<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
                                ---------------
 
                                 ANNUAL REPORT
                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997        COMMISSION FILE NUMBER 1-9553
                            ------------------------
 
                                  VIACOM INC.
 
             (Exact Name Of Registrant As Specified In Its Charter)
                            ------------------------
 

<TABLE>
<S>                                                   <C>
                     DELAWARE                                        04-2949533
         (State or Other Jurisdiction of                          (I.R.S. Employer
          Incorporation Or Organization)                        Identification No.)
 
           1515 BROADWAY, NEW YORK, NY                                 10036
     (Address of Principal Executive Offices)                        (Zip Code)
 
              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 258-6000
</TABLE>

 
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 

<TABLE>
<CAPTION>
                                                               NAME OF EACH EXCHANGE ON
                    TITLE OF EACH CLASS                            WHICH REGISTERED
- -----------------------------------------------------------  -----------------------------
<S>                                                          <C>
Class A Common Stock, $0.01 par value                              American Stock Exchange
Class B Common Stock, $0.01 par value                              American Stock Exchange
Warrants Expiring on July 7, 1999                                  American Stock Exchange
6.75% Senior Notes due 2003                                        American Stock Exchange
7.75% Senior Notes due 2005                                        American Stock Exchange
8% Exchangeable Subordinated Debentures due 2006                   American Stock Exchange
7.625% Senior Debentures due 2016                                  American Stock Exchange
</TABLE>

 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE
 
                                (Title Of Class)
 
    Indicate by check mark whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.  Yes /X/ No / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  /X/
 
    As of March 23, 1998, 69,786,230 shares of Viacom Inc. Class A Common Stock,
$0.01 par value ("Class A Common Stock"), and 285,831,341 shares of Viacom Inc.
Class B Common Stock, $0.01 par value ("Class B Common Stock"), were
outstanding. The aggregate market value of the shares of Class A Common Stock
(based upon the closing price of $53.06 per share as reported by the American
Stock Exchange on that date) held by non-affiliates was approximately
$1,217,628,202 and the aggregate market value of the shares of the Class B
Common Stock (based upon the closing price of $53.75 per share as reported by
the American Stock Exchange on that date) held by non-affiliates was
approximately $12,557,887,162.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    The Definitive Proxy of the Registrant for the 1998 Annual Meeting of
Shareholders (Part III to the extent described herein).
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

                                     PART I
 

ITEM 1.  BUSINESS.
 
BACKGROUND
 
    Viacom Inc. (together with its subsidiaries and divisions, unless the
context otherwise requires, the "Company") is a diversified entertainment and
publishing company with operations in four segments: (i) Networks and
Broadcasting, (ii) Entertainment, (iii) Video and Music/Theme Parks, and (iv)
Publishing. Through the Networks and Broadcasting segment, the Company operates
MTV: MUSIC TELEVISION-Registered Trademark-, SHOWTIME-Registered Trademark-,
NICKELODEON-Registered Trademark-/NICK AT NITE-Registered Trademark-, VH1 MUSIC
FIRST-TM- and TV LAND-Registered Trademark-, among other program services, and
operates or programs 17 broadcast television stations. Through the Entertainment
segment, which includes PARAMOUNT PICTURES-Registered Trademark-, PARAMOUNT
TELEVISION-Registered Trademark- and the Company's approximately 80%-owned
subsidiary SPELLING ENTERTAINMENT GROUP INC. ("SPELLING"), the Company produces
and distributes theatrical motion pictures and television programming. Through
the Video and Music/Theme Parks segment, which includes the
BLOCKBUSTER-Registered Trademark- family of businesses and PARAMOUNT
PARKS-Registered Trademark-, the Company owns, operates and franchises
videocassette rental and sales stores worldwide and owns and operates music
stores in the U.S. In addition, PARAMOUNT PARKS owns and operates five theme
parks and one water park in the U.S. and Canada. Through the Publishing segment,
which includes numerous imprints such as SIMON & SCHUSTER-Registered Trademark-,
MACMILLAN PUBLISHING USA-TM- and PRENTICE HALL-Registered Trademark-, the
Company publishes and distributes educational, consumer, business, technical and
professional books, and audio-video software products.
 
    The Company was organized in Delaware in 1986 for the purpose of acquiring
the stock of a predecessor. On March 11, 1994, the Company acquired a majority
of outstanding shares of Paramount Communications Inc. by tender offer; on July
7, 1994, Paramount Communications Inc. became a wholly owned subsidiary of the
Company, and, on January 3, 1995, Paramount Communications Inc. was merged into
the principal subsidiary of the Company. On September 29, 1994, Blockbuster
Entertainment Corporation merged with and into the Company. On July 31, 1996,
the Company completed the split-off of a subsidiary that held its cable
television systems to its shareholders pursuant to an exchange offer and related
transactions. On July 2, 1997, the Company sold its ten radio stations to
Chancellor Media Corp. On January 14, 1998, the Company announced its intention
to sell all of its Education, Reference, and International and Business &
Professional publishing businesses while retaining its Consumer publishing
business. Additionally, the Company has determined to dispose of its interactive
game businesses, including VIRGIN INTERACTIVE ENTERTAINMENT-TM- which SPELLING
plans to dispose of in 1998. The interactive games business unit is now
accounted for as a discontinued operation (see "Business-- Discontinued
Operations"). In 1997, the Company increased its ownership of SPELLING to
approximately 80%, thereby permitting tax consolidation of SPELLING with the
Company.
 
    As of March 23, 1998, National Amusements, Inc. ("NAI"), a closely held
corporation that owns and operates more than 1,100 movie screens in the U.S.,
the U.K. and Latin America, owned approximately 67% of the Company's voting
Class A Common Stock ("Class A Common Stock"), and approximately 28% of the
Company's outstanding Class A Common Stock and non-voting Class B Common Stock
("Class B Common Stock") on a combined basis. 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's principal offices are located at 1515 Broadway, New York, New
York 10036 (telephone 212/258-6000). At December 31, 1997, the Company and its
affiliated companies employed approximately 116,700 people, of which
approximately 38,100 were full-time salaried employees.
 
                                      I-1

<PAGE>

BUSINESS
 
    NETWORKS AND BROADCASTING
 
    NETWORKS.  The Company owns and operates advertiser-supported basic cable
television program services and premium subscription television program services
in the U.S. and internationally. The MTV Networks division ("MTVN") includes
such owned and operated program services as MTV: MUSIC
TELEVISION-Registered Trademark- ("MTV") in the U.S., Europe and Latin America,
NICKELODEON-Registered Trademark- in the U.S., Latin America and Scandinavia,
NICK AT NITE-Registered Trademark- in the U.S., VH1 MUSIC FIRST-TM- in the U.S.
("VH1"), VH-1-TM- in the U.K., MTV's spin-off, M2: MUSIC TELEVISION-TM- ("M2")
in the U.S. and NICKELODEON's spin-off, TV LAND-Registered Trademark- in the
U.S.  MTVN also participates in program services as a joint venturer, including
MTV-TM- in Asia and in Brazil, NICKELODEON-Registered Trademark- in the U.K.,
NICKELODEON-Registered Trademark- in Australia and in Germany, and
VH-1-Registered Trademark- in Germany. The Company's Showtime Networks Inc.
subsidiary ("SNI") owns and operates SHOWTIME-Registered Trademark-, THE MOVIE
CHANNEL-TM- and FLIX-Registered Trademark-, and participates as a joint venturer
in, and is the manager of, SUNDANCE CHANNEL-Registered Trademark-.
 Additionally, the Company participates as a joint venturer in the UNITED
PARAMOUNT NETWORK-Registered Trademark- ("UPN"), a broadcast television network,
in two advertiser-supported basic cable program services in the U.S., COMEDY
CENTRAL-Registered Trademark- and ALL NEWS CHANNEL-TM-, and a basic cable
programming service in the U.K., THE PARAMOUNT COMEDY CHANNEL. The Company also
participates as a joint venturer in GULF DTH ENTERTAINMENT LDC ("GULF DTH"). On
October 21, 1997, the Company sold its fifty percent interest in USA Networks,
including Sci-Fi Channel, to Universal Studios, Inc ("Universal").
 
    Generally, the Company's networks are offered to customers of cable
television operators, distributors of direct-to-home satellite services ("DTH")
and other multichannel distributors. DTH distributors provide service by either
low-powered C-Band satellite technology (received by large satellite dishes at
customers' premises, "TVRO") or mid- to high-powered K-Band satellite technology
(received by smaller satellite dishes at customers' premises, "DBS"). Cable
television operators are currently the predominant distributors of the Company's
program services in the U.S. Internationally, the predominant distribution
technology varies territory by territory.
 
    MTV NETWORKS.  MTV targets viewers from the ages of 12 to 34 with
programming that consists primarily of music videos and concerts, augmented by
music and general lifestyle information, comedy and dramatic series, animated
programs, news specials, interviews, documentaries and other youth-oriented
programming. M2, a 24-hour, seven-days-a-week spin-off of MTV, targets a segment
of the 12 to 34 year old audience with a "freeform" music format which features
music videos from a broad range of musical genres and artists and is principally
distributed to consumers by DTH. In the fourth quarter of 1997, MTVN announced
that it is developing a package of digital music television services planned for
launch in July 1998. "The Suite from MTV and VH1"-TM- will consist of seven
music television program services, each featuring different music genres that
are extensions of the MTV and VH1 services and will be offered for distribution
by digital technologies such as DBS and cable operators offering digital
technology.
 
    MTV continues to expand its business opportunities based on its programming.
MTV FILMS-TM- produced the highly successful BEAVIS & BUTTHEAD DO AMERICA,
released by PARAMOUNT PICTURES in December 1996 and expects 200 CIGARETTES, DEAD
MAN ON CAMPUS and ELECTION to be released by PARAMOUNT PICTURES in 1998.  MTV
has also launched lines of home videos, consumer products and books, featuring
MTV programming and personalities, as well as on-line services offering music
information and interactive versions of MTV programming. In addition, MTV
pursues broadcast network and first-run syndication television opportunities
through MTV PRODUCTIONS-TM-.
 
    MTV was licensed to approximately 63.4 million domestic subscribers at
December 31, 1997 (based on subscriber counts provided by each distributor of
the service, including cable, DTH and other multichannel programming providers).
According to the December 1997 sample reports issued by the A.C. Nielsen
 
                                      I-2

<PAGE>
Company (the "Nielsen Report"), MTV reached approximately 68.0 million domestic
subscriber households. At December 31, 1997, M2 was licensed to approximately
9.3 million domestic subscribers.
 
    MTV also owns and operates, participates in as a joint venturer, and
licenses third parties to operate, MTV program services throughout the world.
The MTV international program services are described in the table below. These
international MTV program services are regionally customized to suit the local
tastes of their young adult viewers by the inclusion of local music,
programming, and on-air personalities, and use of the local language.
 
    NICKELODEON combines acquired and originally produced programs in a
pro-social, non-violent format comprising two distinct program units tailored to
age-specific demographic audiences: NICKELODEON, targeted to audiences ages 2 to
15 (which includes NICK JR.-Registered Trademark-, a program block designed for
2 to 11 year olds), features a variety of live-action and animated programs,
including children's game shows, educational shows, puppet shows, dramatic
specials, comedy, adventure and magazine shows; and NICK AT NITE, which attracts
primarily audiences ages 18 to 54 and offers mostly situation comedies from
various eras, including I LOVE LUCY, THE DICK VAN DYKE SHOW, HAPPY DAYS, THE
MARY TYLER MOORE SHOW and TAXI. At December 31, 1997, NICKELODEON/NICK AT NITE
was licensed to approximately 65.9 million domestic subscribers (based on
subscriber counts provided by each distributor of the service, including cable,
DTH and other multichannel programming providers). According to the Nielsen
Report, NICKELODEON/NICK AT NITE reached approximately 71.1 million domestic
subscriber households. According to the Nielsen Report for the period from
September 1, 1997 to January 18, 1998, NICKELODEON held 56% of the gross ratings
points for the kids ages 2 to 11 audience. TV LAND, a 24-hour, seven-days-a-week
spin-off of NICKELODEON, is comprised of a broad range of well-known television
programs from various genres, including comedies, dramas, westerns, variety and
other formats from the 1950s through the 1980s. At December 31, 1997, TV LAND
was licensed to approximately 27.8 million domestic subscribers (based on
subscriber counts provided by each distributor of the service, including cable,
DTH and other multichannel programming providers).
 
    NICKELODEON licenses its brands and characters for and in connection with
merchandise, home video and publishing worldwide. Additionally, the Company
publishes a monthly NICKELODEON MAGAZINE, which had approximately 752,000
subscribers at December 31, 1997, and created NICKELODEON MOVIES-TM-, a new
unit, which is developing a mix of story and character-driven projects based on
original ideas and NICKELODEON programming, such as the feature films GOOD
BURGER and RUGRATS VACATION (which was released in direct-to-video format).  A
new RUGRATS movie will be produced by NICKELODEON and is expected to be released
by PARAMOUNT PICTURES in 1998. NICKELODEON also owns and operates theme park
attractions and touring shows under its NICKELODEON RECREATION-TM- unit and
interactive public attractions and television production studios under its
NICKELODEON STUDIOS-Registered Trademark- unit located at Universal Studios
Florida.
 
    NICKELODEON also owns and operates, participates in as a joint venturer, and
licenses third parties to operate, NICKELODEON program services throughout the
world. The NICKELODEON international program services are described in the chart
below. These international program services are customized by region and country
to suit the tastes and needs of their viewers by inclusion of regionally or
locally produced programming and by use of local language.
 
    VH1 presents current and classic music and related programming with emphasis
on series which context viewers' favorite music and artists such as "Behind the
Music", "VH1 Pop Up Videos" and "Storytellers", in addition to airing music
videos, concerts, special events, and music movies. VH1 targets an audience aged
25 to 44. At December 31, 1997, VH1 was licensed to approximately 56.5 million
domestic subscribers (based on subscriber counts provided by each distributor of
the service, including cable, DTH and other multichannel programming providers).
 According to the Nielsen Report, VH1 reached approximately 60.1 million
domestic subscriber households.  International versions of VH1 program services
are described in the chart below.
 
                                      I-3

<PAGE>
    MTVN, in exchange for cash and advertising time or for promotional
consideration only, licenses from record companies music videos for exhibition
on MTV, VH1, M2 and other MTVN program services. The agreements generally cover
a three to five year period and contain provisions regarding video debut and
exclusivity in the U.S.  MTVN has entered into multi-year global music video
licensing agreements with certain of the major record companies. MTVN also is
negotiating and expects to renew or conclude additional global and/or regional
license agreements with major and independent labels. However, there can be no
assurance that such renewals or agreements can be concluded on favorable terms.
MTVN is continuing to take measures to assure its music video program services
worldwide access to music videos. (See "Business--Competition--Networks")
 
    MTVN derives revenues principally from two sources: the sale of time on its
own networks to advertisers; and the license of the networks to 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 in general market conditions for advertising
may affect MTVN's revenues. (See "Business--Competition--Networks")
 
                                      I-4

<PAGE>
    The following table sets forth information regarding MTVN program services
operated internationally:
 

<TABLE>
<CAPTION>
                                                                                                                    LAUNCH/
PROGRAM                                                                                   REGIONAL FEEDS/         COMMENCEMENT
SERVICE(1)                            TERRITORY                   OWNERSHIP                 LANGUAGE(2)               DATE
- -------------------------  ------------------------------- -----------------------  ---------------------------- --------------
<S>                        <C>                             <C>                      <C>                          <C>
MTV Europe(3)              41 territories, including most  100% by the Company      4 Regional Feeds (UK, North, August 1987
                           of Europe, Ireland, South                                Central and South), all in
                           Africa, certain countries in                             English (except Central feed
                           the former Soviet Union, the                             partially in German and
                           Middle East, Egypt, Faroe                                South feed partially in
                           Islands, Israel, Liechtenstein,                          Italian)
                           Malta and Moldova
 
MTV Latin America          Latin America, the Caribbean,   100% by the Company      2 Regional Feeds in Spanish  October 1993
                           Brazil and the U.S.
 
MTV Brasil                 Brazil                          Joint Venture (with      Portuguese                   October 1990
                                                           Abril S.A.)
 
MTV Mandarin               Taiwan, certain provinces in    Joint Venture (with      Mandarin                     April 1995
                           China* and Singapore            PolyGram N.V.)
 
MTV Asia                   South East Asia (Brunei,        Joint Venture ) (with    English, Bahasa Indonesian   May 1995
                           Thailand, Singapore,            PolyGram N.V.)           and Tagalog
                           Philippines, Indonesia,
                           Malaysia, Vietnam), Hong Kong*
                           and South Korea*
 
MTV India                  India, Sri Lanka, Bangla-desh,  Joint Venture (with      English and Hindi            October 1996
                           Nepal and Pakistan              PolyGram N.V.)
 
MTV New Zealand            New Zealand                     Licensing Arrangement    English                      July 1997
                                                           (with Television New
                                                           Zealand Ltd.)
 
MTV Japan                  Japan                           Licensing Arrangement    Japanese                     December 1992
                                                           (with Music Channel
                                                           Co., Ltd.)
 
MTV Australia              Australia                       Licensing Arrangement    English                      March 1997
                                                           (with Austereo Village
                                                           Music TV Pty Limited
                                                           and Optus Vision Pty
                                                           Limited)
 
Nickelodeon Latin America  Latin America, Brazil and the   100% by the Company      Spanish, Portuguese and      December 1996
                           Caribbean                                                English
 
Nickelodeon Nordic*        Nordic region (including        100% by the Company      English and Swedish          February 1997
                           Sweden, Norway, Denmark and
                           Finland)
 
Nickelodeon Turkey*        Turkey                          Licensing Arrangement    Turkish                      September 1997
                                                           (with The Media Group
                                                           of Turkey)
 
Nickelodeon Germany*       Germany                         Joint Venture (with      German                       July 1995
                                                           Ravensburger Film and
                                                           TV GmbH and Bear
                                                           Stearns)
 
Nickelodeon U.K.*          U.K.                            Joint Venture (with      English                      September 1993
                                                           British Sky
                                                           Broadcasting Limited)
 
Nickelodeon Australia      Australia                       Joint Venture (with XYZ  English                      October 1995
                                                           Entertainment Pty Ltd.)
 
VH-1 U.K.                  U.K., Ireland, the Middle East, 100% by the Company      English                      September 1994
                           Africa, Scandinavia, some
                           countries in Europe, Israel,
                           Malta, Moldova, Netherlands,
                           South Africa and Eastern Europe
 
VH-1 Germany               Germany and Austria             Joint Venture (with      German                       May 1995
                                                           Bear Stearns)
</TABLE>

 
- ------------------------
(1) Unless otherwise indicated by an asterisk, the program services are 24
    hours-a-day, and seven days-a-week.
(2) All MTV and VH-1 program services include English language music videos.
(3) In 1996, MTV Europe divided its one Pan-European service into three regional
    services in order to provide viewers with more locally relevant programming,
    including some local language programming. In July 1997, MTV Europe launched
    a fourth regional feed customized for viewers in the U.K. and further
    customized the South feed for viewers in Italy by adding Italian language
    programming. At December 31, 1997, MTV Europe had 58.3 million subscribers
    (based on subscriber counts provided by each distributor of the service,
    including cable, DTH and other multichannel programming providers).
 
                                      I-5

<PAGE>
    SHOWTIME NETWORKS INC.  SNI owns and operates three commercial-free, premium
subscription television program services: SHOWTIME, offering recently released
theatrical feature films, original movies and series, family entertainment and
boxing and other special events; THE MOVIE CHANNEL, offering recently released
theatrical films and related programming and original movies; and FLIX, an
added-value program service featuring theatrical movies primarily from the
1960s, 70s and 80s, as well as select recent titles. At December 31, 1997,
SHOWTIME, THE MOVIE CHANNEL and FLIX, in the aggregate, had approximately 18.2
million cable and other subscriptions in 50 states and certain U.S. territories.
SUNDANCE CHANNEL, a joint venture (among SNI, an affiliate of Robert Redford and
an affiliate of PolyGram Filmed Entertainment Inc.) managed by SNI, is a
commercial-free premium subscription service, dedicated to independent film,
featuring top-quality American independent films, documentaries, foreign and
classic art films, shorts and animation, with an emphasis on recently released
titles.
 
    SNI also provides special events, such as sports events, to licensees on a
pay-per-view basis. SHOWTIME EVENT TELEVISION-TM- is a pay-per-view distributor
of these special events, including boxing events, such as the historic rematch
between heavyweight champion Evander Holyfield and former heavyweight champion
Mike Tyson in June 1997.
 
    On February 5, 1997, SNI sold certain assets of its subsidiary, SHOWTIME
SATELLITE NETWORKS INC. ("SSN"), to Consumer Satellite Systems, Inc. ("CSS").
SSN had been in the business of offering subscriptions to the Company's and
other program services to TVRO viewers on a direct retail basis. SNI will
continue to offer its program services to TVRO and other DTH satellite packagers
such as CSS on a wholesale basis.
 
