSI series, including the impact of the new international self-distribution arrangement for the CSI franchise, which was previously distributed by a third party. Television license fees decreased 14% to $1.38 billion in 2007 from $1.61 billion in 2006 principally reflecting lower domestic syndication revenues as revenues from 2007 domestic availabilities, including NCIS, did not match contributions from the 2006 basic cable availability and off-network syndication of Frasier and the 2006 basic cable availability of Star Trek: Voyager.

Affiliate revenues increased 6% to $1.19 billion in 2008 from $1.12 billion in 2007 principally due to rate increases and subscriber growth at Showtime Networks and CBS College Sports Network. Affiliate revenues increased 4% to $1.12 billion in 2007 from $1.07 billion in 2006 driven by rate increases and subscriber growth at Showtime Networks and CBS College Sports Network.

Publishing revenues decreased 3% to $857.7 million in 2008 from $886.1 million in 2007 principally reflecting lower book sales due to a difficult comparison with the prior year, which included the success of the best-selling title The Secret by Rhonda Byrne. Publishing revenues increased 10% to $886.1 million in 2007 from $807.0 million in 2006 reflecting higher sales in the Adult and International groups, led by the release of The Secret by Rhonda Byrne.

Home entertainment revenues, primarily consisting of DVD sales, increased 16% to $234.0 million in 2008 from $201.9 million in 2007 reflecting the mix of available DVD releases. Home entertainment revenues increased $118.5 million to $201.9 million in 2007 from $83.4 million in 2006, as the Company was in the second year of a third party distribution arrangement which provides the Company with revenues after recoupment of upfront distribution costs incurred by the third party distributor.

Other revenues, which include digital media revenues and other ancillary fees for Television, Radio, Outdoor and Interactive operations, increased 17% to $494.3 million in 2008 from $424.1 million in 2007, primarily reflecting the impact of the acquisition of CNET. For 2007, other revenues increased 12% to $424.1 million in 2007 from $380.3 million in 2006 principally reflecting higher digital media revenues.

                                      II-6

--------------------------------------------------------------------------------

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

International Revenues

    The Company generated approximately 16% of its total revenues from
international regions in 2008, 12% in 2007 and 11% in 2006. The increase in
international revenues for 2008 primarily reflects the impact of the new
international self-distribution arrangement for the CSI franchise.


                                              Percentage                 Percentage                 Percentage
Year Ended December 31,            2008        of Total       2007        of Total       2006        of Total

United Kingdom                   $   584.3             26 % $   534.9             31 % $   484.5             31 %
Other Europe                         903.5             40       610.4             35       548.5             35
Canada                               350.6             16       302.2             18       276.5             17
All other                            407.7             18       275.2             16       270.8             17

  Total International Revenues   $ 2,246.1            100 % $ 1,722.7            100 % $ 1,580.3            100 %

Operating Expenses

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


 Operating Expenses
 by Type                                           Increase/                         Increase/
 Year Ended                                        (Decrease)                       (Decrease)
 December 31,            2008        2007        2008 vs. 2007         2006        2007 vs. 2006

 Programming           $ 3,291.3   $ 3,394.9    $   (103.6 )   (3 )% $ 3,354.7    $   40.2       1 %
 Production              2,570.3     2,331.9         238.4     10      2,585.1      (253.2 )   (10 )
 Outdoor operations      1,274.2     1,177.4          96.8      8      1,168.3         9.1       1
 Publishing                566.5       590.1         (23.6 )   (4 )      539.2        50.9       9
 operations
 Other                     948.4       835.0         113.4     14        777.5        57.5       7

    Total Operating    $ 8,650.7   $ 8,329.3    $    321.4      4 %  $ 8,424.8    $  (95.5 )    (1 )%
    Expenses

For 2008, operating expenses of $8.65 billion increased 4% from $8.33 billion in 2007. For 2007, operating expenses of $8.33 billion decreased 1% from $8.42 billion in 2006. The major components and changes in operating expenses were as follows:

º •
º Programming expenses represented 38% of total operating expenses in 2008, 41% in 2007 and 40% in 2006, and reflect the amortization of acquired rights of programs exhibited on the broadcast and cable networks, and television and radio stations. Programming expenses decreased 3% to $3.29 billion in 2008 from $3.39 billion in 2007 principally reflecting lower sports programming costs from the absence of the telecast of Super Bowl XLI which aired on CBS Television Network during the first quarter of 2007 and lower costs in 2008 due to the impact of the WGA strike, partially offset by higher cable programming costs. 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 partially offset by lower expenses resulting from the absence of UPN, which was shut down in September 2006.