    In order to exhibit theatrical motion pictures on premium subscription
television, 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. SNI's exhibition
rights cover the U.S. and may, on a contract-by-contract basis, cover additional
territories. SNI has the exclusive U.S. premium television rights to PARAMOUNT
PICTURES' feature films theatrically released in the U.S. from January 1, 1998,
as well as non-exclusive rights to titles from PARAMOUNT PICTURES' film library
(see "Business--Entertainment"). SNI also has significant theatrical motion
picture license agreements with Sony Pictures Entertainment Inc.,
Metro-Goldwyn-Mayer Inc., PolyGram Filmed Entertainment Inc., Castle Rock
Entertainment, Phoenix Pictures, LIVE Film and Mediaworks Inc., and Buena Vista
Television (a subsidiary of the Walt Disney Company) covering motion pictures
initially theatrically released through dates ranging from December 31, 1998 to
December 31, 2003. Theatrical motion pictures that are licensed to SNI on an
exclusive basis are generally exhibited first on SHOWTIME and THE MOVIE CHANNEL
after an initial period for theatrical, home video and pay-per-view exhibition
and before the period has commenced for standard broadcast television and basic
cable television exhibition. Many of the motion pictures which appear on FLIX
have been previously available for standard broadcast and other exhibitions.
 
    SNI also arranges for the development, production, acquisition and, in many
cases, distribution of original programs and motion pictures. These original
programs and motion pictures premiere in the U.S. on SHOWTIME and THE MOVIE
CHANNEL, unless they are previously theatrically released. Such programming is
also exploited in various media worldwide. As part of its original programming
strategy, SNI premiered 30 original movies on SHOWTIME and 23 original movies on
THE MOVIE CHANNEL in 1997, and intends to premiere a similar number in 1998. The
producers of SNI's original motion pictures are given an opportunity to seek a
theatrical release prior to such pictures' exhibition on SHOWTIME or THE MOVIE
CHANNEL. If the producers are not successful in obtaining such a theatrical
release, these pictures then premiere in the U.S. on SHOWTIME or THE MOVIE
CHANNEL. SNI has entered into and plans to continue to enter into co-financing,
co-production and/or co-distribution arrangements with other parties to reduce
the net cost to SNI for its original movies. In 1997, Hallmark Entertainment
Distribution Company and PARAMOUNT PICTURES were the predominant co-producers,
co-financiers and co-distributors of SNI's original motion pictures for that
calendar year.
 
                                      I-6

<PAGE>
    The costs of acquiring premium television rights to programming and
producing original motion pictures are the principal expenses of SNI. At
December 31, 1997, in addition to program acquisition commitments reflected in
the Company's financial statements, SNI had commitments to acquire programming
rights and original programming commitments in an aggregate amount of
approximately $1.5 billion, most of which is payable over the next six years as
part of SNI's normal programming expenditures. SNI's commitments to acquire
programming rights are contingent upon delivery of motion pictures which are not
yet available for premium television exhibition and, in many cases, have not yet
been produced.
 
    BROADCASTING.  The Company's television division, PARAMOUNT STATIONS GROUP
("PSG"), owns and operates 15 television stations, all of which operate pursuant
to the Communications Act of 1934, as amended (the "Communications Act"), under
licenses granted by the Federal Communications Commission ("FCC"). Such licenses
are renewable every eight years. In addition, the Company programs two
additional commercial television stations pursuant to local market agreements
("LMAs"). All of the above stations are located in the top 50 television markets
and reach approximately 24% of all U.S. television households.
 
    In connection with the expansion and development of the Company's interest
in UPN-Registered Trademark-, PSG has pursued a strategy of acquiring television
stations in major U.S. markets principally through like-kind exchanges of PSG's
stations which are affiliated with networks other than UPN for stations which
are or will become UPN affiliates. On June 2, 1997, PSG consummated a three-way
exchange agreement with Cox Broadcasting Corporation and A. H. Belo Corporation
whereby PSG exchanged KMOV-TV, a CBS affiliate serving St. Louis, Missouri, for
(i) KSTW-TV, which became a UPN affiliate serving Seattle-Tacoma, Washington,
and (ii) consideration used to acquire WUPL-TV, serving New Orleans, Louisiana,
on October 28, 1997, and WGNT-TV, serving Norfolk-Portsmouth-Newport News,
Virginia, on October 31, 1997. On December 8, 1997, PSG closed on an agreement
with Outlet Broadcasting, Inc., whereby PSG exchanged WVIT-TV, serving
Hartford-New Haven, Connecticut, for (i) WWHO-TV, serving Columbus, Ohio, and
(ii) consideration used to purchase KMAX-TV, serving
Sacramento-Stockton-Modesto, on December 8, 1997, and WNDY-TV, serving
Indianapolis, Indiana, on February 4, 1998. In addition, PSG entered into two
separate LMAs during the past year, one on July 31, 1997 with the licensee of
WTVX-TV, serving West Palm Beach-Ft. Pierce, Florida, and one on December 8,
1997 with the licensee of WLWC-TV, serving Providence, Rhode Island-New Bedford,
Massachusetts. On March 23, 1998, PSG agreed to acquire KTLC-TV, serving
Oklahoma City, Oklahoma for $23.5 million. The agreement is subject to certain
conditions including FCC approval. Under the LMAs, PSG programs and sells the
advertising time for the television stations.
 
                                      I-7

<PAGE>
    The table below sets forth the 15 television stations owned and operated by
PSG and the two television stations operated by PSG under LMAs at March 23,
1998, as well as the station that the Company expects to acquire this year.
 

<TABLE>
<CAPTION>
STATION AND                               MARKET    TYPE/          NETWORK
METROPOLITAN AREA SERVED*                  RANK    CHANNEL       AFFILIATION
- ----------------------------------------  ------   -------  ----------------------
<S>                                       <C>      <C>      <C>
WPSG-TV.................................     4     UHF/57            UPN
  Philadelphia, PA
WSBK-TV.................................     6     UHF/38            UPN
  Boston, MA
WDCA-TV.................................     7     UHF/20            UPN
  Washington, DC
KTXA-TV.................................     8     UHF/21            UPN
  Dallas-Ft. Worth, TX
WKBD-TV.................................     9     UHF/50            UPN
  Detroit, MI
WUPA-TV.................................    10     UHF/69            UPN
  Atlanta, GA
KTXH-TV.................................    11     UHF/20            UPN
  Houston, TX
KSTW-TV.................................    12     VHF/11            UPN
  Seattle-Tacoma, WA
WTOG-TV.................................    15     UHF/44            UPN
  Tampa-St. Petersburg-Sarasota, FL
WBFS-TV.................................    16     UHF/33            UPN
  Miami-Ft. Lauderdale, FL
KMAX-TV.................................    20     UHF/31            UPN
  Sacramento-Stockton-Modesto, CA
WNDY-TV.................................    25     UHF/23      WB/primary (expires)
  Indianapolis, IN                                                   April 5, 1998
                                                            UPN/secondary**
 
WWHO-TV.................................    34     UHF/53      WB/primary (expires)
  Columbus, OH                                                      April 13, 2000
                                                            UPN/secondary**
 
WGNT-TV.................................    39     UHF/27            UPN
  Norfolk-Portsmouth-Newport News, VA
WUPL-TV.................................    41     UHF/54            UPN
  New Orleans, LA
KTLC-TV***..............................    44     UHF/43   PBS (upon closing, UPN)
  Oklahoma City, OK
 
   The following two stations are operated by PSG under LMAs:
 
WTVX-TV                                     43     UHF/34            UPN
  West Palm Beach-Ft. Pierce, FL
WLWC-TV                                     49     UHF/28      WB/primary (expires)
  Providence, RI-New Bedford, MA                                    April 13, 2000
                                                            UPN/secondary**
</TABLE>

 
- ------------------------
*   Metropolitan Areas Served are A.C. Nielsen Company's Designated Market
    Areas.
**  Under secondary affiliation agreements, UPN programming is broadcast
    out-of-pattern and is scheduled around WB programming.
*** Under contract.
 
    UNITED PARAMOUNT NETWORK.  On January 15, 1997, the Company acquired a 50%
interest in UPN-Registered Trademark- from BHC Communications, Inc. ("BHC"), a
corporate affiliate of Chris Craft Industries, Inc. The interest was acquired
pursuant to an option the Company exercised on December 3, 1996, for an exercise
price of approximately $160 million. The exercise price was equal to
approximately one-half of BHC's aggregate cash contributions to UPN through the
exercise date, increased by an interest factor. At December 31, 1997, UPN
provided 15 hours of programming a week, including two-hour prime-time
programming blocks three nights a week, to affiliates in approximately 175 U.S.
television markets, reaching approximately 89.5% of all U.S. television
households. The Company also produces original programming for UPN (see
"Business--Entertainment") and owns and operates 15 stations and programs an
additional two stations pursuant to LMAs, all of which are affiliates of UPN
(see "Business--Broadcasting").
 
                                      I-8

<PAGE>
    OTHER JOINT VENTURES.  COMEDY CENTRAL, a joint venture of the Company and
Home Box Office ("HBO"), a division of Time Warner Inc. ("Time Warner"), is an
advertiser-supported basic cable television comedy program service.  ALL NEWS
CHANNEL, a joint venture of the Company and Conus Communications Company Limited
Partnership, is a limited partnership whose managing general partner is Hubbard
Broadcasting, Inc., and its programming consists of national and international
news, weather, sports and business news. The Company is a joint venturer in GULF
DTH, a satellite direct-to-home platform offering programming in the Middle
East, including programming from MTV, VH-1, NICKELODEON, TV LAND and THE
PARAMOUNT CHANNEL. A partnership including subsidiaries of PARAMOUNT PICTURES
and Sony Pictures Entertainment Inc. owns THE MOVIE CHANNEL MIDDLE EAST ("GULF
DTH's THE MOVIE CHANNEL"), a premium subscription television service in the
Middle East carried on GULF DTH.  The PARAMOUNT COMEDY CHANNEL is a joint
venture with BSkyB, featuring comedies and films during the daypart following
NICKELODEON in the U.K.
 
ENTERTAINMENT
 
    The Entertainment segment's principal businesses are the production and
distribution of motion pictures and television programming, as well as movie
theater operations and music publishing.
 
    THEATRICAL MOTION PICTURES.  Through PARAMOUNT PICTURES, the Company
produces, finances and distributes feature motion pictures. Motion pictures are
produced by PARAMOUNT PICTURES, produced by independent producers and financed
in whole or in part by PARAMOUNT PICTURES, or produced by others and distributed
by PARAMOUNT PICTURES.  Each picture is a separate and distinct product with its
financial success dependent upon many factors, among which cost and public
response are of fundamental importance. The normal distribution cycle of motion
pictures produced or acquired for distribution by PARAMOUNT PICTURES is
exhibition in U.S. and foreign theaters followed by videocassettes and discs,
pay-per-view television, premium subscription television, network television,
and basic cable television and syndicated television exploitation. During 1997,
PARAMOUNT PICTURES theatrically released 20 feature motion pictures in the U.S.,
including TITANIC, winner of 11 Academy Awards including "Best Picture",
FACE/OFF, KISS THE GIRLS, THE RAINMAKER, PRIVATE PARTS, and as co-productions
with SPELLING FILMS, IN AND OUT and BREAKDOWN.  In February 1998, SPELLING
announced that it will no longer produce motion pictures. PARAMOUNT PICTURES
currently plans to release approximately 15 films in 1998, including NEIL
SIMON'S THE ODD COUPLE II, DEEP IMPACT, THE TRUMAN SHOW, SNAKE EYES and STAR
TREK IX, and MTV FILMS' 200 CIGARETTES, DEAD MAN ON CAMPUS and ELECTION and
NICKELODEON FILMS' THE RUGRATS MOVIE.
 
    In seeking to limit PARAMOUNT PICTURES' financial exposure, the Company has
pursued a strategy with respect to a number of films of entering into agreements
to distribute such films produced and/or financed, in whole or in part, with
other parties. The parties to these arrangements include studio and non-studio
entities, both domestic and foreign. In various of these arrangements, the other
parties control certain distribution and other ownership rights.
 
    PARAMOUNT PICTURES generally distributes its motion pictures for theatrical
release outside the U.S. and Canada through United International Pictures
("UIP"), a company owned by the Company, MGM and Universal.  PARAMOUNT PICTURES
distributes its motion pictures on videocassette and disc in the U.S. and Canada
through PARAMOUNT HOME VIDEO-TM- and outside the U.S. and Canada, generally
through Cinema International B.V., a joint venture of entities associated with
the Company and Universal. PARAMOUNT PICTURES' feature films initially
theatrically released in the U.S. from January 1, 1998 will be exhibited
exclusively (within U.S. premium television) on SHOWTIME and THE MOVIE CHANNEL.
PARAMOUNT PICTURES also distributes its motion pictures for premium subscription
television release outside the U.S. and Canada and licenses its motion pictures
to home and hotel/motel pay-per-view, airlines, schools and universities.
 
                                      I-9

<PAGE>
    During 1996, PARAMOUNT PICTURES entered into transactions with KirchGroup in
Germany and with TCM Droits AudioVisuel S.N.C. and T elevision par Satellite in
France for the licensing of its feature film and television programming output
and libraries for free and pay television exploitation. SPELLING entered into a
similar broad-based agreement with KirchGroup in 1996.
 
    During 1997, affiliates of PARAMOUNT PICTURES (i) entered into a multi-year
license for television programming with GULF DTH and a multi-year license for
feature film output and library product for GULF DTH's THE MOVIE CHANNEL (see
"Business--Networks and Broadcasting--Other Joint Ventures"), and (ii) entered
into multi-year transactions with Prima TV Spa in Italy and with Sogecable, S.A.
in Spain for the licensing of feature film and television product for pay
television and pay-per-view exploitation. PARAMOUNT PICTURES, through various
affiliates, is also a joint venture partner in a number of international pay
television channel services.
 
    UIP and United Cinemas International ("UCI", as described below) are the
subject of governmental inquiries by the Commission of the European Community
("EC").  UIP has resolved all issues with the EC relating to its pay television
operations in the European Union. Consistent with PARAMOUNT PICTURES' and the
other member studios' recent practices, the UIP member studios have agreed to
license their pay television rights in the future without using the facilities
of UIP, although UIP is offering its licensees the opportunity to enter into
separate agreements with each of PARAMOUNT PICTURES and the other UIP partners
on substantially identical business terms.  UIP Pay Television will continue to
administer certain agreements that were previously entered into through UIP. The
agreement regarding UIP's pay television operations is separate from the EC's
evaluation of UIP's request to renew the exemption granted as of 1988 under the
EC's rules covering UIP's theatrical distribution operations. On January 16,
1998, the EC issued a Statement of Objections expressing its preliminary views
that UIP's application to renew such exemption should be denied. UIP and its
partners sharply dispute the preliminary views expressed by the EC in the
Statement of Objections and intend to provide evidence to the EC in order to
persuade the EC that UIP provides significant advantages to its customers and
filmgoers alike, and that the exemption should be extended.
 
    In addition to premium subscription television, most motion pictures are
also licensed for exhibition on broadcast and basic cable television, with fees
generally collected in installments. All of the above license fees for
television exhibition (including international and U.S. premium television and
basic cable television) are recorded as revenue in the year that licensed films
are available for such exhibition, which, among other reasons, may cause
substantial fluctuation in PARAMOUNT PICTURES' operating results. At December
31, 1997, the unrecognized revenues attributable to such licensing of completed
films from PARAMOUNT PICTURES' license agreements were approximately $1.1
billion. PARAMOUNT PICTURES has approximately 900 motion pictures in its
library.
 
    TELEVISION PRODUCTION AND SYNDICATION.  The Company, through PARAMOUNT
PICTURES, VIACOM PRODUCTIONS and SPELLING, produces, acquires and distributes
series, miniseries, specials and made-for-television movies primarily for
network television, first-run syndication, pay television and basic cable
television.
 
    The Company's current network programming includes FRASIER, GEORGE AND LEO,
DIAGNOSIS: MURDER, SABRINA THE TEENAGE WITCH, FIRED UP, SISTER, SISTER, and JAG,
and through SPELLING, BEVERLY HILLS 90210, MELROSE PLACE, SAVANNAH, SUNSET BEACH
and SEVENTH HEAVEN. The Company also produces original programming for UPN,
including STAR TREK: VOYAGER, THE SENTINEL, and CLUELESS, and through SPELLING,
MOESHA (see "Business--Networks and Broadcasting--United Paramount Network").
Generally, a network will license a specified number of episodes for exhibition
on the network in the U.S. during the license period. All other distribution
rights, including foreign and off-network syndication rights, are typically
retained by the Company. The episodic license fee is normally less than the
costs of producing each series episode; however, in many cases, the Company has
been successful in recouping some of its costs by obtaining international sales
through its syndication operations. Foreign sales are generally concurrent with
U.S.
 
                                      I-10

<PAGE>
network runs. Generally, a series must have a network run of at least four years
to be successfully sold in domestic syndication.
 
    The Company produces and/or distributes original television programming for
first-run syndication which it sells directly to television stations in the U.S.
on a market-by-market basis. The Company sells its programs to television
stations for cash, advertising time or a combination of both. The Company's
first-run syndicated programming includes such shows as STAR TREK: DEEP SPACE
NINE, ENTERTAINMENT TONIGHT, HARD COPY, THE MONTEL WILLIAMS SHOW, REAL TV, WILD
THINGS and VIPER, and through SPELLING, JUDGE JUDY.
 
    The Company also distributes its television programming to basic cable
program services, including services in which the Company has an interest, such
as NICK AT NITE and VH1 in the U.S. PARAMOUNT PICTURES also licenses programming
to and operates THE PARAMOUNT COMEDY CHANNEL and NICKELODEON licenses
programming to and operates NICKELODEON in the U.K. (See "Business--Networks and
Broadcasting")
 
    The Company, through PARAMOUNT TELEVISION and through WORLDVISION, a
subsidiary of SPELLING, distributes or syndicates television series, feature
films, made-for-television movies, miniseries and specials for television
exhibition in domestic and/or international broadcast, cable and other
marketplaces. Feature film and television properties distributed by the Company
are produced by the Company and/or SPELLING or acquired from third parties.
Third-party agreements for the acquisition of distribution rights are generally
long-term and exclusive in nature; such agreements frequently guarantee a
minimum recoupable advance payment to such third parties and generally provide
for periodic payment to such third parties based on the amount of revenues
derived from distribution activities after deduction of the Company's
distribution fee, recoupment of distribution expenses and recoupment of any
advance payments.
 
    The recognition of revenues for license fees for completed television
programming in syndication and on basic cable is similar to that of feature
films exhibited on television and, consequently, operating results are subject
to substantial fluctuation. At December 31, 1997, the unrecognized revenues
attributable to television program license agreements were approximately $523.5
million, of which approximately $117.2 million was attributable to SPELLING.
 
    THEATRICAL EXHIBITION.  The Company's movie theater operations consist
primarily of FAMOUS PLAYERS-Registered Trademark- in Canada and UCI in Europe,
Latin America and Asia. At December 31, 1997, FAMOUS PLAYERS, a 100%-owned
subsidiary of the Company, operated approximately 550 screens in 100 theaters
across Canada. UCI, a 50%-owned joint venture of entities associated with the
Company and Universal, operated as of December 31, 1997, approximately 520
screens in 74 theaters in the U.K., Ireland, Germany, Austria, Spain, Japan,
Portugal, Argentina, Brazil and Panama. On December 26, 1997, the Company sold
the assets of CINAMERICA THEATRES L.P., a 50%-owned joint venture with Time
Warner, to WestStar Holdings, Inc., a joint venture between Jeffrey G. Levine
and Warburg, Pincus Ventures, L.P.
 
    MUSIC PUBLISHING.  The FAMOUS MUSIC publishing companies own, control and/or
administer all or a portion of the copyright rights to more than 100,000 musical
works (songs, scores, cues). These rights include the right to license and
exploit such works, as well as the right to collect income generated by such
licensing and exploitation.
 
    The majority of rights acquired by FAMOUS MUSIC are derived from (i) music
acquisition agreements entered into by PARAMOUNT PICTURES, MTVN and various
other divisions of the Company respecting certain motion pictures, television
programs and other properties produced by such units, and (ii) music acquisition
agreements entered into directly by FAMOUS MUSIC with songwriters and music
publishers, including exclusive songwriting agreements, catalog purchases and
administration agreements.
 
                                      I-11

<PAGE>
VIDEO AND MUSIC/THEME PARKS
 
    The Company operates in the home video rental and retailing business, the
music retailing business and the video game rental business through its
BLOCKBUSTER ENTERTAINMENT GROUP ("BLOCKBUSTER").
 
    HOME VIDEO RENTAL AND RETAILING.  BLOCKBUSTER owns, operates and franchises
videocassette rental and sales stores worldwide. Domestically, BLOCKBUSTER
VIDEO-Registered Trademark- stores generally range in size from approximately
5,000 square feet to 15,000 square feet, averaging 6,100 square feet, and carry
a comprehensive selection of prerecorded videocassettes. Internationally,
BLOCKBUSTER VIDEO-Registered Trademark- stores are generally smaller, averaging
approximately 3,600 square feet but varying widely. The selection of prerecorded
videocassettes available for rental and sale varies widely among international
markets. BLOCKBUSTER offers titles primarily for rental and also offers titles
for purchase on a "sell-through" basis (see "Business--Competition--Video"). At
its BLOCKBUSTER VIDEO stores, the Company also offers video games for rental.
 