º •
º Production expenses represented 30% of total operating expenses in 2008, 28% in 2007 and 31% in 2006, 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 increased 10% to $2.57 billion in 2008 from $2.33 billion in 2007 primarily reflecting higher costs associated with higher syndication sales, principally for the CSI series, partially offset by lower costs

Management's Discussion and Analysis of Results of Operations and Financial Condition (Continued)

due to the impact of the WGA strike, which resulted in fewer episodes and pilots produced in 2008, and the cancellation of certain television series. 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.

º •
º Outdoor operations expenses represented 15% of total operating expenses in 2008, and 14% in both 2007 and 2006, and reflect transit, billboard lease, maintenance, posting and rotation expenses. Outdoor operations expenses increased 8% to $1.27 billion in 2008 from $1.18 billion in 2007 primarily due to contractual increases in billboard lease and transit costs and the impact of acquisitions. 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.

º •
º Publishing operations expenses, which represented 7% of total operating expenses in 2008 and 2007 and 6% in 2006, reflect the cost of book sales, royalties and other costs incurred with respect to publishing operations. Publishing operations expenses decreased 4% to $566.5 million in 2008 from $590.1 million in 2007 reflecting lower royalty and production expenses driven by the decrease in revenues, which was largely due to lower sales of the best-selling title The Secret. Publishing operations expenses increased 9% to $590.1 million in 2007 from $539.2 million in 2006 reflecting increased production costs and higher royalty expenses resulting from the increase in revenues and the mix of titles.

º •
º Other operating expenses, which represented 11% of total operating expenses in 2008, 10% in 2007 and 9% in 2006, primarily include distribution expenses incurred with respect to television product, costs associated with digital media, and compensation. Other operating expenses increased 14% to $948.4 million in 2008 from $835.0 million in 2007 due to increased costs associated with digital media, including the impact of the acquisition of CNET, and higher television distribution costs. 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.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses, which include expenses incurred for selling and marketing costs, occupancy and back office support, represented 19% of revenues for each of the years 2008, 2007 and 2006. SG&A expenses decreased $57.4 million, or 2%, to $2.61 billion in 2008 from $2.67 billion in 2007, primarily reflecting lower costs resulting from cost-saving initiatives, the settlement of an international receivable claim, lower postretirement benefits expenses, and lower expenses due to the divestitures of television and radio stations, partially offset by the impact of acquisitions and higher stock-based compensation expense. In 2008, pension and postretirement benefits expenses decreased $15.2 million from 2007 due to higher actuarial gains related to postretirement plans. Pension expense is expected to increase in 2009 primarily due to plan asset performance in 2008.

For 2007, SG&A expenses decreased $106.6 million, or 4%, to $2.67 billion in 2007 from $2.77 billion in 2006, primarily reflecting lower expenses due to the divestitures of radio and television stations, the absence of UPN and lower pension and postretirement benefits expenses. These decreases were partially offset by higher stock-based compensation expense and increased costs associated with online and interactive businesses. In 2007, pension and postretirement benefits expenses decreased $66.7 million from 2006 primarily due to the recognition of lower actuarial losses and the impact of $250.0 million of discretionary contributions made during 2006 to pre-fund the Company's qualified pension plans.

Management's Discussion and Analysis of Results of Operations and Financial Condition (Continued)

Restructuring Charges

During 2008, as a result of weakened economic conditions, the Company reduced its cost structure across all of its segments. Accordingly, the Company recorded restructuring charges of $136.7 million, which are expected to reduce the Company's annual cost structure by approximately $220 million. The charges reflect $127.5 million of severance costs and $9.2 million of contract termination and other associated costs. During the year ended December 31, 2008, the Company paid $44.5 million of the severance costs and $1.5 million of the contract termination and other associated costs. The following table sets forth the 2008 activity for these restructuring charges by segment.

                                2008        2008          Balance at
                              Charges     Payments     December 31, 2008

               Television      $  60.5    $   (24.6 )    $           35.9
               Radio              53.9        (15.0 )                38.9
               Outdoor            13.2         (5.4 )                 7.8
               Interactive         3.4          (.7 )                 2.7
               Publishing          4.2          (.3 )                 3.9
               Corporate           1.5            -                   1.5

                  Total        $ 136.7    $   (46.0 )    $           90.7

During September 2006, the Company combined the resources of its syndication and distribution operations. As a result, restructuring charges of $11.6 million were recorded in the Television segment during the year ended December 31, 2006. The charges reflected severance costs of $9.7 million and legal, lease termination and other expenses of $1.9 million. As of December 31, 2008 the Company had settled substantially all of these liabilities.