    The Company has embarked upon a strategy to improve customer satisfaction as
a means of improving BLOCKBUSTER's performance and is implementing various
programs with its major video product suppliers to improve selection,
convenience, price and availability of videos for its customers. The Company is
also implementing new advertising campaigns to highlight the inprovements it is
making for BLOCKBUSTER's customers.
 
    At December 31, 1997, there were 6,049 BLOCKBUSTER VIDEO stores operating
worldwide, a net increase of 732 stores over December 31, 1996; there were 4,038
BLOCKBUSTER VIDEO stores operating throughout all 50 states, Puerto Rico and
Guam, a net increase of 337 stores over December 31, 1996, 3,347 of which were
owned by the Company and 691 of which were owned by franchisees; and there were
2,011 BLOCKBUSTER VIDEO stores operating in 26 foreign countries, a net increase
of 395 stores over December 31, 1996, 1,758 of which were owned by the Company,
123 of which were owned by various joint ventures in which the Company is a
partner and 125 of which were owned by franchisees.
 
    No new franchises to develop, own and operate BLOCKBUSTER VIDEO stores were
granted in 1997. During 1997, the Company entered into two new foreign markets,
exited one foreign market, and increased its participation in one previously
franchised foreign market.
 
    During 1997, BLOCKBUSTER relocated its headquarters to Dallas, Texas,
commenced construction of a new 800,000 square foot distribution facility in
McKinney, Texas and implemented a program to purchase virtually all product
directly from the manufacturer and distribute that product directly to its
stores. This new distribution facility became operational in the first quarter
of 1998, doubling BLOCKBUSTER's existing distribution capabilities.
 
    The Company's home video business may be affected by a variety of factors,
including but not limited to, general economic trends in the movie and home
video industries, the quality of new release titles available for rental and
sale, competition, marketing programs, weather, special or unusual events,
changes in technology, and similar factors that may affect retailers in general.
 As with other retail outlets, there is a distinct seasonal pattern to the home
video business. The peak rental times tend to mirror school vacation patterns
(I.E., summer, spring break, Christmas, Easter).
 
    MUSIC RETAILING.  Through retail stores operating under the BLOCKBUSTER
MUSIC-Registered Trademark- trade name, BLOCKBUSTER is among the largest
retailers of prerecorded music in the U.S.  At December 31, 1997, BLOCKBUSTER
owned and operated 425 BLOCKBUSTER MUSIC stores in 34 states in the U.S., a net
decrease of 71 stores from the prior year.
 
    The Company's music business may be affected by a variety of factors,
including, but not limited to, general economic trends and conditions in the
music industry, including the quality of new titles and artists, competition,
marketing programs, changes in technology, and similar factors that may affect
retailers in general. The Company's music business is seasonal, with higher than
average monthly revenue
 
                                      I-12

<PAGE>
experienced during the Thanksgiving and Christmas seasons, and lower than
average monthly revenue experienced in September and October.
 
    THEME PARKS.  The Company, through PARAMOUNT PARKS, owns and operates five
regional theme parks and one water park in the U.S. and Canada: PARAMOUNT'S
CAROWINDS-Registered Trademark-, in Charlotte, North Carolina; PARAMOUNT'S GREAT
AMERICA-TM-, in Santa Clara, California; PARAMOUNT'S KINGS DOMINION-TM- located
near Richmond, Virginia; PARAMOUNT'S KINGS ISLAND-TM- located near Cincinnati,
Ohio; PARAMOUNT CANADA'S WONDERLAND-Registered Trademark- located near Toronto,
Ontario; and RAGING WATERS-TM-, in San Jose, California. Each of the theme parks
features attractions based on intellectual properties of the Company.
Substantially all of the theme parks' operating income is generated from May
through September; however, the profitability of the leisure-time industry is
influenced by various factors which are not directly controllable, such as
economic conditions, amount of available leisure time, oil and transportation
prices, and weather patterns. In January 1998, PARAMOUNT PARKS and Las Vegas
Hilton Corporation launched STAR TREK: THE EXPERIENCE-TM- at the Las Vegas
Hilton, a futuristic-themed, interactive environment based on the popular TV
series and movies.
 
PUBLISHING
 
    The Company, through the SIMON & SCHUSTER family of companies, publishes and
distributes hardcover and paperback books, audiobooks, software (including
CD-ROM products), educational textbooks, supplemental educational materials,
multimedia curricula, and information and reference materials for consumers,
schools, businesses and professionals. SIMON & SCHUSTER's flagship imprints
include SIMON & SCHUSTER, POCKET-Registered Trademark- BOOKS, PRENTICE HALL,
SILVER BURDETT GINN-Registered Trademark- and MACMILLAN-Registered Trademark-
USA.  SIMON & SCHUSTER distributes its products directly and through third
parties. SIMON & SCHUSTER also delivers content and sells products on Internet
Web sites operated by various imprints or linked to individual titles.
 
    SIMON & SCHUSTER is organized into four operating groups, consisting of the
Education, Consumer, Reference, and International and Business & Professional
Groups. On January 14, 1998, the Company announced its intention to sell all of
its publishing businesses other than the Consumer Group.
 
    EDUCATION GROUP.  The Education Group publishes college, elementary and
secondary textbooks and related materials, computer-based educational and staff
development products, audiovisual products and vocational and technical
materials under such imprints as PRENTICE HALL, SILVER BURDETT GINN, GLOBE
FEARON-TM-, MODERN CURRICULUM PRESS, SIMON & SCHUSTER CUSTOM PUBLISHING and
ALLYN & BACON, among others. The Education Group is composed of three operating
units: Higher Education, K-12 Publishing, and Education Technology.
 
    The Higher Education unit publishes titles in all major disciplines, at both
the introductory and advanced levels. Increasingly, titles published by the
Higher Education unit are packaged with CD-ROM software and linked to Internet
Web sites. The K-12 Publishing unit offers textbooks and related instructional
materials as well as software and on-line educational materials in all major
school subject areas. The Education Technology Group produces electronic
instructional products and services, and includes the COMPUTER CURRICULUM
CORPORATION-TM-, which licenses an integrated multiple media learning system to
schools for instruction on all core subjects, and the EDUCATIONAL MANAGEMENT
GROUP-TM- unit, which broadcasts taped, live, interactive and customized
television programming into classrooms via satellite.
 
    In 1997, the Company acquired all the outstanding stock of SkyLight Training
& Publishing Inc., a company that offers continuing education programs and
seminars for elementary and secondary school teachers.
 
    The educational marketplace is subject to seasonal fluctuations in its
business which correlate to the traditional school year. Sales to elementary and
secondary schools are dependent, in part, on the
 
                                      I-13

<PAGE>
"adoption" or selection of instructional materials by designated state agencies.
Approximately half of the U.S. states and some localities regulate the purchase
of textbooks through the textbook adoption process.
 
    CONSUMER GROUP.  The Consumer Group publishes and distributes hardcover,
trade paperback, mass-market books, audiobooks and CD-ROM products under
imprints including SIMON & SCHUSTER, POCKET BOOKS, SCRIBNER, and THE FREE PRESS.
Additionally, SIMON & SCHUSTER develops special imprints and publishes titles
based on MTV, NICKELODEON and PARAMOUNT PICTURES products.
 
    Fifty-six titles published by the Consumer Group in 1997 were New York Times
bestsellers, including eleven New York Times number one bestsellers. Bestselling
consumer titles released in 1997 include the Pulitzer Prize-winning "Angela's
Ashes" (Frank McCourt), "Undaunted Courage" (Stephen Ambrose), "She's Come
Undone" (Wally Lamb), "Stones from the River" (Ursula Hegi), "Pretend You Don't
See Her" (Mary Higgins Clark), "The Bible Code" (Michael Drosnin), Julie
Garwood's "Clayborne Brides" trilogy, "Hanson" (Jill Matthews), and "Diana: Her
True Story, The Commemorative Edition" (Andrew Morton).
 
    The Company publishes audiobooks through SIMON & SCHUSTER AUDIO-TM- and
publishes consumer CD-ROM titles through SIMON & SCHUSTER INTERACTIVE-TM-.
Titles published by SIMON & SCHUSTER INTERACTIVE generally consist of CD-ROM
product extensions of well known book publishing properties or titles associated
with recognized authors, including such 1997 titles as "Star Trek Captain's
Chair", "Star Trek Encyclopedia" and "Richard Scarry's Best Math Program Ever".
SIMON & SCHUSTER ONLINE-TM-, through "SimonSays.com", publishes original
content, builds reader communities, and promotes and sells the Consumer Group's
books and products over the Internet.
 
    The consumer marketplace is subject to increased periods of demand in the
summer months and during the end-of-year holiday season.
 
    REFERENCE GROUP.  The Reference Group, operating as MACMILLAN PUBLISHING
USA, publishes for the consumer and library markets through its MACMILLAN
COMPUTER PUBLISHING USA, MACMILLAN REFERENCE USA and MACMILLAN DIGITAL
PUBLISHING USA units.
 
    MACMILLAN COMPUTER PUBLISHING USA ("MCP") published approximately 600 titles
in 1997, of which over half were either packaged with a CD-ROM or other
software, or linked to Web sites on the Internet. MCP also published original
content over the Internet through the MACMILLAN INFORMATION SUPERLIBRARY-TM- Web
site. Other well-known imprints of MCP include QUE, SAMS, NEW RIDERS-TM-,
ZIFF-DAVIS PRESS, ADOBE PRESS and CISCO PRESS.
 
    MACMILLAN REFERENCE USA is the publisher of such well-known consumer
reference series as Frommer's-Registered Trademark- and Unofficial Guide travel
guides, J.K. Lasser tax guides, Betty Crocker and Weight Watchers cookbooks,
Arco test preparation guides, Howell Book House-TM- pet books,
Burpee-Registered Trademark- gardening books and Thorndike-Registered Trademark-
large print books. MACMILLAN REFERENCE USA also publishes library reference
materials, including multivolume academic encyclopedias, many through its
CHARLES SCRIBNER'S SONS-Registered Trademark- imprints. MACMILLAN DIGITAL
PUBLISHING is the software and online division that publishes electronic
products based primarily on the MACMILLAN PUBLISHING USA library.
 
    INTERNATIONAL AND BUSINESS & PROFESSIONAL GROUP.  Through a wide variety of
imprints, the International and Business & Professional Group (the "IBP Group")
publishes and distributes books and software in 42 countries, and offers
business, professional training, vocational, medical and healthcare information
and human resources management products and related services, including books,
newsletters, journals, seminars, videos, loose-leaf series and multimedia
programs. Operating units include PRENTICE HALL
INTERNATIONAL-Registered Trademark-, THE NEW YORK INSTITUTE OF FINANCE-TM-,
APPLETON & LANGE-Registered Trademark-, JOSSEY-BASS-TM-, THE BUREAU OF BUSINESS
PRACTICE-TM-, PRENTICE-HALL DIRECT-Registered Trademark-, and MASTER DATA
CENTER-TM-.
 
                                      I-14

<PAGE>
    International publishing consists of the international distribution of
English-language titles as well as the publication of non-English language
titles and local translations and adaptations of U.S. titles. The IBP Group,
primarily through PRENTICE HALL INTERNATIONAL, distributes English-language
books, software and multimedia titles in North America, Asia, Europe, Australia
and Latin America. The non-English language titles published by the Group
outside North America are focused in the areas of academic, computer, English
language training, vocational training, and professional publishing. The IBP
Group also maintains co-publishing partnerships in approximately 14 countries,
including Japan and the People's Republic of China.
 
DISCONTINUED OPERATIONS
 
    RADIO.  On July 2, 1997, the Company sold its ten radio stations to
Chancellor Media Corp. for approximately $1.1 billion.
 
    CABLE TELEVISION.  On July 31, 1996, the Company completed the split-off of
a subsidiary that held its cable television systems to its shareholders pursuant
to an exchange offer and related transactions.
 
    INTERACTIVE GAMES.  On February 19, 1997, the Company adopted a plan to
dispose of its interactive game businesses, including VIACOM NEW
MEDIA-Registered Trademark-, the operations of which were terminated in 1997. On
that same date, the Board of Directors of SPELLING approved a formal plan to
dispose of VIRGIN INTERACTIVE ENTERTAINMENT LIMITED ("VIRGIN INTERACTIVE").
Spelling expects to complete a transaction in 1998. VIRGIN INTERACTIVE develops
and publishes interactive entertainment software for personal computers and
video game consoles on a wide variety of platforms.
 
    MADISON SQUARE GARDEN.  On March 10, 1995, the Company sold Madison Square
Garden Corporation which included the Madison Square Garden Arena, the Paramount
theater, the New York Knickerbockers, the New York Rangers and the Madison
Square Garden Network to a joint venture of ITT Corporation and Cablevision
Systems Corporation for closing proceeds of approximately $1.0 billion,
representing the sale price of approximately $1.075 billion, less an
approximately $66 million in working capital adjustments. The net after-tax
proceeds of the sale were used to repay debt.
 
INTELLECTUAL PROPERTY
 
    It is the Company's practice to protect its theatrical and television
product, software, publications and its other original and acquired works. The
following logos and trademarks are among those strongly identified with the
product lines they represent and are significant assets of the Company:
VIACOM-Registered Trademark-, the BLOCKBUSTER-Registered Trademark- family of
marks, MACMILLAN-Registered Trademark-, the MTV: MUSIC
TELEVISION-Registered Trademark- family of marks, THE MOVIE CHANNEL-TM-, NICK AT
NITE-Registered Trademark- and the NICKELODEON-Registered Trademark- family of
marks, TV LAND-Registered Trademark-, the PARAMOUNT-Registered Trademark- family
of marks, POCKET BOOKS-TM-, SIMON & SCHUSTER-Registered Trademark-,
SHOWTIME-Registered Trademark-, the STAR TREK-Registered Trademark- family of
marks and the VH1 MUSIC FIRST-TM- family of marks.
 
COMPETITION
 
NETWORKS
 
    MTVN.  MTVN services are in competition for available channel space on cable
systems and for fees from cable operators and other multichannel distributors,
with other cable program services, and nationally distributed and local
independent television stations. MTVN also competes for advertising revenue with
other cable and broadcast television networks, and radio 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 A.C. Nielsen. (See "Business--Competition--Entertainment")
 
                                      I-15

<PAGE>
    Certain major record companies have launched music-based program services
outside the U.S., including, but not limited to: Channel V, which is jointly
owned and operated in Asia by Star TV and four major record labels; and Viva and
Viva 2, German-language music channels distributed in Germany and owned in large
part by four major record labels. In addition, MuchMusic, a music service which
originated in Canada, is distributing a MuchMusic service customized for the
Latin American market in Argentina, and commenced U.S. distribution in the
spring of 1995.
 
    Children oriented programming blocks are currently exhibited on a number of
U.S. broadcast television networks, including, among others, "Fox Kids", "Kids'
WB" and a Saturday morning block on ABC, all of which directly compete with
NICKELODEON for advertising revenue. There are also a number of other U.S. cable
television program services featuring children oriented programming, including
The Cartoon Network and the Disney Channel. In addition, NICKELODEON also
directly competes internationally with other television programming services and
blocks targeted at children for distribution by cable, satellite and other
systems, and for distribution license fees and advertising revenue.
 
    SNI.  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 quality motion pictures and the production,
acquisition and packaging of original programs and motion pictures; and (ii) the
offering of prices, marketing and advertising support and other incentives to
cable operators and other distributors for carriage so as to favorably position
and package SNI's premium subscription television program services to
subscribers. HBO is the dominant company in the U.S. premium subscription
television category, offering two premium subscription television program
services, the HBO service and Cinemax. SNI is second to HBO with a significantly
smaller share of the premium subscription television category. Encore Media
Group (an affiliate of Tele-Communications, Inc.) owns the third principal
premium subscription television program service in the U.S., Starz!, which
features recently released motion pictures and competes with SNI's and HBO's
premium program services. Starz!, which had initially received distribution
primarily on cable systems owned and/or managed by Tele-Communications, Inc., is
now also carried on cable systems owned or managed by others, in TVRO and on all
three DBS platforms.
 
BROADCASTING
 
    The principal method of competition in broadcast television is the
development of audience interest through programming and promotions. The
Company's expansion strategy has been to seek to acquire UPN affiliates or
independent stations which will become primary affiliates of UPN. At this time,
UPN has limited programming. Therefore, with respect to the UPN-affiliated
stations, and, to the extent that the Company acquires independent stations,
there will be a need for those stations to acquire additional programming to a
greater extent than would otherwise be required if the stations were affiliated
with other, more established networks. Television stations compete for
advertising revenues with other stations in their respective coverage areas as
well as with all other advertising media.
 
    Generally, technological advances in the methods of providing home
entertainment and changing regulatory policies with respect to the broadcast
industry may have an impact upon broadcasting's future competitive environment.
The broadcasting industry itself is in the midst of retooling for the digital
era. Broadcast television signals are presently transmitted in analog form.
However, in April 1997, the FCC issued a digital television ("DTV") Table of
Allotments, which assigned to all existing television stations nationwide a
second, six-MHz channel for broadcasting in digital form. Under FCC rules,
television stations may use this second channel to broadcast either one or two
streams of "high definition" digital television ("HDTV") video programming or to
"multicast" several streams of standard digital video programming. Broadcasters
may also deliver large amounts of data over their DTV channels. At a minimum,
broadcasters are required under the FCC's DTV rules to provide a free digital
video programming service the resolution of which is comparable to or better
than that of today's service on air during the same time periods that their
analog channels are broadcasting.
 
                                      I-16

<PAGE>
    At the time it adopted the DTV Table of Allotments, the FCC also established
a schedule pursuant to which all television stations must have constructed their
DTV operations (see "Business Regulation-Broadcasting"). Under that schedule,
any commercial television station that is not an affiliate of ABC, CBS, NBC or
FOX must construct its DTV station no later than May 1, 2002. Accordingly,
because its stations are all affiliates of UPN or WB, the Company must have
constructed its digital operations by that date, unless an extension of time is
granted by the FCC. Industry estimates of the cost of construction of a single
DTV station range from $3 million to $6 million. The Company is currently
formulating plans for use of its DTV channels. It is difficult to assess how DTV
will affect the Company's broadcast business with respect to other broadcasters
and other video program providers.
 
    Another factor that could affect the Company's broadcast business is the
deregulation of television ownership restrictions. The Telecommunications Act of
1996, which amended the Communications Act, liberalized television station
ownership limits by eliminating the former numerical cap of 12 television
stations and by increasing the nationwide audience reach limitation from 25% to
35%. This change in the restrictions on national television ownership has
enabled the Company, as well as other broadcast groups, to significantly
increase their television holdings. As for restrictions on local television
ownership, the FCC is currently considering relaxation of its ownership rules
(see "Business--Regulation--Broadcasting").
 
ENTERTAINMENT
 
    The Company competes with other major studios and independent film producers
in the production and distribution of motion pictures and videocassettes.
Similarly, as a producer and distributor of television programs, the Company
competes with other studios and independent producers in the licensing of
television programs to both networks and independent television stations.
PARAMOUNT PICTURES' competitive position primarily depends on the quality of the
product produced, public response and cost. The Company also competes to obtain
creative talents and story properties which are essential to the success of all
of the Company's entertainment businesses.
 
    Corporate mergers consummated in recent years have resulted in greater
consolidation in the entertainment and media industries, which may also present
significant competitive challenges to several of the Company's businesses,
including its theatrical motion picture division and its basic and premium
subscription program services.
 
VIDEO RETAIL
 
    The home video retail business is highly competitive. The Company believes
that the principal competitive factors in the business are title selection,
number of copies of titles available, the quality of customer service and
pricing. The Company believes that the success of its business depends, among
other factors, on its large and attractive Company-owned and franchisee-owned
BLOCKBUSTER VIDEO stores offering a wider selection of titles and larger and
more accessible inventory than most of its competitors, more convenient store
locations, faster and more efficient computerized check-in/check-out procedures,
extended operating hours, effective customer service and competitive pricing.
 
    Home video retailers and distributors from time to time offer titles at a
price substantially lower than the range in which titles are ordinarily priced
to home video retailers. These titles, known as "sell-through" titles (because
their lower wholesale price is intended to increase the number of copies sold by
retailers), consist primarily of successful movies for children and other movies
that have unique characteristics or other mass ownership appeal. BLOCKBUSTER
offers these titles both for rental and sale in its stores. The competition for
sales of these titles is greater than "rental-priced products" due to the
participation in this marketplace of mass merchants, grocery stores and other
retailers not engaged primarily in the business of renting videocassettes.
 
                                      I-17

<PAGE>
    In the retail rental marketplace, the Company and its franchisees compete
with other national and regional video rental chains, local video rental stores,
grocery stores and several other retailers engaged in the rental of
videocassettes.
 
    A significant competitive advantage that the Company and its franchisees
(and all other video retail outlets) currently enjoy over broadcast, cable and
DBS television is a limited exclusive distribution "window" that occurs soon
after a film's theatrical release. Generally, after the initial domestic
theatrical exhibition of a film, motion picture producers make the films
available to video rental outlets on an exclusive basis for a period of time.
The length of this period, however, varies based upon a number of factors
including, but not limited to, the box office success of the film and license
fee commitments made by pay-per-view distributors, premium subscription program
services and broadcast networks to exhibit the film in such alternative windows.
While the Company believes that the economic advantages to motion picture
producers in the home video marketplace favor continuation of present practices
regarding windowing, there can be no assurances that such producers will not
alter the exclusive home video window due to new methods of distribution or
other factors.
 
    A number of consumer electronics companies introduced "digital versatile
disc" or "DVD" players into the marketplace during 1997. This new digital
technology is an alternative to the videocassette recorder ("VCR") that permits
the owner to view prerecorded filmed entertainment on a standard television set.
The DVD players, however, do not accept videocassettes; they only play a newly
developed disc, similar in size and shape to a compact disc or a CD-ROM. It is
unclear at this time how many new releases and older titles will be made
available in this new format. In addition, the initial DVD players, unlike VCRs,
will not have recording capabilities. Given these issues, the Company is unable
to determine whether this new format will gain significant consumer acceptance
generally or among the Company's customers. As a result, the Company is unable
to determine the impact, if any, this new format will have on the Company's
business. The Company is monitoring the acceptance by the marketplace of DVD and
is considering how to exploit this new medium, both in the rental and sale of
DVD titles.
 
MUSIC RETAIL
 
    In recent years, competition among music retailers has intensified greatly
with the significant expansion of the importance of mass merchants in the
business. A number of these retail chains have significantly reduced their
prices on prerecorded music products (primarily new releases) to attract
customers into their stores and generate sales of other higher margin products.
As a result of this competition, the Company has been required to lower the
prices at which it sells many of its products, resulting in lower revenue and
reduced profit margins. Some of these chains, including the Company, have begun
closing unprofitable stores in an attempt to minimize operating losses; however,
it has generally been recognized that music retailers have experienced improved
demand in 1997.
 
THEME PARKS
 
    The Company's theme parks compete directly with other theme parks in their
respective geographic regions as well as generally with other forms of leisure
entertainment. The Company believes that its intellectual properties enhance
existing attractions and facilitate the development of new attractions to
encourage visitors to the PARAMOUNT PARKS theme parks, water park and STAR TREK:
THE EXPERIENCE at the Las Vegas Hilton.
 
PUBLISHING
 
    The publishing business is highly competitive. Consumer and reference
publishing are affected by well-publicized trends in the retail bookselling
business, including the emergence of the book superstore and the trend toward
consolidation of the retail channel in general. In certain segments of
publishing, particularly in the consumer area, books are sold on a fully
returnable basis, resulting in significant product
 
                                      I-18

<PAGE>
returns. The Company also competes with other publishers for the rights to works
by well-known authors and public personalities.
 
    In elementary and secondary educational publishing, approximately one-half
of the U.S. states and some local jurisdictions regulate the purchase of
textbooks with state funds through formal textbook adoption procedures
administered by state authorities. The Education Group faces considerable
competition from other education publishers to have its textbooks selected.
Further, significant investment is required to develop new textbooks and to
update existing ones. Sales of elementary and secondary school textbooks are
subject to federal, state and local education funding and local enrollment
levels. In higher education publishing, sales of new textbooks are affected by
the availability of used textbooks for purchase, as well as competition from
other publishers. In business and professional publishing, there are numerous
organizations that provide competitive materials and services. International
publishing is subject to global trends, including the consolidation of the
European markets.
 
REGULATION
 
    The Company's businesses are either subject to or affected by regulations of
federal, state and local governmental authorities. The rules, regulations,
policies and procedures affecting these businesses are constantly subject to
change. The descriptions which follow are summaries and should be read in
conjunction with the texts of the statutes, rules and regulations described
herein. The descriptions do not purport to describe all present and proposed
statutes, rules and regulations affecting the Company's businesses.
 
INTELLECTUAL PROPERTY
 
    The Company conducts many of its businesses through the control and
exploitation of the numerous copyrights and trademarks underlying its products
and licenses; therefore, domestic and international laws affecting intellectual
property are of significant importance to the Company.
 
    WIPO COPYRIGHT TREATIES.  On December 20, 1996, delegates from countries
belonging to the World Intellectual Property Organization ("WIPO") adopted two
proposed treaties: a Copyright Treaty and a Performers and Phonograms Treaty.
The treaties take effect if ratified by 30 nations. The delegates from the U.S
government, as well as those from virtually every other country where the
Company engages in business, supported adoption of the treaties.
 
    The proposed Copyright Treaty updates the Berne Convention, last revised in
1971, and addresses copyright protection with respect to new technologies that
have emerged since that time. Because it is not possible to predict whether the
Copyright Treaty will take effect, how many or which countries will ratify the
Treaty, or how such countries would implement the Treaty after ratification, it
is impossible to predict what impact the Treaty will have on the Company. The
Performers and Phonogram Treaty covers the rights of audio performers and
producers of sound recordings; however, this Treaty is not expected to have any
material effect on the Company if it is ratified.
 
    On July 28, 1997, the Executive Branch proposed legislation to implement the
WIPO treaties in the United States. This legislation (H.R. 2281, S. 1121)
included a provision to prohibit the sale of devices which have limited
significant commercial purpose other than to circumvent anti-copying
technologies and a provision to prohibit the dissemination of false copyright
management information. Hearings on this bill have been held in both the House
of Representatives and the Senate. On February 26, 1998, the House Judiciary
Subcommittee on Courts and Intellectual Property voted to send this implementing
legislation to the full House Judiciary Committee. The full House Judiciary
Committee may consider this legislation in April 1998. The Senate Judiciary
Committee has not scheduled a vote on S. 1121. Since it is unclear whether or in
what form such legislation will be enacted into law, the Company cannot predict
what impact any such law would have on its operations.
 
                                      I-19

<PAGE>
    ONLINE SERVICE PROVIDER LIABILITY.  The House of Representatives' Courts and
Intellectual Property Subcommittee, on February 26, 1998, approved legislation,
H.R. 3209, which would limit the liability, in certain circumstances, of online
service providers and telephone companies for some copyright infringements which
occur on their networks. It is anticipated that the full House Judiciary
Committee will consider the legislation in April 1998 and additional changes to
the legislation are anticipated. Similar legislation has not been introduced in
the Senate; however, legislation is being developed by the Senate Judiciary
Committee. In addition, this legislation is being considered concurrently with
the WIPO legislation. As with WIPO, the Company cannot predict whether or in
what form this legislation will be enacted into law or what impact the
legislation would have on its operations.
 
    COPYRIGHT TERM EXTENSION.  The House of Representatives' Courts and
Intellectual Property Subcommittee, on September 30, 1997, approved legislation
to extend the term of copyright by 20 years. In March 1998, the House Judiciary
Committee approved this legislation and the House of Representatives
subsequently passed such legislation. The Senate Judiciary Committee has yet to
vote on this legislation. Term extension, if approved, would have little effect
on the Company in the near term, but could have a small beneficial effect over
time.
 
    COMPULSORY COPYRIGHT.  Multichannel video distributors such as cable
television, SMATV, MMDS and DTH systems are each subject to the Copyright Act
which provides a compulsory copyright license for retransmission of broadcast
signals. It is expected that a rulemaking now underway at the U.S. Copyright
Office will determine that "open video systems" under the 1996
Telecommunications Act will also be subject to the compulsory license.
 
    The compulsory license rate paid to various copyright owners of programs for
cable, MMDS and SMATV systems retransmission of broadcast signals is statutorily
set while the fees for DTH service are set through negotiations and binding
arbitration, taking into account fair market value of the signals. On August 1,
1997, a Copyright Arbitration Royalty Panel ruled that the DTH rates for
retransmission of distant broadcast signals should be increased to $0.27 per
subscriber per month. This decision was upheld by the Librarian of Congress on
October 23, 1997, who set the effective date for the rate increase as January 1,
1998. However, the new rate is now being challenged in federal district court
and legislation has been introduced in Congress, (H.R. 2921, S. 1422) which
temporarily reinstates the old rates. On March 12, 1998, the Senate Commerce
Committee approved S. 1422 and the bill is awaiting consideration by the full
Senate. In the House, language similar to that in S. 1422 was included in
legislation that was voted on by the Courts and Intellectual Property
Subcommittee. The final rate, however, that is to be paid by the satellite
companies is still under consideration. It is not possible to predict what the
final result will be.
 
    Unlike the compulsory license applicable to other multichannel video program
providers, the DTH compulsory license is not permanent and is scheduled to end
in December 1999. Legislation has been introduced (H.R. 3210, S. 1720) which
would grant a permanent extension of the DTH compulsory copyright license. In
addition, this legislation would broaden the scope of the DTH compulsory license
to allow these satellite providers to retransmit local broadcast signals into
their local markets, something that is not allowed under current law. The House
Courts and Intellectual Property Subcommittee approved this legislation on March
18, 1998. It is not clear when the full House Judiciary Committee or the Senate
Judiciary Committee will vote on the legislation. If the legislation is enacted,
it could be expected to have a positive impact on the Company.
 
    FIRST SALE DOCTRINE.  The "First Sale" provision of the Copyright Act
provides that the owner of a legitimate copy of a copyrighted work may rent or
otherwise use or dispose of that copy in such a manner as the owner sees fit.
The First Sale doctrine does not apply to sound recordings or computer software
(other than software made for a limited purpose computer, such as a video game
platform) for which the Copyright Act vests a rental right (I.E., the right to
control the rental of the copy) in the copyright holder. The repeal or
limitation of the First Sale doctrine (or conversely, the creation of a rental
right vested in the
 
                                      I-20

<PAGE>
copyright holder) for audiovisual works or for computer software made for
limited purpose computers would have an adverse impact on the Company's home
video business; however, no such legislation is pending in Congress at the
present time.
 
CABLE NETWORKS AND BROADCASTING
 
CABLE NETWORKS
 
    COMMUNICATIONS ACT; 1996 TELECOMMUNICATIONS ACT.  The Communications Act
sets forth the framework under which broadcast television networks and cable
television systems are regulated. On February 8, 1996, the 1996
Telecommunications Act was enacted as an amendment to the Communications Act.
 
    Among other items, the 1996 Telecommunications Act authorizes entry of
electric utilities and telephone companies into the multichannel video
distribution business. As a result, regional Bell companies, their subsidiaries
and affiliates can now enter the cable distribution business in their own
service areas. The Company cannot predict the impact of this legislation,
although it anticipates that its program services could benefit from increased
distribution opportunities afforded by meaningful telephone company entry into
multichannel video distribution. Such entry has yet to occur except in limited
geographic areas.
 
    A number of other aspects of the Communications Act may have indirect and
limited effects on the Company's cable networks, but the Company is unable to
predict what the impact would be.
 
CABLE RATE REGULATION
 
    The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act") directed the FCC to prescribe rate regulations that protect
subscribers from having to pay unreasonable rates by insuring that rate levels
of cable systems' "basic service tier" (BST)--which includes retransmission
consent and must-carry broadcast signals and the public, educational and
governmental channels-- and "cable programming service tier" (CPST) do not
exceed rates that would be charged in the presence of effective competition.
Programming offered on a per-channel or per-program basis is exempt from rate
regulation.
 
    In implementing the 1992 Cable Act, the FCC has adopted a system of rate
regulation that combines a benchmarking approach with a mark-up or a price cap
mechanism. A benchmark formula is used to determine an initial reasonable
regulated rate for each cable system. Then a price cap mechanism or a mark-up
method is applied to determine how cable operators can adjust their rates on a
going forward basis. Under the price cap mechanism, with respect to programming
costs, operators are allowed to pass through the costs of newly added channels,
subject to specified caps. In addition, operators may create a "new product
tier" (NPT), which is exempt from rate regulation, so long as certain conditions
are met. In light of recent cable rate increases, the FCC has recently expressed
interest in reexamining the terms of its allowance of programming cost
pass-throughs.
 
    Congress revisited certain aspects of cable rate regulation in the
Telecommunications Act of 1996, which offered significant regulatory relief.
Small cable systems were immediately exempted from regulation of their CPSTs.
All other cable systems are set to experience the same change, but not until
March 31, 1999, when all rate regulation of the CPST is set to expire, although
this month legislation was introduced in the House which seeks to indefinitely
extend the rate regulation provisions.
 
    Cable rate regulation adversely affects the Company's non-premium cable
program services which rely on cable operator license fee support, along with
advertising revenues, to maintain the quantity and quality of programming. Rate
regulation erodes incentives for operator investment in programming,
particularly new, start-up program services.
 
                                      I-21

<PAGE>
PROGRAM ACCESS
 
    The 1992 Cable Act added a program access requirement, which imposes certain
pricing and other restrictions on vertically integrated satellite cable
programming vendors with respect to the provision of their program services to
multichannel distributors of programming, such as cable systems, SMATV systems,
MMDS operators and TVRO and DBS distributors. Specifically, vertically
integrated program services generally are prohibited from entering exclusive
arrangements with cable operators and from discriminating against cable
competitors on programming price and other terms. Congress enacted the program
access provision in order to spur competition to incumbent cable providers by
insuring that cable competitors would not have difficulty in obtaining access to
cable programming that is affiliated with cable operators. The
Telecommunications Act of 1996 extended the program access rules to program
services in which common carriers that provide video programming have an
attributable interest.
 
    The Company divested its cable systems in 1996 and, as a result, the
Company's wholly owned program services have been deemed no longer subject to
program access restrictions. However, it has been reported that legislation may
be introduced in both houses of Congress, which would, among other things,
extend the program access provisions to unaffiliated program services. Such
legislation, if ever enacted, could adversely impact the Company's program
services, particularly its start-up services.
 
BROADCASTING
 
    Television and radio broadcasting are subject to the jurisdiction of the FCC
pursuant to the Communications Act.
 
    THE COMMUNICATIONS ACT.  The Communications Act authorizes the FCC to issue,
renew, revoke or modify broadcast licenses; to regulate the radio frequency,
operating power and location of stations; to approve the transmitting equipment
used by stations; to adopt rules and regulations necessary to carry out the
provisions of the Communications Act; and to impose certain penalties for
violations of the Communications Act and the FCC's regulations governing the
day-to-day operations of television stations.
 
    BROADCAST LICENSES.  Unless the FCC finds that doing so would not be in the
public interest, it will grant broadcast station licenses for maximum periods of
eight years. Upon application to and approval by the FCC, the licenses are
renewable for an indefinite number of additional eight-year periods.
 
    A licensee can ordinarily expect renewal of its license if the licensee has
served the public interest and has not seriously violated the Communications Act
or FCC rules. The FCC decides what factors are relevant to whether a broadcaster
has served the "public interest." In addition to the broadcaster's record of
providing news, public affairs, and other informational programming, the FCC
also reviews at renewal a licensee's compliance with the Children's Television
Act of 1990 and FCC rules implementing that law. Under those rules, beginning on
September 1, 1997, licensees generally are required to program on a regularly
scheduled basis at least three hours per week of "core" educational and
informational programming targeted to children ages 16 and under. Licensees are
also required to abide by commercial limits during all programming targetted to
children ages 12 and under. At renewal, the FCC also reviews the licensee's
compliance with that agency's EEO policies and rules.
 
    A license which has expired but is awaiting renewal entitles the licensee to
continue broadcasting pending grant of the renewal. The status of the Company's
television stations' licenses is as follows: KTXA-TV and KTXH-TV each expires on
August 1, 1998; KMAX-TV expires on December 1, 1998; KSTW-TV expires on February
1, 1999; WSBK-TV expires on April 1, 1999; WPSG-TV expires on August 1, 1999;
WDCA-TV and WGNT-TV each expires on February 1, 2005; WUPA-TV expires on April
1, 2005; WUPL-TV expires on June 1, 2005; WNDY-TV expires on August 1, 2005; and
WKBD-TV and WWHO-TV each expires on October 1, 2005. Applications for renewal of
a license must be filed with the FCC on the date that is four months prior to
the license expiration. Any party seeking to formally object to a renewal
application must file a petition to deny no later than 30 days prior to the
license expiration date.
 
                                      I-22

<PAGE>
    With respect to DTV, the digital channel allotted to each television station
licensee will be licensed for an eight-year term that is anticipated to run
coterminous with that of the licensee's companion analog channel. The FCC
contemplates that full conversion from analog to digital mode will occur in
2006, when broadcasters are expected to turn in licenses for their analog
channels. However, in the Conference Report to the Balanced Budget Act of 1997,
Congress indicated that the analog-to-DTV transition may be extended in the
event certain conditions are not met in a station's market, including, among
others, the availability of DTV-to-analog technology. Until the transition to
digital is complete, FCC rules require that broadcasters phase in (according to
annual benchmarks) the percentage of video programming of their analog channels
that is simulcast on the DTV channel.
 
    During the transition and thereafter, broadcasters are permitted to use
their digital channels to offer ancillary and supplementary services, including,
but not limited to, data transmission and subscription services. The
Telecommunications Act of 1996 provides that broadcasters must pay the
government fees for use of the spectrum based upon the extent to which such
services generate revenues other than from commercial advertisements used to
support broadcasting for which a subscription fee is not required. In
mid-December 1997, the FCC initiated a rule making proceeding to determine the
method for assessing those fees.
 
    The Communications Act prohibits the assignment of a license or the transfer
of control of a licensee without prior approval of the FCC. Additionally, the
Communications Act provides that no license may be held by a corporation if more
than 20% of the voting stock is owned of record or voted by aliens or is subject
to control by aliens. In addition, no corporation may hold the voting stock of
another corporation owning broadcast licenses if more than 25% of the voting
stock of such parent corporation is owned of record or voted by aliens or is
subject to control by aliens, unless specific FCC authorization is obtained. The
Company conducts annual surveys of its shareholders to ascertain compliance with
foreign ownership limits. (See "Business--Regulation--Broadcasting--Ownership
Limitations")
 
    MUST-CARRY/RETRANSMISSION CONSENT.  The Communications Act grants certain
"must carry" rights to broadcast television stations that are "local" to
communities served by cable systems. Under the Communications Act, commercial
stations have the alternative right to elect carriage on a cable system pursuant
to "retransmission consent" on a negotiated basis. Must-carry/retransmission
consent elections must be made every three years. (The next election period
commences January 1, 2000.) On March 31, 1997, in TURNER BROADCASTING SYSTEM,
INC. V. FCC, the U.S. Supreme Court upheld against a First Amendment challenge
to the must-carry provisions of the Communications Act.
 
    All of the Company's television stations are carried on cable systems
serving the communities in the stations' markets. Certain of the stations
obtained carriage by asserting must-carry rights and other stations granted
retransmission consent. Failure of broadcast stations to be carried on cable
systems could be detrimental to the business of a television station.
 
    The application of must-carry requirements to DTV is to be decided by the
FCC in a proceeding that is expected to be initiated the first or second quarter
of 1998. The Telecommunications Act of 1996 expressly provides that no ancillary
or supplementary DTV services provided by broadcasters will be entitled to
mandatory cable carriage.
 
    RESTRICTIONS ON BROADCAST ADVERTISING.  In the past, committees of Congress
examined proposals that would eliminate or severely restrict advertising of beer
and wine either through direct restrictions on content or through elimination or
reduction of the deductibility of expenses for such advertising under federal
tax laws. Such proposals generated substantial opposition. It is possible that
similar proposals will be considered in Congress, particularly in view of the
fact that certain broadcasters and cable networks have recently begun to
advertise distilled spirits after a self-imposed, long-term ban on the airing of
such ads. The new chairman of the FCC has stated that it is unlikely that the
agency will initiate an inquiry into alcohol advertising in the near future. The
elimination of all beer and wine advertising would have an adverse effect on the
revenues of the Company's television stations.
 
                                      I-23

<PAGE>
    OWNERSHIP LIMITATIONS.  The Telecommunications Act of 1996 deregulated
national television ownership by eliminating the 12-station limit and increasing
the nationwide audience reach limit from 25% to 35%. In calculating audience
reach, the FCC looks to the percentage of U.S. households in each television
market where a station is located. Under current FCC rules, UHF stations are
entitled to a "discount," whereby only half of the households in a market are
counted. The UHF discount will be reevaluated in 1998 as part of the FCC's
biennial review, which, as directed by the Telecommunications Act of 1996, must
be undertaken with respect to all of the broadcast ownership rules. Even if the
UHF discount is eliminated, the Company's current group of television stations
would remain well below the nationwide audience reach limit.
 