Impairment Charges

Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") requires the Company to perform a fair value-based impairment test of goodwill and other intangible assets with indefinite lives annually and also between annual tests if an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its book value. During the third quarter of 2008, the Company performed an interim impairment test as a result of its assessment of factors including the continuation of adverse market conditions, which affected the Company's market value and trading multiples for entities within the Company's industry, as well as the continued economic slowdown which adversely affected the Company's advertising revenues, primarily at the Company's local businesses. The first step of the goodwill impairment test examined whether the book value of each of the Company's reporting units, which are generally one level below the operating segment level, exceeded its fair value. If the book value of the reporting unit exceeded its fair value, the second step of the test required the Company to then compare the implied fair value of that reporting unit's goodwill with the book value of its goodwill.

The estimated fair value of each reporting unit was computed principally based upon the present value of future cash flows (Discounted Cash Flow Method) and both the traded and transaction values of comparable businesses (Market Comparable Method). The Discounted Cash Flow Method and Market Comparable Method resulted in substantially equal fair values. For the impairment test of intangible assets with indefinite lives, the fair value of the intangible asset was compared with its book value. The estimated fair value of intangible assets was computed using the Discounted Cash Flow Method.

Management's Discussion and Analysis of Results of Operations and Financial Condition (Continued)

As a result of this interim impairment test, the Company recorded a non-cash impairment charge of $14.12 billion during the third quarter of 2008 to reduce the carrying value of goodwill by $10.99 billion and intangible assets by $3.13 billion. The charge was reflected as a reduction to goodwill at the Television segment of $5.81 billion, the Radio segment of $2.33 billion and the Outdoor segment of $2.85 billion as well as a reduction to the carrying value of intangible assets related to FCC licenses at the Television segment of $2.13 billion and the Radio segment of $984.6 million, and franchise agreements at the Outdoor segment of $8.2 million.

Also in 2008, in connection with the sale of certain of its radio stations, the Company recorded a pre-tax impairment charge of $62.0 million to reduce the carrying value of intangible assets by $30.4 million and the allocated goodwill by $31.6 million. In 2006, in connection with the sale of seven of its owned television stations, the Company recorded a pre-tax impairment charge of $65.2 million to reduce the carrying value of the allocated goodwill. (See Note 2 to the consolidated financial statements.)

The Company also performed its annual SFAS 142 impairment test during the fourth quarter of 2008. The assumptions underlying the Company's Discounted Cash Flow model for all of its reporting units were revised to reflect further slowdown of worldwide economic conditions. The Company also evaluated the reasonableness of its estimated fair values of the individual reporting units as compared to the Company's overall market capitalization during the fourth quarter. The Company's market capitalization during that period was below the aggregate fair value of its reporting units. The Company believes the substantial decrease in its traded market value during the fourth quarter of 2008 was largely due to factors which did not impact the fair value of its reporting units to the same extent. These factors included liquidity and credit concerns in the overall market and the market's perceived risk in advertising-based businesses during an economic slowdown. The Company believes the aggregate fair value of its reporting units computed based on the Discounted Cash Flow Method and Market Comparable Method represents the best estimate of its future performance and therefore, is a more accurate fair value of the Company.

The fourth quarter 2008 annual SFAS 142 impairment test did not result in any additional 2008 impairment charges. However, due to the uncertainty of future economic conditions and their impact on the Company's financial performance, further downward revisions to the estimated fair values of certain reporting units or intangible assets could result in a future impairment charge.

Depreciation and Amortization

For 2008, depreciation and amortization increased $75.9 million, or 17%, to $531.6 million from $455.7 million principally reflecting depreciation and amortization associated with fixed assets and intangible assets acquired in connection with CNET, higher depreciation resulting from higher capital expenditures at Outdoor and higher amortization associated with other interactive businesses. For 2007, depreciation and amortization increased $16.2 million, or 4%, to $455.7 million from $439.5 million principally reflecting higher depreciation associated with new broadcast facilities.

Interest Expense

For 2008, interest expense decreased $24.3 million to $546.6 million from $570.9 million principally due to lower interest rates. For 2007, interest expense increased $5.4 million to $570.9 million from $565.5 million. The Company had $7.00 billion at December 31, 2008 and $7.09 billion at December 31, . . .