    With respect to local television ownership, the FCC currently prohibits a
party from owning a television station whose Grade B contour overlaps with that
of another television station. In a pending rule making proceeding, the FCC has
proposed to relax the so-called "duopoly" rule to a Grade A contour/DMA
standard. Under this proposal, a party would be permitted to own two television
stations provided that their smaller Grade A contours do not overlap and they
are not located within the same DMA, or "Designated Market Area", as that term
is defined by Nielsen Media Research. As part of the same local television
ownership proceeding, the FCC is also considering attributing ownership of
stations to parties which operate those stations pursuant to LMAs. An LMA
essentially enables a licensee of a television station to delegate the
operations, sales and programming to another party subject to the ultimate
control of the licensee. Under the most common scenario, a station in a given
television market will operate a second station in the same market under an LMA
- -- without conflicting with FCC local ownership rules. In the pending
proceeding, however, the FCC has proposed to narrow the use of LMAs by
attributing ownership of a station to a party which operates that station
pursuant to an LMA for 15% of the broadcast time. It is unclear how the
Company's out-of-market LMAs in West Palm Beach-Fort Pierce, Florida, and in
Providence, Rhode Island-New Bedford, Massachusetts, would be affected, if at
all, by the FCC's proceedings.
 
ENTERTAINMENT
 
    The Company's first-run, network and other production operations and its
distribution of off-network, first-run and other programs in domestic and
foreign syndication are not directly regulated by legislation. However, existing
and proposed rules and regulations of the FCC applicable to broadcast networks,
individual broadcast stations and cable could affect the Company's entertainment
businesses.
 
    ANTITRUST.  The Company, through PARAMOUNT PICTURES, is subject to a consent
decree, entered in 1948, which contains restrictions on certain motion picture
trade practices in the U.S.
 
    EUROPEAN UNION DIRECTIVE.  In October 1989, the European Union ("EU", now
the EC) directed each of the then 12 (now 15) Member States to adopt by October
3, 1991 broadcast quota regulations as outlined in the "Television without
Frontiers" Directive (89/552/EEC). In March 1995, the European Commission
approved revisions to this directive which would, if adopted, increase the
discrimination against non-European programming. The EU Council of Ministers
modified the proposed revisions in November 1995 and in February 1996 and the
European Parliament recommended further modifications which were considered by
both the Commission and the Council of Ministers. After much discussion, and
referral to a Conciliation Committee, a final text was approved and adopted in
June 1997 (97/36/EC). In respect of quotas the original wording of the 1989
Directive has been retained -- I.E., a majority proportion, where practicable
and by appropriate means, to be achieved progressively on the basis of suitable
criteria--thereby preserving the status quo reached in 1989. This change adopted
by the EU has not had a material impact on the Company's television syndication
business. The Company believes that its program services in Europe are in
compliance with the EU broadcast quotas.
 
                                      I-24

<PAGE>
VIDEO AND MUSIC DISTRIBUTION
 
    FRANCHISING.  Certain states, the U.S. Federal Trade Commission (the "FTC")
and certain foreign jurisdictions require a franchiser to transmit specified
disclosure statements to potential owners before issuing a franchise.
Additionally, some states and foreign jurisdictions require the franchiser to
register its franchise before its issuance. The Company believes the offering
circulars used to market its franchises comply with the FTC guidelines and all
applicable laws of states in the United States and foreign jurisdictions
regulating the offering and issuance of franchises. The Company's home video and
music retailing businesses, other than the franchising aspect, are not generally
subject to any government regulation other than customary laws and local zoning
and permit requirements.
 
                                      I-25

<PAGE>

I
TEM 2. PROPERTIES.
 
    The Company maintains its world headquarters at 1515 Broadway, New York, New
York, where it rents approximately one million square feet for executive offices
and certain of its operating divisions. The lease runs to 2010, with four
renewal options for five years each. The lease also grants the Company options
for additional space and a right of first negotiation for other available space
in the building. The Company also leases approximately 494,000 square feet of
office space at 1633 Broadway, New York, New York, which lease runs to 2010, and
approximately 237,000 square feet of office space at 1230 Avenue of the
Americas, New York, New York, which lease runs to 2009, which leases contain
options to renew. The Company owns the PARAMOUNT PICTURES studio at 5555 Melrose
Avenue, Los Angeles, California, which consists of approximately 65 acres
containing sound stages, administrative, technical and dressing room structures,
screening theaters, machinery and equipment facilities, plus a back lot and
parking lots. PARAMOUNT PARKS' operations in the U.S. include approximately
1,862 acres owned and 242 acres leased and in Canada include approximately 380
acres owned. The BLOCKBUSTER headquarters at 1201 Elm Street, Dallas, Texas
consists of approximately 210,000 square feet of leased space. The BLOCKBUSTER
retail and distribution operations in the U.S. and Canada consist of
approximately 54 owned properties, aggregating approximately 343,000 square
feet, and approximately 4,060 leased locations, aggregating approximately 27.8
million square feet. Facilities within the Publishing segment (other than
executive offices at 1230 Avenue of the Americas described above) include
approximately 6,366,000 square feet of space, of which approximately 4,766,000
square feet are leased. The facilities are used for warehouse, distribution and
administrative functions.
 
    The Company also owns and leases office, studio, retail and warehouse space
in various cities in the U.S., Canada and several countries around the world for
its businesses. The Company considers its properties adequate for its present
needs.
 

ITEM 3. LEGAL PROCEEDINGS.
 
    The Company was served last week with an action entitled ROSSDEUTSCHER V.
VIACOM INC. (C.A. No. 98C-03-091 JEB) filed in the Superior Court in and for New
Castle County, Delaware alleging that the Company breached contractual duties in
connection with certain contingent rights issued in connection with the
Company's acquisitions of Paramount Communications Inc. and Blockbluster
Entertainment Corporation in 1994. The action seeks unspecified compensatory
damages. The Company believes that the claims are without merit and intends to
defend vigorously.
 
    Certain subsidiaries of the Company from time to time receive claims from
federal and state environmental regulatory agencies and other entities asserting
that they are or may be liable for environmental cleanup costs and related
damages arising out of former operations. While the outcome of these claims
cannot be predicted with certainty, on the basis of its experience and the
information currently available to it, the Company does not believe that the
claims it has received will have a material adverse effect on its results of
operations, financial position or cash flows. (See "Item 6. Selected Financial
Data" and "Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition")
 
    The Company and various of its subsidiaries are parties to certain other
legal proceedings. However, these proceedings are not likely to result in
judgments that will have a material adverse effect on its results of operations,
financial position or cash flows.
 
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
 
    Financial information relating to foreign and domestic operations for each
of the last three years ending December 31, is set forth in Notes 13 and 14 to
the Consolidated Financial Statements of the Company included elsewhere herein.
 
                                      I-26

<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
    Not Applicable
 
EXECUTIVE OFFICERS OF THE COMPANY
 
    Set forth below is certain information concerning the current executive
officers of the Company, which information is hereby included in Part I of this
report.
 

<TABLE>
<CAPTION>
NAME                                                       AGE                              TITLE
- -----------------------------------------------------      ---      -----------------------------------------------------
<S>                                                    <C>          <C>
Sumner M. Redstone...................................          74   Chairman of the Board of Directors and Chief
                                                                      Executive Officer
Philippe P. Dauman...................................          44   Deputy Chairman, Executive Vice President, General
                                                                      Counsel, Chief Administrative Officer and Secretary
                                                                      and Director
Thomas E. Dooley.....................................          41   Deputy Chairman, Executive Vice President-Finance,
                                                                      Corporate Development and Communications and
                                                                      Director
Robert M. Bakish.....................................          34   Senior Vice President, Planning, Development and
                                                                      Technology
Carl D. Folta........................................          40   Senior Vice President, Corporate Relations
Michael D. Fricklas..................................          38   Senior Vice President, Deputy General Counsel
Susan C. Gordon......................................          44   Vice President, Controller and Chief Accounting
                                                                      Officer
Rudolph L. Hertlein..................................          57   Senior Vice President, Corporate Development
Carol A. Melton......................................          43   Senior Vice President, Government Affairs
William A. Roskin....................................          55   Senior Vice President, Human Resources and
                                                                      Administration
Martin M. Shea.......................................          54   Senior Vice President, Investor Relations
George S. Smith, Jr..................................          49   Senior Vice President, Chief Financial Officer
</TABLE>

 
- ------------------------
 
    None of the executive officers of the Company is related to any other
executive officer or director by blood, marriage or adoption except that Brent
D. Redstone and Shari Redstone, Directors of the Company, are the son and
daughter, respectively, of Sumner M. Redstone.
 
    Mr. Redstone has been a Director of the Company since 1986 and Chairman of
the Board since 1987, acquiring the additional title of Chief Executive Officer
in January 1996. Mr. Redstone has served as President, Chief Executive Officer
of NAI since 1967, and continues to serve in such capacity; he has also served
as the Chairman of the Board of NAI since 1986. Mr. Redstone became a Director
of Spelling in 1994 and became Chairman of the Board of Spelling in January
1996. He served as the first Chairman of the Board of the National Association
of Theatre Owners, and is currently a member of the Executive Committee of that
organization. Mr. Redstone is Chairman of the Corporate Commission on Education
Technology whose mission is to advance the quality of education in the United
States through the use of technology. The Commission comprises chief executive
officers from leading media and telecommunications companies. Since 1982, Mr.
Redstone has been a member of the faculty of Boston University Law School, where
he has lectured on entertainment law, and since 1994, he has been a Visiting
Professor at Brandeis University. In 1944, Mr. Redstone graduated from Harvard
University and, in 1947, received an LL.B. from Harvard University School of
Law. Upon graduation, he served as Law Secretary with the United States Court of
Appeals, and then as a Special Assistant to the United States Attorney General.
 
    Mr. Dauman has been a Director of the Company since 1987 and was appointed
Deputy Chairman of the Company in January 1996. In March 1994, he was elected
Executive Vice President, General Counsel,
 
                                      I-27

<PAGE>
Chief Administrative Officer and Secretary of the Company. Mr. Dauman became a
Director of LaFarge Corporation in 1997, a Director of Spelling in 1994 and a
Director of NAI in 1992. From February 1993 to March 1994, he served as Senior
Vice President, General Counsel and Secretary of the Company. Prior to that, Mr.
Dauman was a partner in the law firm of Shearman & Sterling in New York, which
he joined in 1978.
 
    Mr. Dooley was appointed a Director and Deputy Chairman of the Company in
January 1996 and has been an executive officer of the Company since January
1987. Mr. Dooley became a Director of Spelling in 1996. In March 1994, he was
elected Executive Vice President-Finance, Corporate Development and
Communications of the Company. From July 1992 to March 1994, Mr. Dooley served
as Senior Vice President, Corporate Development of the Company. From August 1993
to March 1994, he also served as President, Interactive Television. Prior to
that, he held various positions in the Company's corporate and divisional
finance areas.
 
    Mr. Bakish was elected Senior Vice President, Planning, Development and
Technology of the Company in January 1998. Prior to that, he served as Vice
President, Planning and Development of the Company since February 1997. Before
joining the Company, Mr. Bakish served most recently as a partner with Booz
Allen and Hamilton in its media and entertainment practice, which he joined in
1990.
 
    Mr. Folta was elected Senior Vice President, Corporate Relations of the
Company in November 1994. Prior to that, he served as Vice President, Corporate
Relations of the Company from April 1994 to November 1994. From 1984 until
joining the Company in April 1994, Mr. Folta held various Corporate
Communications positions at Paramount, serving most recently as Senior Director,
Corporate Communications.
 
    Mr. Fricklas was elected Senior Vice President, Deputy General Counsel of
the Company in March 1994. From June 1993 to March 1994, he served as Vice
President, Deputy General Counsel of the Company. He served as Vice President,
General Counsel and Secretary of Minorco (U.S.A.) Inc. from 1990 to 1993. Prior
to that, Mr. Fricklas was an attorney in private practice at the law firm of
Shearman & Sterling.
 
    Ms. Gordon was elected Vice President, Controller and Chief Accounting
Officer in April 1995. Prior to that, she served as Vice President, Internal
Audit of the Company since October 1986. From June 1985 to October 1986, Ms.
Gordon served as Controller of Viacom Broadcasting. She joined the Company in
1981 and held various positions in the corporate finance area.
 
    Mr. Hertlein was elected Senior Vice President, Corporate Development of the
Company in July 1994. Prior to that, he served as Senior Vice President and
Controller of Paramount from September 1993 to July 1994 and as Senior Vice
President, Internal Audit and Special Projects of Paramount from September 1992
to September 1993 and, before that, as Vice President, Internal Audit and
Special Projects of Paramount.
 
    Ms. Melton was elected Senior Vice President, Government Affairs of the
Company in May 1997. Before joining the Company, Ms. Melton served most recently
as Vice President, Law and Public Policy at Time Warner Inc., having joined
Warner Communications, Inc. in 1987. Ms. Melton serves on the Boards of Trustees
of the Federal Communications Bar Association Foundation, The Media Institute
and the Washington Performing Arts Society.
 
    Mr. Roskin has been an executive officer of the Company since April 1988
when he became Vice President, Human Resources and Administration. In July 1992,
Mr. Roskin was elected Senior Vice President, Human Resources and Administration
of the Company. From May 1986 to April 1988, he was Senior Vice President, Human
Resources at Coleco Industries, Inc. From 1976 to 1986, he held various
executive positions at Warner Communications, Inc., serving most recently as
Vice President, Industrial and Labor Relations.
 
                                      I-28

<PAGE>
    Mr. Shea was elected Senior Vice President, Investor Relations of the
Company in January 1998. From July 1994 to May 1995 and from November 1995 to
December 1997, he was Senior Vice President, Corporate Communications for Triarc
Companies, Inc. From June 1995 through October 1995, he served as Managing
Director of Edelman Worldwide. Prior to that, Mr. Shea served most recently as
Vice President, Investor Relations at Paramount Communications Inc., which he
joined in 1977.
 
    Mr. Smith has been an executive officer of the Company since May 1985. In
November 1987, he was elected Senior Vice President, Chief Financial Officer of
the Company and he continues to serve in such capacity. Mr. Smith became a
Director of Gemstar International Group Limited in 1997. In May 1985, Mr. Smith
was elected Vice President, Controller and, in October 1987, he was elected Vice
President, Chief Financial Officer of the Company. From 1983 until May 1985, he
served as Vice President, Finance and Administration of Viacom Broadcasting and
from 1981 until 1983, he served as Controller of Viacom Radio. Mr. Smith joined
the Company in 1977 in the Corporate Treasurer's office and until 1981 served in
various financial planning capacities.
 
                                      I-29

<PAGE>

                                    PART II
 

ITEM 5. MARKET FOR VIACOM INC.'S COMMON EQUITY AND RELATED SECURITY HOLDER
      MATTERS.
 
    Viacom Inc. voting Class A Common Stock and Viacom Inc. non-voting Class B
Common Stock are listed and traded on the American Stock Exchange ("AMEX") under
the symbols "VIA" and "VIA B", respectively.
 
    The following table sets forth, for the calendar period indicated, the per
share range of high and low sales prices for Viacom Inc.'s Class A Common Stock
and Class B Common Stock, as reported on the AMEX Composite Tape.
 

<TABLE>
<CAPTION>
                                         VIACOM CLASS A                              VIACOM CLASS B
                                          COMMON STOCK                                COMMON STOCK
                                       ------------------                          ------------------
                                   HIGH                  LOW                   HIGH                  LOW
                                 -------               -------               -------               -------
<S>                        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
 
1996
  1st quarter............  $      46  3/4        $      36  5/8        $      47  5/8        $      37  1/8
  2nd quarter............         43  3/8               36  3/8               44  3/8               37  1/8
  3rd quarter............         38  3/8               29  5/8               39                    29  3/4
  4th quarter............         38  1/4               30  7/8               38  3/4               30  7/8
 
1997
  1st quarter............  $      37  1/8        $      32             $      37  7/8        $      32
  2nd quarter............         35  7/16              25  1/4               36                    25  1/4
  3rd quarter............         34  3/4               27  1/2               35  1/8               27  1/4
  4th quarter............         41  3/4               26                    42  1/4               26  1/2
</TABLE>

 
    Viacom Inc. has not declared cash dividends on its common stock and has no
present intention of so doing.
 
    As of March 23, 1998 there were approximately 10,435 holders of Viacom Inc.
Class A Common Stock, and 19,881 holders of Viacom Inc. Class B Common Stock.
 
                                      II-1

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
 
                          VIACOM INC. AND SUBSIDIARIES
                (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------------------------
                                                        1997        1996        1995        1994       1993
                                                     ----------  ----------  ----------  ----------  ---------
<S>                                                  <C>         <C>         <C>         <C>         <C>
Revenues...........................................  $ 13,206.1  $ 12,084.2  $ 10,915.9  $  6,701.4  $ 1,513.6
Operating income (a)...............................  $    752.8  $  1,274.3  $  1,398.7  $    505.9  $   253.4
Earnings from continuing operations................  $    374.5  $    170.7  $    150.5  $     77.0  $    41.3
Net earnings.......................................  $    793.6  $  1,247.9  $    222.5  $     89.6  $   171.0
Net earnings attributable to common stock..........  $    733.6  $  1,187.9  $    162.5  $     14.6  $   158.2
Basic earnings per common share:
  Earnings from continuing operations..............  $      .89  $      .30  $      .25  $      .01  $     .24
  Net earnings.....................................  $     2.08  $     3.26  $      .45  $      .07  $    1.31
Diluted earnings per common share:
  Earnings from continuing operations..............  $      .89  $      .30  $      .24  $      .01  $     .23
  Net earnings.....................................  $     2.07  $     3.23  $      .43  $      .07  $    1.30
At year end:
  Total assets.....................................  $ 28,288.7  $ 28,834.0  $ 28,991.0  $ 28,273.7  $ 6,416.9
  Long-term debt, net of current portion...........  $  7,423.0  $  9,855.7  $ 10,712.1  $ 10,402.4  $ 2,440.0
  Shareholders' equity.............................  $ 13,383.6  $ 12,586.5  $ 12,093.8  $ 11,791.6  $ 2,718.1
</TABLE>

 
- ------------------------
 
(a) For the five years presented, operating income is defined as net earnings
    before cumulative effect of change in accounting principle, extraordinary
    losses, discontinued operations, minority interest, equity in earnings
    (loss) of affiliated companies (net of tax), income taxes, other items
    (net), and interest expense (net).
 
    Paramount Communications Inc.'s and Blockbuster Entertainment Corporation's
results of operations are included from their dates of acquisition, commencing
March 1, 1994 and October 1, 1994, respectively. Revenues, operating income, and
earnings from continuing operations for each year presented exclude the Cable
segment, interactive game operations, including Virgin, and Viacom Radio
Stations which are reported as discontinued operations.
 
    See Notes to Consolidated Financial Statements for additional information on
transactions and accounting classifications which have affected the
comparability of the periods presented above.
 
    Viacom Inc. has not declared cash dividends on its common stock for any of
the periods presented above.
 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
      FINANCIAL CONDITION.
 
GENERAL
 
    Management's discussion and analysis of the results of operations and
financial condition of Viacom Inc. and its subsidiaries (the "Company") 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.
 
                                      II-2

<PAGE>
    On October 21, 1997, the Company completed the sale of its half-interest in
USA Networks, including the Sci-Fi Channel, to Universal Studios, Inc. for a
total of $1.7 billion in cash. The Company realized a pre-tax gain of
approximately $1.1 billion reflected in "Other items, net" in the fourth quarter
of 1997. The net proceeds from this transaction were used to repay debt.
 
    On February 19, 1997, the Company adopted a plan to dispose of its
interactive game businesses, including Viacom New Media, the operations of which
were terminated in 1997. On that same date, the Board of Directors of Spelling
Entertainment Group Inc. ("Spelling"), a majority owned subsidiary of the
Company, approved a formal plan to dispose of Virgin Interactive Entertainment
Limited ("Virgin"). Spelling expects to complete a transaction in 1998.
 
    On July 2, 1997, the Company completed the sale of Viacom Radio Stations to
Chancellor Media Corp. for approximately $1.1 billion in cash. As a result of
the sale, the Company realized a pre-tax gain on disposition of approximately
$782.3 million, or $416.4 million net of tax, in the third quarter of 1997.
 
    On July 31, 1996, the Company completed the split-off of its Cable segment
pursuant to an exchange offer and related transactions. As a result, the Company
realized a gain of approximately $1.3 billion, reduced its debt and retired
approximately 4.1% of the total outstanding common shares.
 
    The interactive game businesses, Viacom Radio Stations and Viacom Cable have
been accounted for as discontinued operations. Operating results and the related
gain or loss attributable to discontinued operations have been separately
disclosed in the Company's notes to the consolidated financial statements. (See
Note 3 of the Notes to the Consolidated Financial Statements.)
 
BUSINESS SEGMENT INFORMATION
 
    The Company's consolidated statements of operations reflect four operating
segments:
 
    NETWORKS AND BROADCASTING-- Basic Cable and Premium Subscription Television
                               Program Services, and Television Stations.
 
    ENTERTAINMENT-- Production and Distribution of Motion Pictures and
                   Television Programming as well as Movie Theater Operations
                   and Music Publishing.
 
    VIDEO AND MUSIC/THEME PARKS--Home Video and Music Retailing, and Theme
Parks.
 
    PUBLISHING--Education; Consumer; Business and Professional/Reference; and
International Groups.
 
                                      II-3

<PAGE>
    The following tables set forth revenues and operating income by business
segment, for the years ended December 31, 1997, 1996 and 1995 . Results for each
year presented exclude the interactive game businesses, Viacom Radio Stations
and Viacom Cable which are reported as discontinued operations.
 

<TABLE>
<CAPTION>
                                                                       YEAR ENDED                      % CHANGE
                                                                      DECEMBER 31,             ------------------------
                                                           ----------------------------------     1997         1996
(IN MILLIONS)                                                 1997        1996        1995       VS 1996      VS 1995
                                                           ----------  ----------  ----------  -----------  -----------
<S>                                                        <C>         <C>         <C>         <C>          <C>
Revenues:
Networks and Broadcasting................................  $  2,717.8  $  2,404.0  $  2,030.8          13%          18%
Entertainment............................................     3,861.3     3,493.4     3,407.5          11            3
Video and Music/Theme Parks..............................     4,286.6     3,920.4     3,333.4           9           18
Publishing...............................................     2,472.1     2,331.7     2,171.1           6            7
Intercompany.............................................      (131.7)      (65.3)      (26.9)        102          143
                                                           ----------  ----------  ----------
    Total revenues.......................................  $ 13,206.1  $ 12,084.2  $ 10,915.9           9           11
                                                           ----------  ----------  ----------
                                                           ----------  ----------  ----------
Operating income (a):
Networks and Broadcasting................................  $    747.5  $    630.2  $    520.3          19%          21%
Entertainment............................................       233.4       330.6       354.8         (29)          (7)
Video and Music/Theme Parks..............................      (248.3)      273.1       501.5        (191)         (46)
Publishing...............................................       221.7       217.2       186.3           2           17
                                                           ----------  ----------  ----------
    Segment operating income.............................       954.3     1,451.1     1,562.9         (34)          (7)
Corporate................................................      (201.5)     (176.8)     (164.2)         14            8
                                                           ----------  ----------  ----------
    Total operating income...............................  $    752.8  $  1,274.3  $  1,398.7         (41)          (9)
                                                           ----------  ----------  ----------
                                                           ----------  ----------  ----------
</TABLE>

 
- ------------------------
 
(a) Operating income is defined as net earnings before discontinued operations,
    minority interest, equity in loss of affiliated companies (net of tax),
    provision for income taxes, other items (net), and interest expense (net).
 
                                      II-4

<PAGE>
EBITDA
 
    The following table sets forth EBITDA (defined as operating income (loss)
before depreciation and amortization principally of goodwill related to business
combinations) for the years ended December 31, 1997, 1996 and 1995. While many
in the financial community consider EBITDA to be an important measure of
comparative operating performance, it should be considered in addition to, but
not as a substitute for or superior to operating income, net earnings, cash flow
and other measures of financial performance prepared in accordance with
generally accepted accounting principles.
 

<TABLE>
<CAPTION>
                                                                        YEAR ENDED                     % CHANGE
                                                                       DECEMBER 31,            ------------------------
                                                              -------------------------------     1997         1996
                                                                1997       1996       1995       VS 1996      VS 1995
                                                              ---------  ---------  ---------  -----------  -----------
<S>                                                           <C>        <C>        <C>        <C>          <C>
(IN MILLIONS)
EBITDA (a):
Networks and Broadcasting...................................  $   881.6  $   755.3  $   627.9          17%          20%
Entertainment...............................................      364.6      457.7      480.9         (20)          (5)
Video and Music/Theme Parks.................................      241.6      676.6      823.0         (64)         (18)
Publishing..................................................      384.9      365.2      340.2           5            7
                                                              ---------  ---------  ---------
    Segment EBITDA..........................................    1,872.7    2,254.8    2,272.0         (17)          (1)
Corporate...................................................     (176.6)    (162.9)    (156.6)          8            4
                                                              ---------  ---------  ---------
    Total EBITDA............................................  $ 1,696.1  $ 2,091.9  $ 2,115.4         (19)          (1)
                                                              ---------  ---------  ---------
                                                              ---------  ---------  ---------
</TABLE>

 
- ------------------------
 
(a) EBITDA is defined as operating income (loss) before depreciation and
    amortization.
 
RESULTS OF OPERATIONS 1997 VERSUS 1996
 
    Revenues increased 9% to $13.2 billion for 1997 from $12.1 billion for 1996.
Revenue increases were driven primarily by the Networks and Broadcasting,
Entertainment and Video and Music/Theme Parks segments, all of which increased
their percentage of total revenue for 1997. EBITDA decreased 19% to $1.7 billion
for 1997 from $2.09 billion for 1996. Operating income decreased 41% to $752.8
million for 1997 from $1.3 billion for 1996. Operating results were adversely
affected by lower operating margins at Blockbuster in 1997 and charges taken by
Blockbuster during 1997 and 1996.
 
    Total expenses increased 15% to $12.5 billion for 1997 from $10.8 billion
for 1996 reflecting normal increases in every segment associated with revenue
growth. Expense increases for the year also reflect the second quarter 1997
Blockbuster charge of approximately $247.5 million, associated with the
reduction in the carrying value of excess retail inventory and reorganizing and
closing underperforming stores in certain international markets.
 
SEGMENT RESULTS OF CONTINUING OPERATIONS--1997 VERSUS 1996
 
NETWORKS AND BROADCASTING (BASIC CABLE AND PREMIUM SUBSCRIPTION TELEVISION
  PROGRAM SERVICES, AND TELEVISION STATIONS)
 
    The Networks and Broadcasting segment is principally comprised of MTV
Networks ("MTVN"), basic cable television program services; Showtime Networks
Inc. ("SNI"), premium subscription television program services; and the
Paramount Stations Group ("PSG").
 
    Revenues increased 13% to $2.7 billion for 1997 from $2.4 billion for 1996.
EBITDA increased 17% to $881.6 million for 1997 from $755.3 million for 1996.
Operating income increased 19% to $747.5 million for 1997 from $630.2 million
for 1996. MTVN revenues of $1.5 billion, EBITDA of $636.2 million and operating
income of $572.2 million increased 19%, 20% and 23%, respectively. The increase
in MTVN's
 
                                      II-5

<PAGE>
revenues principally reflects higher advertising sales and affiliate fees.
Advertising revenue increases were driven by rate increases at Nickelodeon and
higher unit volume at MTV. MTVN's EBITDA and operating income increases were
driven by revenue growth offset by increased programming and production
expenses.
 
    SNI's revenues of $724.1 million increased 3% over the prior year
principally reflecting higher DBS revenues due to subscriber growth. SNI's
reported 1997 increases of 17% and 10% for EBITDA and operating income,
respectively, reflect continued DBS growth and cost reductions associated with
the exit from the backyard (TVRO) dish retail business. Showtime subscriptions
increased approximately 2.3 million to 18.2 million subscriptions at December
31, 1997.
 
    PSG's revenues, EBITDA and operating income increased 8%, 5% and 6%,
respectively, primarily due to higher advertising sales partially offset by a
change in station mix reflecting the swapping of network affiliated television
stations for stations which are or will become affiliated with United Paramount
Network. On a same-station basis, revenues, EBITDA and operating income for PSG
increased 13%, 21% and 39%, respectively.
 
    The Networks and Broadcasting segment derives revenues principally from two
sources: the sale of time on its networks and television stations to advertisers
and the license of the networks to cable television operators, direct-to-home
("DTH") and other distributors. The sale of advertising time is affected by
viewer demographics, viewer ratings and market conditions. Adverse changes in
general market conditions for advertising may affect revenues.
 
ENTERTAINMENT (MOTION PICTURES AND TELEVISION PROGRAMMING, MOVIE THEATERS AND
  MUSIC PUBLISHING)
 
    The Entertainment segment is principally comprised of Paramount Pictures,
Paramount Television and Spelling. Revenues increased 11% to $3.9 billion for
1997 from $3.5 billion for 1996. EBITDA decreased 20% to $364.6 million for 1997
from $457.7 million for 1996. Operating income decreased 29% to $233.4 million
for 1997 from $330.6 million for 1996. Entertainment revenues were higher than
the prior year principally reflecting higher revenues at Paramount Television
attributable to higher network and syndication revenues for FRASIER. For 1997,
higher feature film revenues were driven by higher home video revenues, led by
THE FIRST WIVES CLUB, MISSION: IMPOSSIBLE and STAR TREK: FIRST CONTACT as well
as higher pay television revenues partially offset by lower foreign theatrical
revenues. The EBITDA in 1996 reflects the impact of significant foreign library
licensing agreements entered into by Paramount and Spelling.
 
    Each motion picture is a separate and distinct product with its financial
success dependent upon many factors, among which cost and public response are of
fundamental importance. Entertainment's operating results fluctuate due to the
timing of theatrical and home video releases. Release dates are determined by
several factors, including timing of vacation and holiday periods and
competition in the marketplace.
 
    License fees for the television exhibition of motion pictures and for
syndication and basic cable exhibition of television programming are recorded as
revenue in the period that the products are available for such exhibition,
which, among other reasons, may cause substantial fluctuation in operating
results. As of December 31, 1997, the unrecognized revenues attributable to such
licensing agreements were approximately $1.6 billion.
 
VIDEO AND MUSIC/THEME PARKS (HOME VIDEO AND MUSIC RETAILING/THEME PARKS)
 
    The Video and Music/Theme Parks segment is principally comprised of
Blockbuster Video and Music and Paramount Parks. Revenues increased 9% to $4.3
billion for 1997 from $3.9 billion for 1996. EBITDA decreased 64% to $241.6
million for 1997 from $676.6 million for 1996. The segment recorded operating
losses of $248.3 million for 1997 versus operating income of $273.1 million for
1996. The revenue increase primarily reflects the increased number of
Company-owned video stores in operation in 1997 as compared to 1996. Blockbuster
video worldwide same-store rental revenues and worldwide same store sales each
 
                                      II-6

<PAGE>
decreased 1%. Blockbuster Video ended the year with 6,049 stores, a net increase
of 732 stores from the prior year. EBITDA of $241.6 million reflects the impact
of the Blockbuster charge taken in the second quarter of 1997 which is described
below, as well as increased rental tape amortization costs and higher expenses
attributable to the interim effects of the change in strategic emphasis back to
video rental from broad based retail. Music stores revenues of $605.7 million
for 1997 decreased 2% from the comparable prior-year period. Music stores posted
operating losses before depreciation and amortization of $71.6 million for 1997
as compared to $46.2 million for 1996. Music stores recorded operating losses of
$96.5 million as compared to $79.2 million for 1996. Music store results for
1997 were also adversely affected by the second quarter Blockbuster charge
described below. Blockbuster Music ended the year with 425 stores, a net
decrease of 71 stores from the prior year. Theme Parks revenues of $367.3
million, operating income of $42.4 million and EBITDA of $88.9 million for 1997
as compared with revenues of $361.9 million, operating income of $43.7 million
and EBITDA of $87.9 million for 1996 principally reflect higher per capita
spending.
 
    In the second quarter of 1997, Blockbuster recorded a pre-tax charge of
$322.8 million (the "Blockbuster charge"). The Blockbuster charge consists of
operating expenses of approximately $247.5 million, associated with the
reduction in the carrying value of excess retail inventory and the reorganizing
and closing of underperforming Blockbuster stores in certain international
markets as well as depreciation expense attributable to the write-off of fixed
assets of $45.9 million and write-offs attributable to international joint
ventures accounted for under the equity method of $29.4 million.
 
    During the fourth quarter of 1996, Blockbuster adopted a plan to abandon
certain Music retail stores, relocate its headquarters and eliminate third party
distributors domestically. As a result of such plan, Blockbuster recognized a
restructuring charge of approximately $88.9 million principally reflecting costs
associated with the closing of approximately 10%, or 50, of its Music retail
stores and costs associated with relocating Blockbuster's headquarters from Fort
Lauderdale to Dallas. As a result of the Music retail store closings,
Blockbuster recognized lease termination costs of $28.3 million and accrued
shut-down and other costs of $14.6 million as part of the restructuring charge.
Through December 31, 1997, the Company paid and charged approximately $20.2
million against these liabilities. The Company expects to substantially complete
the activities related to the Music retail store closings by the end of 1998.
 
    In the fourth quarter of 1996, Blockbuster recognized $25 million of
estimated severance benefits payable to approximately 650 employees of its Fort
Lauderdale headquarters who had chosen not to relocate. Blockbuster, through the
restructuring charge, also recognized $21.0 million of other costs of exiting
Fort Lauderdale and eliminating third party distributors. The Blockbuster
relocation to Dallas was completed during the second quarter of 1997. The
construction of the Blockbuster distribution center has been completed and this
facility was opened in the first quarter of 1998. Through December 31, 1997, the
Company paid and charged approximately $26.6 million against the severance
liability and other exit costs.
 
    Excluding the impact of the second quarter 1997 Blockbuster charge of
approximately $247.5 million, associated with the reduction in the carrying
value of excess retail inventory and reorganizing and closing underperforming
stores in certain international markets, 1997 Video and Music/Theme Parks posted
EBITDA of $489.1 million and video stores posted EBITDA of $514.5 million.
 
    The Company's home video and music businesses may be affected by a variety
of factors, including but not limited to, general economic trends in the movie,
home video and music industries, the quality of new products available for
rental and sale, competition, marketing programs, special or unusual events,
changes in technology, and similar factors that may affect retailers in general.
As with other retail outlets, there is a distinct seasonal pattern to the home
video and music businesses. For home video the peak rental times tend to mirror
school vacations patterns (i.e., summer, spring break, Christmas and Easter).
The music business typically generates higher revenues during the holiday
seasons.
 
                                      II-7

<PAGE>
PUBLISHING (EDUCATION; CONSUMER; BUSINESS AND PROFESSIONAL/REFERENCE; AND
  INTERNATIONAL GROUPS)
 
    Publishing is comprised of Simon & Schuster which includes imprints such as
Simon & Schuster, Pocket Books, Prentice Hall and Macmillan Publishing USA.
Revenues increased 6% to $2.5 billion for 1997 from $2.3 billion for 1996.
EBITDA increased 5% to $384.9 million for 1997 from $365.2 million for 1996.
Operating income increased 2% to $221.7 million for 1997 from $217.2 million for
1996. Revenue increases for the year primarily reflect strong sales from
International, Macmillan Publishing USA and the Higher Education Group stemming
principally from strong European sales, growth in Macmillan Digital and General
Reference product lines and market share growth for Higher Education. The
Consumer Group's revenues increased slightly while EBITDA remained unchanged
from 1996. The Consumer Group's bestsellers for 1997 were led by ANGELA'S ASHES
by Frank McCourt, THE JOY OF COOKING by Irma S. Rombauer, Mary Higgins Clark's
PRETEND YOU DON'T SEE HER and Andrew Morton's DIANA: HER TRUE STORY, THE
COMMEMORATIVE EDITION.
 
    The educational marketplace is subject to seasonal fluctuations in its
business which correlate to the traditional school year. Sales to elementary and
secondary schools are dependent, in part, on the adoption cycle or selection of
instructional materials by designated state agencies. Approximately half the
U.S. states and some localities regulate the purchase of textbooks through the
textbooks adoption process. The consumer marketplace is subject to increased
periods of demand in the summer months and during the end-of-year holiday
season.
 
OTHER INCOME AND EXPENSE INFORMATION
 
CORPORATE EXPENSES
 
    Corporate expenses, including depreciation and amortization expense,
increased 14% to $201.5 million for 1997 from $176.8 million for 1996,
principally reflecting increased general and administrative expenses and
increased intercompany profit elimination for the year.
 
INTEREST EXPENSE
 
    Net interest expense decreased 4% to $763.0 million for 1997 from $798.0
million for 1996, principally reflecting the reduction of debt with proceeds
from the sale of Viacom Radio Stations and USA Networks partially offset by
increases in debt to finance capital expenditures and other investments
including the exercise by the Company of its option to purchase a 50% interest
in United Paramount Network ("UPN"). The Company had approximately $7.8 billion
and $9.9 billion principal amount of debt outstanding as of December 31, 1997
and December 31, 1996, respectively, at weighted average interest rates of 7.8%
and 7.4%, respectively. (See Note 7 of Notes to Consolidated Financial
Statements.)
 
OTHER ITEMS, NET
 
    On October 21, 1997, the Company completed the sale of its half-interest in
USA Networks, including the Sci-Fi Channel, to Universal Studios, Inc. for a
total of $1.7 billion in cash. The Company realized a pre-tax gain of
approximately $1.1 billion in the fourth quarter of 1997. The net proceeds from
this transaction were used to repay debt.
 
    In addition, during 1997, the Company recorded pre-tax gains on the swap of
certain television stations of approximately $190.9 million partially offset by
write-offs of certain cost investments.
 
PROVISION FOR INCOME TAXES
 
    The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The annual effective tax rates of 56.4%
for 1997 and 61.5% for 1996, were both adversely affected by amortization of
intangibles in excess of the amounts deductible for tax purposes. Excluding the
non-deductible amortization of intangibles, the annual effective tax rate would
have been 44.6% for 1997 and 32.2% for 1996.
 
                                      II-8

<PAGE>
EQUITY IN LOSS OF AFFILIATES
 
    "Equity in loss of affiliated companies, net of tax" was $163.3 million for
1997 as compared to $13.0 million for 1996. The net equity loss for 1997
increased significantly due to the start-up losses of UPN, the absence of income
from USA Networks subsequent to its sale on October 21, 1997 and charges
associated with international network ventures.
 
MINORITY INTEREST
 
    Minority interest primarily represents the minority ownership of Spelling's
common stock.
 
DISCONTINUED OPERATIONS
 
    For 1997, discontinued operations reflect the Viacom Radio Stations' net
earnings prior to disposal on July 2, 1997 and the realized after-tax gain of
approximately $416.4 million, a net reversal of approximately $20.8 million
principally of Cable split-off reserves that were no longer required, partially
offset by a reserve of $32.0 million, net of minority interest, for anticipated
additional losses associated with the operations of Virgin through disposition.
 
    For the year ended December 31, 1997, the revenues and operating losses for
the interactive game businesses were $241.3 million and $43.5 million,
respectively. These losses were provided for in the estimated loss on disposal
of $159.3 million, net of minority interest, which included a provision for
future operating losses of approximately $44.0 million, net of minority
interest, as of December 31, 1996.
 
    For 1996, discontinued operations reflect the results of operations, net of
tax, of the Cable segment, the interactive game businesses, including Virgin,
and the Viacom Radio Stations. The Cable segment was split-off from the Company
on July 31, 1996 and the gain realized of approximately $1.3 billion is included
in the net gain on dispositions, net of tax, offset by the anticipated loss on
disposal of the interactive game businesses.
 
RESULTS OF OPERATIONS 1996 VERSUS 1995
 
    Revenues increased 11% to $12.1 billion for 1996 from $10.9 billion for
1995. Revenue increases were driven primarily by the Networks and Broadcasting
and Video and Music/Theme Parks segments, which reported increased advertising
and affiliate revenues and continued expansion of Video stores which also
reported a 6% increase in worldwide same-store sales. EBITDA decreased 1% to
$2.09 billion for 1996 from $2.12 billion for 1995. Operating income decreased
9% to $1.3 billion for 1996 from $1.4 billion for 1995. Operating results
decreased due principally to the Video and Music/Theme Parks segment which
recorded a restructuring charge of $88.9 million, a write-off of music inventory
of $9.4 million and continued to encounter difficult conditions in the music
retailing industry. The Entertainment segment also recognized approximately
$250.0 million of revenues and $68.0 million of EBITDA and operating income
during 1995 resulting from the conforming of accounting policies pertaining to
the television programming libraries of Viacom Entertainment, Spelling and
Paramount. The Networks and Broadcasting and Video and Music/Theme Parks
segments contributed 49% and 21%, respectively, of consolidated operating income
for 1996 versus 37% and 36%, respectively, for 1995.
 
    The restructuring charge noted above includes costs associated with the
closing of approximately 10%, or 50, Blockbuster Music stores, as well as
certain costs associated with the move of Blockbuster's headquarters from Fort
Lauderdale to Dallas. Excluding the impact of the $98.3 million Blockbuster
restructuring and inventory charges described above, the Company's EBITDA
increased 4% to $2.2 billion for 1996 from $2.1 billion for 1995.
 
                                      II-9

<PAGE>
SEGMENT RESULTS OF CONTINUING OPERATIONS--1996 VERSUS 1995
 
NETWORKS AND BROADCASTING (BASIC CABLE AND PREMIUM SUBSCRIPTION TELEVISION
  PROGRAM SERVICES, AND TELEVISION STATIONS)
 
    Revenues increased 18% to $2.4 billion for 1996 from $2.0 billion for 1995.
EBITDA increased 20% to $755.3 million for 1996 from $627.9 million for 1995.
Operating income increased 21% to $630.2 million for 1996 from $520.3 million
for 1995. MTVN revenues of $1.3 billion increased 27%, EBITDA of $529.2 million
increased 29% and operating income of $464.1 million increased 30%. The increase
in MTVN's revenues principally reflects higher advertising and affiliate
revenues. Advertising revenue gains were driven by rate increases at Nickelodeon
and higher unit volume at MTV. MTVN's EBITDA and operating income gains were
driven by the increased revenues partially offset by start-up costs of TV Land
and M2 and increased expenses associated with programming and international
expansion. SNI's revenues, EBITDA and operating income increased 12%, 19% and
14%, respectively, reflecting an increase of 1.0 million subscriptions to 15.9
million as of December 31, 1996, partially offset by increased programming
costs. PSG's revenues and EBITDA each increased 2% and operating income
increased 1%, primarily reflecting the swapping of network affiliated television
stations for independent stations which are or will become affiliated with UPN.
On a same-station basis, revenues and EBITDA for PSG increased 6% and 11%,
respectively.
 
ENTERTAINMENT (MOTION PICTURES AND TELEVISION PROGRAMMING, MOVIE THEATERS, AND
  MUSIC PUBLISHING)
 
    Revenues increased 3% to $3.5 billion for 1996 from $3.4 billion for 1995.
EBITDA decreased 5% to $457.7 million for 1996 from $480.9 million for 1995.
Operating income decreased 7% to $330.6 million for 1996 from $354.8 million for
1995. Feature Film revenues from Paramount Pictures' major 1996 theatrical
releases, including MISSION: IMPOSSIBLE, THE FIRST WIVES CLUB AND STAR TREK:
FIRST CONTACT and the impact, principally in the first quarter, of Paramount's
KirchGroup transaction, were offset primarily by lower operating results at
Spelling, stemming from softness in the direct-to-video market and significantly
higher production spending. In 1995, the Company also recognized $250.0 million
of revenues and $68.0 million of EBITDA and operating income resulting from the
conforming of accounting policies pertaining to the television programming
libraries of Viacom Entertainment, Spelling and Paramount.
 
    License fees for the television exhibition of motion pictures and for
syndication and basic cable exhibition of television programming are recorded as
revenue in the year that the products are available for such exhibition, which,
among other reasons, may cause substantial fluctuation in operating results. As
of December 31, 1996, the unrecognized revenues attributable to such licensing
agreements were approximately $1.7 billion.
 
VIDEO AND MUSIC/THEME PARKS (HOME VIDEO AND MUSIC RETAILING/THEME PARKS)
 
    Revenues increased 18% to $3.9 billion for 1996 from $3.3 billion for 1995.
EBITDA decreased 18% to $676.6 million for 1996 from $823.0 million for 1995.
Operating income decreased 46% to $273.1 million for 1996 from $501.5 million
for 1995. The revenue increase primarily reflects the increased number of
Company-owned video stores in operation in 1996 as compared to 1995 and a 6%
increase in worldwide same-store sales. Blockbuster Video ended the year with
5,317 stores, a net increase of 804 stores from the prior year. EBITDA of $676.6
million reflects the impact of a write-off of music inventory of $9.4 million, a
restructuring charge of $88.9 million and increased rental tape amortization.
The restructuring charge includes costs associated with the closing of
approximately 10% or 50 Blockbuster Music stores, as well as certain costs
associated with the move of Blockbuster's headquarters from Fort Lauderdale to
Dallas. Music stores revenues of $616.2 million for 1996 increased 5% over the
comparable prior-year period. Music stores operating losses before depreciation
and amortization of $46.2 million for 1996 decreased from EBITDA of $33.1
million for 1995 reflecting continuing difficult conditions in the music
retailing
 
                                     II-10

<PAGE>
industry. Music stores recorded operating losses of $79.2 million as compared to
operating income of $14.7 million for 1995. Theme Parks revenues increased 5%,
operating income increased 28% and EBITDA increased 16% driven principally by
increased attendance.
 
    Excluding the impact of the Blockbuster restructuring and inventory charges
of $98.3 million, 1996 Video and Music/Theme Parks posted EBITDA of $774.9
million and Music stores posted EBITDA of $1.9 million.
 
PUBLISHING (EDUCATION; CONSUMER; BUSINESS AND PROFESSIONAL/REFERENCE; AND
  INTERNATIONAL GROUPS)
 
    Revenues increased 7% to $2.3 billion for 1996 from $2.2 billion for 1995.
EBITDA increased 7% to $365.2 million for 1996 from $340.2 million for 1995.
Operating income increased 17% to $217.2 million for 1996 from $186.3 million
for 1995. Revenue increases for the year primarily reflect strong sales from the
Higher Education, Macmillan Publishing USA, and International divisions,
stemming principally from strong domestic title sales and an enhanced focus in
the Latin American and Asian markets. The Consumer Group's EBITDA rose slightly
reflecting strong sales for UNDAUNTED COURAGE by Stephen Ambrose, ANGELA'S ASHES
by Frank McCourt, MOONLIGHT BECOMES YOU by Mary Higgins Clark and IT TAKES A
VILLAGE by Hillary Rodham Clinton.
 
OTHER INCOME AND EXPENSE INFORMATION 1996 VS. 1995
 
CORPORATE EXPENSES
 
    Corporate expenses, including depreciation and amortization expense,
increased 8% to $176.8 million for 1996 from $164.2 million for 1995,
principally reflecting the impact of executive severance expense in 1996.
 
INTEREST EXPENSE
 
    Net interest expense decreased 1% to $798.0 million for 1996 from $809.3
million for 1995, principally reflecting the reduction of debt attributable to
the Cable split-off partially offset by increases in debt to finance capital
expenditures and other investments including the purchase of treasury stock
during 1996. The Company had approximately $9.9 billion and $10.8 billion
principal amount of debt outstanding as of December 31, 1996 and December 31,
1995, respectively, at a weighted average interest rate of 7.4% for each period.
(See Note 7 of Notes to Consolidated Financial Statements.)
 
PROVISION FOR INCOME TAXES
 
    The provision for income taxes represents federal, state and foreign income
taxes on earnings before income taxes. The annual effective tax rates of 61.5%
for 1996 and 63.3% for 1995, were both adversely affected by amortization of
intangibles in excess of the amounts deductible for tax purposes. Excluding the
non-deductible amortization of intangibles, the annual effective tax rate would
have been 32.2% for 1996 and 39.4% for 1995.
 
EQUITY IN LOSS OF AFFILIATES
 
    "Equity in loss of affiliated companies, net of tax" was $13.0 million for
1996 as compared to $52.9 million for 1995. The net equity loss of $13.0 million
for 1996 principally reflects the losses from international start-up equity
ventures, partially offset by improved operating results for both USA Networks,
a basic cable network and United Cinemas International Multiplex B.V. The equity
loss for 1995 primarily reflects the loss of $49.4 million, net of tax, related
to the Company's write off of its approximately 49% interest in Discovery Zone,
which filed for protection under bankruptcy laws, and losses of international
ventures, partially offset by operating results of USA Networks.
 
                                     II-11

<PAGE>
MINORITY INTEREST
 
    Minority interest primarily represents the minority ownership of Spelling's
common stock.
 
DISCONTINUED OPERATIONS
 
    For 1996 and 1995, discontinued operations reflect the results of
operations, net of tax, of the Cable segment, the interactive game operations,
including Virgin, and the Viacom Radio Stations. The Cable segment was split-off
from the Company on July 31, 1996 and the gain realized of approximately $1.3
billion is included in the net gain on dispositions, net of tax, offset by the
anticipated loss of $159.3 million, net of minority interest, on disposal of the
interactive game businesses. The sale of Viacom Radio Stations was completed
during 1997. Madison Square Garden Corporation ("MSG") is also included within
discontinued operations in 1995, as it was sold March 10, 1995. The Company
acquired MSG during March 1994 as part of the Paramount Merger with its book
value recorded at fair value and therefore no gain was recorded on its sale.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    The Company expects to fund its anticipated cash requirements (including the
anticipated cash requirements of its capital expenditures, joint ventures,
commitments and payments of principal, interest and dividends on its outstanding
indebtedness and preferred stock) with internally generated funds and from
various external sources, which may include the Company's existing Credit
Agreements and amendments thereto, co-financing arrangements by the Company's
various divisions, additional financings and the sale of non-strategic assets as
opportunities may arise.
 
    On February 15, 1998, the Company redeemed all $150 million of its
outstanding 9.125% Senior Subordinated Notes due 1999 and incurred a net loss of
approximately $1.7 million in the first quarter of 1998.
 
    On January 14, 1998, the Company announced its intention to sell Simon &
Schuster's educational, professional and reference publishing operations, while
retaining its consumer book business. Upon completion of this transaction, the
net proceeds will be used to repay debt.
 
    Effective June 30, 1997, certain financial covenants in the March 1997
Credit Agreements and the film financing credit agreement were amended to
provide the Company with increased financial flexibility. (See Note 7 of Notes
to Consolidated Financial Statements.)
 
    Effective December 23, 1997, the Company permanently reduced its commitments
under the March 1997 Credit Agreement by $1.0 billion.
 
    The Company's scheduled maturities of indebtedness through December 31,
2002, assuming full utilization of the March 1997 Credit Agreements, as amended,
are $673 million (1998), $660 million (1999), $1.7 billion (2000), $2.1 billion
(2001) and $2.0 billion (2002). The Company has classified certain short-term
indebtedness as long-term debt based upon its intent and ability to refinance
such indebtedness on a long-term basis. The Company's Preferred Stock dividend
requirement is $60 million per year.
 
    Debt as a percentage of total capitalization of the Company decreased to 37%
at December 31, 1997 from 44% at December 31, 1996.
 
    The Company was in compliance with all debt covenants and had satisfied all
financial ratios and tests as of December 31, 1997 under its Credit Agreements
and the Company expects to be in compliance and satisfy all such covenant ratios
as may be applicable from time to time during 1998.
 
    Planned capital expenditures, including information systems costs, are
approximately $500 million to $600 million in 1998. Capital expenditures are
primarily related to capital additions for new and existing video stores and
theme park attractions. The Company's joint ventures, including UPN, are
expected to
 
                                     II-12

<PAGE>
require estimated net cash contributions of approximately $100 million to $150
million in 1998. On January 15, 1997, the Company acquired a 50% interest in UPN
from BHC Communications, Inc. ("BHC"), an affiliate of Chris Craft Industries,
Inc., pursuant to an option the Company exercised on December 4, 1996, for a
price of approximately $160 million, an amount equaling approximately one-half
of BHC's aggregated cash contributions to UPN through the exercise date, plus
market-based interest. In March 1997, the Company assumed 100% of the funding
requirements of MTV Asia, a joint venture between MTVN and PolyGram N.V., as
PolyGram N.V. satisfied its maximum contribution requirements under the joint
venture agreement.
 
    The Company uses derivative financial instruments to reduce its exposure to
market risks from changes in foreign exchange rates and interest rates. The
Company does not hold or issue financial instruments for speculative trading
purposes. The derivative instruments used are foreign exchange forward contracts
and options. The foreign exchange contracts have principally been used to hedge
the British Pound, the Australian Dollar, the Japanese Yen, the Canadian Dollar,
the Singapore Dollar, the German Deutschemark and the European Currency
Unit/British Pound relationship. These derivatives, which are over-the-counter
instruments, are non-leveraged. At December 31, 1997, the Company had
outstanding contracts with a notional value of approximately $21.6 million which
expire in 1998. Realized gains and losses on contracts that hedge anticipated
future cash flows are recognized in "Other items, net" and were not material in
each of the periods.
 
    The Company continually monitors its positions with, and credit quality of,
the financial institutions which are counterparties to its financial
instruments. The Company is exposed to credit loss in the event of
nonperformance by the counterparties to the agreements. However, the Company
does not anticipate nonperformance by the counterparties. The Company's
receivables do not represent significant concentrations of credit risk at
December 31, 1997, due to the wide variety of customers, markets and geographic
areas to which the Company's products and services are sold.
 
    The Company filed a shelf registration statement with the Securities and
Exchange Commission registering debt securities, preferred stock and contingent
value rights of Viacom and guarantees of such debt securities by Viacom
International which may be issued for aggregate gross proceeds of $3.0 billion.
The registration statement was declared effective on May 10, 1995. The net
proceeds from the sale of the offered securities may be used by Viacom to repay,
redeem, repurchase or satisfy its obligations in respect of its outstanding
indebtedness or other securities; to make loans to its subsidiaries; for general
corporate purposes; or for such other purposes as may be specified in the
applicable Prospectus Supplement. The Company filed a post-effective amendment
to this registration statement on November 19, 1996. To date, the Company has
issued $1.55 billion of notes and debentures and has $1.45 billion remaining
availability under the shelf registration statement.
 
    During 1996, the Company, together with National Amusements, Inc. ("NAI"),
initiated a joint share repurchase program. The Company completed its joint
purchase program during 1997. As of December 31, 1997, the Company repurchased
659,700 shares of Viacom Inc. Class A Common Stock, 5,816,300 shares of Viacom
Inc. Class B Common Stock and 6,824,590 Viacom Five-Year Warrants, expiring on
July 7, 1999, for approximately $250 million in the aggregate. As of December
31, 1997, NAI has separately acquired 1,282,200 shares of Viacom Inc. Class A
Common Stock and 5,602,000 shares of Viacom Inc. Class B Common Stock for
approximately $250 million, raising its ownership to approximately 67% of Viacom
Inc. Class A Common Stock and approximately 28% of Class A and Class B Common
Stock on a combined basis.
 
    On April 18, 1997, the Company announced its intention to acquire additional
shares of Spelling's outstanding common stock. During the period through
December 31, 1997, the Company acquired 5,294,600 additional shares for $46.9
million and currently owns approximately 80% of Spelling's outstanding common
stock. The purchase of additional shares permits the Company to consolidate
Spelling's results for tax purposes.
 
                                     II-13

<PAGE>
    The commitments of the Company for program license fees, which are not
reflected in the balance sheet as of December 31, 1997 and are estimated to
aggregate approximately $1.6 billion, principally reflect SNI's commitments of
approximately $1.5 billion for the acquisition of programming rights and the
production of original programming. This estimate is based upon a number of
factors. A majority of such fees are payable over several years, as part of
normal programming expenditures of SNI. These commitments to acquire programming
rights are contingent upon delivery of motion pictures which are not yet
available for premium television exhibition and, in many cases, have not yet
been produced.
 
    See Note 12 of Notes to Consolidated Financial Statements for a description
of the Company's future minimum lease commitments.
 
    There are various lawsuits and claims pending against the Company.
Management believes that any ultimate liability resulting from those actions or
claims will not have a material adverse effect on the Company's results of
operations, financial position or liquidity.
 
    Certain subsidiaries and affiliates of the Company from time to time receive
claims from federal and state environmental regulatory agencies and other
entities asserting that they are or may be liable for environmental cleanup
costs and related damages, principally relating to discontinued operations
conducted by its former mining and manufacturing businesses (acquired as part of
the mergers with Paramount and Blockbuster). The Company has recorded a
liability reflecting its best estimate of environmental exposure. Such liability
was not discounted or reduced by potential insurance recoveries and reflects
management's estimate of cost sharing at multiparty sites. The estimated
liability was calculated based upon currently available facts, existing
technology and presently enacted laws and regulations. On the basis of its
experience and the information currently available to it, the Company believes
that the claims it has received will not have a material adverse effect on its
results of operations, financial position or liquidity.
 
    Current assets of $5.7 billion as of December 31, 1997 primarily reflect an
increase in net receivables of 11% over the prior year, partly due to
Paramount's higher FRASIER syndication revenues in 1997. This increase is offset
by the reduction in net assets of discontinued operations in 1997, as the sale
of Viacom Radio Stations was completed and its assets are no longer reflected on
the balance sheet. Current inventory decreased principally reflecting a decrease
in the acquisition of programming inventory at Showtime. The change in property
and equipment principally reflects capital expenditures of $530.3 million and
equipment acquired under capital leases of $54.0 million primarily related to
capital additions for new and existing video stores offset by depreciation
expense of $518.0 million. Current liabilities increased to $5.1 billion for
1997 from $4.3 billion for 1996 due to increased income taxes payable associated
with the sale of USA Networks and other normal operating activity. Long-term
debt including current maturities, decreased to $7.8 billion for 1997 from $9.9
billion for 1996, reflecting debt reduction from proceeds received in
conjunction with the sale of the Company's Radio stations and 50% ownership
interest in USA Networks partially offset by continued investment in the
Company's businesses.
 
    Net cash flow from operating activities increased 382% to $340 million in
1997 from $70.5 million for 1996 principally due to an increase in taxes payable
of $455.6 million partially offset by an increase in receivables. The increase
in taxes payable is primarily due to the sale of USA Networks. The taxes
associated with the gain have been paid in the first quarter of 1998. Net cash
flow from operating activities increased 27% to $70.5 million in 1996 from $55.6
million for 1995 principally due to a reduction of $410.6 million in payments
for interest and taxes during 1996 partially offset by increases in foreign
syndication receivables and investment in feature film inventory at Paramount
Pictures, and the timing of payments for higher purchases of rental inventory at
Blockbuster Video. Net cash flow from investing activities of $1.9 billion for
1997, principally reflects the proceeds of $1.1 billion from the sale of the
Company's Radio business, as well as $1.7 billion in proceeds from the sale of
USA Networks, both of which were partially offset by capital expenditures and
other investing activities. Net cash flow from investing activities of $839.6
million for 1996 principally reflects the split-off of the Company's cable
systems partially offset by
 
                                     II-14

<PAGE>
capital expenditures and other investing activities. Financing activities
reflect borrowings and repayment of debt under the credit agreements during each
period presented and the purchase of treasury stock during 1997 and 1996.
 
RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER MATTERS
 
    During February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") 128, "Earnings per
Share," ("SFAS 128") which is effective for financial statements for both
interim and annual periods ending after December 15, 1997. The Company adopted
SFAS 128 in the fourth quarter of 1997. SFAS 128 replaces the presentation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. The Company's adoption of SFAS 128 has not significantly impacted
previously reported earnings per share. See Note 1 to the Consolidated Financial
Statements for further discussion.
 
    In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997. The
new rules establish standards for the reporting of comprehensive income and its
components in financial statements. Comprehensive income consists of net income
and other gains and losses affecting shareholders' equity that, under generally
accepted accounting principles, are excluded from net income, such as unrealized
gains and losses on investments available for sale, foreign currency translation
gains and losses and minimum pension liability. The Company will adopt SFAS 130
in 1998 and does not expect that the adoption will have a material effect on its
financial statements.
 
    In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information", ("SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards for
public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. The Company
continues to assess the impact these revised standards will have on existing
segment disclosures; however, it does not expect that the adoption in 1998 will
have a material effect on its financial statements.
 
    The widespread use of computer programs that rely on two-digit dates to
perform computations and decision-making functions may cause computer systems to
malfunction prior to or in the year 2000 and lead to significant business delays
and disruptions in the U.S. and internationally. Each of the Company's business
units has developed a plan to minimize the impact of this "year 2000 problem"
and periodically reports on the status of its efforts to the Company's corporate
officers and board of directors. Pursuant to such plans, each business unit is
engaged in the process of identifying programs used by its computer systems that
may malfunction as a result of the use of such two-digit dates, and has
initiated programs to rectify any problems, including upgrading existing
software packages, implementing new year 2000 compliant systems or repairing
existing software. Each business unit has also begun communications with its
significant suppliers to determine the extent to which the Company's operations
are vulnerable to those third parties' failure to solve their own year 2000
issues. Management believes that the costs of resolving potential year 2000
issues will not be material and that the necessary revisions or replacements of
material computer systems will be accomplished in a timely manner.
 
                                     II-15

<PAGE>

I
TEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 

REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and
Shareholders of Viacom Inc.
 
    In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of shareholders' equity
present fairly, in all material respects, the financial position of Viacom Inc.
and its subsidiaries (the "Company") at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
 
    Our audits of the consolidated financial statements of the Company also
included an audit of the Financial Statement Schedule listed in Item 14(a) of
this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
 
PRICE WATERHOUSE LLP
 
New York, New York
 
February 12, 1998

 
                                     II-16

<PAGE>
        MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING
 
    Management has prepared and is responsible for the consolidated financial
statements and related notes of Viacom Inc. They have been prepared in
accordance with generally accepted accounting principles and necessarily include
amounts based on judgments and estimates by management. All financial
information in this annual report is consistent with the consolidated financial
statements.
 
    The Company maintains internal accounting control systems and related
policies and procedures designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with management's
authorization and properly recorded, and that accounting records may be relied
upon for the preparation of consolidated financial statements and other
financial information. The design, monitoring, and revision of internal
accounting control systems involve, among other things, management's judgment
with respect to the relative cost and expected benefits of specific control
measures. The Company also maintains an internal auditing function which
evaluates and reports on the adequacy and effectiveness of internal accounting
controls, policies and procedures.
 
    Viacom Inc.'s consolidated financial statements have been audited by Price
Waterhouse LLP, independent accountants, who have expressed their opinion with
respect to the presentation of these statements.
 
    The Audit Committee of the Board of Directors, which is comprised solely of
directors who are not employees of the Company, meets periodically with the
independent accountants, with our internal auditors, as well as with management,
to review accounting, auditing, internal accounting controls and financial
reporting matters. The Audit Committee is also responsible for recommending to
the Board of Directors the independent accounting firm to be retained for the
coming year, subject to shareholder approval. The independent accountants and
the internal auditors have full and free access to the Audit Committee with and
without management's presence.
 
                                                  VIACOM INC.
 
                                By:           /S/ SUMNER M. REDSTONE
                                   ------------------------------------------
                                      CHAIRMAN OF THE BOARD OF DIRECTORS,
                                            CHIEF EXECUTIVE OFFICER
 
                                By:          /S/ GEORGE S. SMITH, JR.
                                   ------------------------------------------
                                              GEORGE S. SMITH, JR.
                                             SENIOR VICE PRESIDENT,
                                            CHIEF FINANCIAL OFFICER
 
                                By:            /S/ SUSAN C. GORDON
                                   ------------------------------------------
                                                SUSAN C. GORDON
                                          VICE PRESIDENT, CONTROLLER,
                                            CHIEF ACCOUNTING OFFICER
 
                                     II-17

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                             ----------------------------------
<S>                                                                          <C>         <C>         <C>
                                                                                1997        1996        1995
                                                                             ----------  ----------  ----------
Revenues...................................................................  $ 13,206.1  $ 12,084.2  $ 10,915.9
Expenses:
  Operating................................................................     8,863.3     7,605.3     6,689.5
  Selling, general and administrative......................................     2,646.7     2,298.1     2,111.0
  Restructuring charge (See Note 4)........................................      --            88.9      --
  Depreciation and amortization............................................       943.3       817.6       716.7
                                                                             ----------  ----------  ----------
    Total expenses.........................................................    12,453.3    10,809.9     9,517.2
                                                                             ----------  ----------  ----------
Operating income...........................................................       752.8     1,274.3     1,398.7
Other income (expense):
  Interest expense, net....................................................      (763.0)     (798.0)     (809.3)
  Other items, net (See Note 16)...........................................     1,232.9         4.2        (9.6)
                                                                             ----------  ----------  ----------
Earnings from continuing operations before income taxes....................     1,222.7       480.5       579.8
Provision for income taxes.................................................      (689.6)     (295.5)     (367.1)
Equity in loss of affiliated companies, net of tax (See Note 6)............      (163.3)      (13.0)      (52.9)
Minority interest..........................................................         4.7        (1.3)       (9.3)
                                                                             ----------  ----------  ----------
Earnings from continuing operations........................................       374.5       170.7       150.5
Discontinued Operations (Note 3):
  Earnings (loss) net of tax...............................................        13.9       (80.5)       72.0
  Net gain on dispositions, net of tax.....................................       405.2     1,157.7      --
                                                                             ----------  ----------  ----------
Net earnings...............................................................       793.6     1,247.9       222.5
Cumulative convertible preferred stock dividend requirement................       (60.0)      (60.0)      (60.0)
                                                                             ----------  ----------  ----------
Net earnings attributable to common stock..................................  $    733.6  $  1,187.9  $    162.5
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
Basic earnings per common share:
  Earnings from continuing operations......................................  $      .89  $      .30  $      .25
  Net earnings.............................................................  $     2.08  $     3.26  $      .45
Diluted earnings per common share:
  Earnings from continuing operations......................................  $      .89  $      .30  $      .24
  Net earnings.............................................................  $     2.07  $     3.23  $      .43
Weighted average number of common shares:
  Basic....................................................................       352.9       364.0       362.5
  Diluted..................................................................       354.3       367.4       375.1
</TABLE>

 
                See notes to consolidated financial statements.
 
                                     II-18

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                    (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                              --------------------
<S>                                                                                           <C>        <C>
                                                                                                1997       1996
                                                                                              ---------  ---------
ASSETS
Current Assets:
  Cash and cash equivalents.................................................................  $   292.3  $   209.0
  Receivables, less allowances of $99.8 (1997) and $101.3 (1996)............................    2,397.7    2,153.1
  Inventory (See Note 5)....................................................................      934.8      923.3
  Theatrical and television inventory (See Note 5)..........................................    1,317.9    1,419.1
  Other current assets......................................................................      770.8      723.8
  Net assets of discontinued operations.....................................................     --          289.4
                                                                                              ---------  ---------
Total current assets........................................................................    5,713.5    5,717.7
                                                                                              ---------  ---------
Property and Equipment:
  Land......................................................................................      452.2      466.9
  Buildings.................................................................................    1,544.4    1,382.6
  Capital leases............................................................................      655.6      637.1
  Equipment and other.......................................................................    1,668.0    1,403.1
                                                                                              ---------  ---------
                                                                                                4,320.2    3,889.7
                                                                                              ---------  ---------
  Less accumulated depreciation and amortization............................................    1,122.5      733.9
                                                                                              ---------  ---------
    Net property and equipment..............................................................    3,197.7    3,155.8
                                                                                              ---------  ---------
Inventory (See Note 5)......................................................................    2,650.6    2,619.4
Intangibles, at amortized cost..............................................................   14,699.6   14,894.2
Other assets................................................................................    2,027.3    2,446.9
                                                                                              ---------  ---------
                                                                                              $28,288.7  $28,834.0
                                                                                              ---------  ---------
                                                                                              ---------  ---------
                            LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current Liabilities:
  Accounts payable..........................................................................  $   699.7  $   808.8
  Accrued expenses..........................................................................    1,564.2    1,459.9
  Deferred income...........................................................................      254.6      364.6
  Accrued compensation......................................................................      441.7      425.7
  Participants' share, residuals and royalties payable......................................      951.3      856.6
  Program rights............................................................................      197.7      290.5
  Income tax payable........................................................................      556.3     --
  Current portion of long-term debt.........................................................      376.5       62.6
  Net liabilities of discontinued operations................................................       10.5     --
                                                                                              ---------  ---------
    Total current liabilities...............................................................    5,052.5    4,268.7
                                                                                              ---------  ---------
Long-term debt (See Note 7).................................................................    7,423.0    9,855.7
Other liabilities...........................................................................    2,429.6    2,123.1
 
Commitments and contingencies (See Note 12)
 
Shareholders' Equity:
  Convertible Preferred Stock, par value $.01 per share; 200.0 shares authorized; 24.0
    (1997) and 24.0 (1996) shares issued and outstanding....................................    1,200.0    1,200.0
  Class A Common Stock, par value $.01 per share; 200.0 shares authorized; 69.6 (1997) and
    69.4 (1996) shares issued and outstanding...............................................        0.7        0.7
  Class B Common Stock, par value $.01 per share; 1,000.0 shares authorized; 284.8 (1997)
    and 282.6 (1996) shares issued and outstanding..........................................        2.9        2.9
  Additional paid-in capital................................................................   10,333.1   10,242.1
  Retained earnings.........................................................................    2,094.6    1,361.0
  Net unrealized gain on investments available for sale.....................................       29.3     --
  Minimum pension liability.................................................................       (8.4)      (7.9)
  Cumulative translation adjustments........................................................      (39.1)      11.3
                                                                                              ---------  ---------
                                                                                               13,613.1   12,810.1
  Less treasury stock, at cost; 6.5 shares (1997) and 6.3 shares (1996).....................      229.5      223.6
                                                                                              ---------  ---------
    Total shareholders' equity..............................................................   13,383.6   12,586.5
                                                                                              ---------  ---------
                                                                                              $28,288.7  $28,834.0
                                                                                              ---------  ---------
                                                                                              ---------  ---------
</TABLE>

 
                See notes to consolidated financial statements.
 
                                     II-19

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN MILLIONS)
 

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                    -------------------------------
<S>                                                                                 <C>        <C>        <C>
                                                                                      1997       1996       1995
                                                                                    ---------  ---------  ---------
Operating Activities:
  Net earnings....................................................................  $   793.6  $ 1,247.9  $   222.5
  Adjustments to reconcile net earnings to net cash flow from operating
    activities:
  Gain on dispositions............................................................   (1,761.3)  (1,157.7)        --
  Depreciation and amortization...................................................      943.3      817.6      820.4
  Restructuring charge............................................................         --       88.9         --
  Distribution from affiliated companies..........................................       62.2       59.8       82.2
  Equity in losses of affiliated companies, net of tax............................      163.3       13.0       53.9
  Gain on the sale of marketable securities.......................................         --         --      (26.9)
  Amortization of deferred financing costs........................................       33.6       31.2       24.4
  Change in operating assets and liabilities:
    Increase in receivables.......................................................     (251.3)    (413.3)    (233.8)
    Decrease (increase) in inventory and related programming liabilities, net.....       79.7     (443.0)    (305.9)
    Increase in prepublication costs, net.........................................      (21.4)     (57.9)     (75.7)
    Increase in prepaid expenses and other current assets.........................      (83.5)     (40.0)     (84.5)
    Increase in unbilled receivables..............................................      (53.3)    (226.5)     (55.6)
    (Decrease) increase in accounts payable and accrued expenses..................       (7.6)       1.0     (364.1)
    Increase (decrease) in income taxes payable and deferred income taxes, net....      455.6       38.5      (56.5)
    (Decrease) increase in deferred income........................................      (93.1)     122.6       68.0
    Other, net....................................................................       80.2      (11.6)     (12.8)
                                                                                    ---------  ---------  ---------
Net cash flow provided by operating activities....................................      340.0       70.5       55.6
                                                                                    ---------  ---------  ---------
Investing activities:
  Proceeds from dispositions......................................................    3,014.9    1,838.1    1,442.9
  Acquisitions, net of cash acquired..............................................     (355.1)    (299.8)    (616.2)
  Capital expenditures............................................................     (530.3)    (598.6)    (730.6)
  Investments in and advances to affiliated companies.............................     (300.4)     (88.8)    (138.1)
  Proceeds from sale of short-term investments....................................      139.8      137.9      281.3
  Purchases of short-term investments.............................................      (81.3)    (149.2)    (301.2)
  Other, net......................................................................       18.2         --      (17.7)
                                                                                    ---------  ---------  ---------
Net cash flow provided by (used in) investing activities..........................    1,905.8      839.6      (79.6)
                                                                                    ---------  ---------  ---------
Financing activities:
  Repayments of credit agreements, net............................................   (2,092.3)    (859.5)  (1,560.2)
  Proceeds from the issuance of senior notes......................................         --         --    1,538.6
  Proceeds from exercise of stock options and warrants............................       69.6       95.1      125.6
  Payment on capital lease obligations............................................      (66.2)     (48.9)     (36.3)
  Payment of Preferred Stock dividends............................................      (60.0)     (60.0)     (60.0)
  Purchase of treasury stock......................................................       (9.8)    (223.6)        --
  Deferred financing fees.........................................................       (9.8)        --      (23.4)
  Repayment of other notes........................................................         --      (50.9)        --
  Settlement of CVRs..............................................................         --         --      (81.9)
  Other, net......................................................................        6.0      (17.4)     (12.0)
                                                                                    ---------  ---------  ---------
Net cash flow used in financing activities........................................   (2,162.5)  (1,165.2)    (109.6)
                                                                                    ---------  ---------  ---------
Net increase (decrease) in cash and cash equivalents..............................       83.3     (255.1)    (133.6)
Cash and cash equivalents at beginning of year....................................      209.0      464.1      597.7
                                                                                    ---------  ---------  ---------
Cash and cash equivalents at end of year..........................................  $   292.3  $   209.0  $   464.1
                                                                                    ---------  ---------  ---------
                                                                                    ---------  ---------  ---------
</TABLE>

 
                See notes to consolidated financial statements.
 
                                     II-20

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                              ------------------------------------------------------------------
<S>                                                           <C>        <C>        <C>        <C>        <C>          <C>
                                                                      1997                  1996                   1995
                                                              --------------------  --------------------  ----------------------
 
<CAPTION>
                                                               SHARES     AMOUNTS    SHARES     AMOUNTS     SHARES      AMOUNTS
                                                              ---------  ---------  ---------  ---------  -----------  ---------
<S>                                                           <C>        <C>        <C>        <C>        <C>          <C>
Convertible Preferred Stock:
Balance, beginning of year..................................       24.0  $ 1,200.0       24.0  $ 1,200.0        24.0   $ 1,200.0
                                                              ---------  ---------  ---------  ---------       -----   ---------
Balance, end of year........................................       24.0  $ 1,200.0       24.0  $ 1,200.0        24.0   $ 1,200.0
                                                              ---------  ---------  ---------  ---------       -----   ---------
                                                              ---------  ---------  ---------  ---------       -----   ---------
Class A Common Stock:
Balance, beginning of year..................................       69.4  $      .7       75.1  $      .8        74.6   $      .7
Exercise of stock options and warrants......................         .2         --         .4         --          .5          .1
Cable split-off.............................................         --         --       (5.4)       (.1)         --          --
Repurchase of Common Stock..................................         --         --        (.7)        --          --          --
                                                              ---------  ---------  ---------  ---------       -----   ---------
Balance, end of year........................................       69.6  $      .7       69.4  $      .7        75.1   $      .8
                                                              ---------  ---------  ---------  ---------       -----   ---------
                                                              ---------  ---------  ---------  ---------       -----   ---------
Class B Common Stock:
Balance, beginning of year..................................      282.6  $     2.9      294.6  $     2.9       284.1   $     2.8
Exercise of stock options and warrants......................        2.2         --        3.5         .1         4.4          --
Cable split-off.............................................         --         --       (9.9)       (.1)         --          --
Repurchase of Common Stock..................................         --         --       (5.6)        --          --          --
Conversion of VCRs to B Shares..............................         --         --         --         --         6.1          .1
                                                              ---------  ---------  ---------  ---------       -----   ---------
Balance, end of year........................................      284.8  $     2.9      282.6  $     2.9       294.6   $     2.9
                                                              ---------  ---------  ---------  ---------       -----   ---------
                                                              ---------  ---------  ---------  ---------       -----   ---------
Additional Paid-In Capital:
Balance, beginning of year..................................             $10,242.1             $10,726.9               $10,579.5
Exercise of stock options and warrants, net of tax
  benefit...................................................                  94.9                 157.4                   233.3
Cable split-off.............................................                    --                (625.6)                     --
Cost of repurchased warrants................................                  (3.9)                (16.6)                     --
Settlement of CVRs..........................................                    --                    --                   (81.9)
Settlement of Paramount Merger appraisal rights.............                    --                    --                    (4.0)
                                                                         ---------             ---------               ---------
Balance, end of year........................................             $10,333.1             $10,242.1               $10,726.9
                                                                         ---------             ---------               ---------
                                                                         ---------             ---------               ---------
Retained Earnings:
Balance, beginning of year..................................             $ 1,361.0             $   173.1               $    10.6
Net earnings................................................                 793.6               1,247.9                   222.5
Convertible Preferred stock dividend requirement............                 (60.0)                (60.0)                  (60.0)
                                                                         ---------             ---------               ---------
Balance, end of year........................................             $ 2,094.6             $ 1,361.0               $   173.1
                                                                         ---------             ---------               ---------
                                                                         ---------             ---------               ---------
Cumulative Translation Adjustments:
Balance, beginning of year..................................             $    11.3             $    (9.9)              $    (2.0)
Translation adjustments.....................................                 (50.4)                 21.2                    (7.9)
                                                                         ---------             ---------               ---------
Balance, end of year........................................             $   (39.1)            $    11.3               $    (9.9)
                                                                         ---------             ---------               ---------
                                                                         ---------             ---------               ---------
Net Unrealized Gain on Investments Available for Sale:
Balance, beginning of year..................................             $      --             $      --               $      --
Net Unrealized Gain.........................................                  29.3                    --                      --
                                                                         ---------             ---------               ---------
Balance, end of year........................................             $    29.3             $      --               $      --
                                                                         ---------             ---------               ---------
                                                                         ---------             ---------               ---------
Minimum Pension Liability:
Balance, beginning of year..................................             $    (7.9)            $      --               $      --
Minimum Pension liability adjustment........................                   (.5)                 (7.9)                     --
                                                                         ---------             ---------               ---------
Balance, end of year........................................             $    (8.4)            $    (7.9)              $      --
                                                                         ---------             ---------               ---------
                                                                         ---------             ---------               ---------
Treasury Stock at cost:
Balance, beginning of year..................................        6.3  $  (223.6)        --  $      --          --   $      --
Class A Common Stock repurchased............................         --         --         .7      (22.9)         --          --
Class B Common Stock repurchased............................         .2       (5.9)       5.6     (200.7)         --          --
                                                              ---------  ---------  ---------  ---------       -----   ---------
Balance, end of year........................................        6.5  $  (229.5)       6.3  $  (223.6)         --   $      --
                                                              ---------  ---------  ---------  ---------       -----   ---------
                                                              ---------  ---------  ---------  ---------       -----   ---------
Total Shareholders' Equity..................................             $13,383.6             $12,586.5               $12,093.8
                                                                         ---------             ---------               ---------
                                                                         ---------             ---------               ---------
</TABLE>

 
                See notes to consolidated financial statements.
 
                                     II-21

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES
 
    BASIS OF PRESENTATION--Viacom Inc. and its subsidiaries (the "Company") is a
diversified entertainment and publishing company with operations in the four
segments described below. See Note 3 regarding the presentation of discontinued
operations. See Note 13 regarding the relative contribution to revenues and
operating income of each of the following business segments:
 
NETWORKS AND BROADCASTING
 
    The Company, through MTV Networks, owns and operates advertiser-supported
basic cable television program services, and, through Showtime Networks Inc.,
owns and operates premium subscription cable television program services. The
Company also owns and operates 15 television stations and programs an additional
2 stations pursuant to Local Marketing Agreements.
 
ENTERTAINMENT
 
    The Company, through Paramount Pictures and Spelling Entertainment Group
Inc. ("Spelling"): 1) produces, acquires, finances and distributes feature
motion pictures, normally for exhibition in U.S. and foreign theaters followed
by videocassettes and discs, pay-per-view television, premium subscription
television, network television, basic cable television and syndicated television
exploitation; 2) produces, acquires and distributes series, mini-series,
specials and made-for-television movies primarily for network television,
first-run syndication and basic cable television; 3) operates movie theaters;
and 4) acquires music copyrights to various musical works, including songs,
scores and cues.
 
VIDEO AND MUSIC/THEME PARKS
 
    The Company, through Blockbuster, operates and franchises videocassette
rental and retail sales stores, and operates music stores throughout the United
States and internationally. Additionally, the Company, through Paramount Parks,
owns and operates five regional theme parks and one water park in the United
States and Canada.
 
PUBLISHING
 
    The Company, through Simon & Schuster, publishes and distributes consumer
hardcover and paperback books, CD-ROM products, audio books, educational
textbooks and supplemental educational materials, multimedia curriculum and
information and reference materials for businesses and professionals.
 
    USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could subsequently differ from those estimates.
 
    PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of the Company and investments of more than 50% in subsidiaries and
other entities. Investments in affiliated companies over which the Company has a
significant influence or ownership of more than 20% but less than or equal
 
                                     II-22

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
to 50% are accounted for under the equity method. All significant intercompany
transactions have been eliminated. Investments of 20% or less are accounted for
under the cost method.
 
    CASH EQUIVALENTS--Cash equivalents are defined as short-term (three months
or less) highly liquid investments.
 
    INVENTORIES--Inventories related to publishing are generally determined
using the lower of cost (first-in, first-out method) or net realizable value.
Prerecorded music and videocassette sell through inventory costs are determined
using the moving weighted average method, the use of which approximates the
first-in, first-out basis. Videocassette rental inventory is recorded at cost
and amortized over its estimated economic life. Videocassettes which are base
stock are amortized over 36 months on a straight-line basis. Videocassettes
which are new release feature films are frequently ordered in large quantities
to satisfy initial demand ("hits"). For each store, the fifth and any succeeding
copies of hit titles purchased are amortized over six months on a straight-line
basis.
 
    Inventories related to theatrical and television product (which include
direct production costs, production overhead, acquisition costs, prints and
certain exploitation costs) are stated at the lower of amortized cost or net
realizable value. Inventories are amortized, and liabilities for residuals and
participations are accrued, on an individual product basis based on the
proportion that current revenues bear to the estimated remaining total lifetime
revenues. Estimates for initial domestic syndication and basic cable revenues
are not included in the estimated lifetime revenues of network series until such
sales are probable. Estimates of total lifetime revenues and expenses are
periodically reviewed. The costs of feature and television films are classified
as current assets to the extent such costs are expected to be recovered through
their respective primary markets, with the remainder classified as noncurrent. A
portion of the cost to acquire Paramount and Spelling was allocated to
theatrical and television inventories based upon estimated revenues from certain
films less related costs of distribution and a reasonable profit allowance for
the selling effort. The cost allocated to films is being amortized over their
estimated economic lives not to exceed 20 years.
 
    The Company estimates that approximately 68% of unamortized film costs
(including amounts allocated under purchase accounting) at December 31, 1997
will be amortized within the next three years.
 
    PROGRAM RIGHTS--The Company acquires rights to exhibit programming on its
broadcast stations or cable networks. The costs incurred in acquiring programs
are capitalized and amortized over the license period. Program rights and the
related liabilities are recorded at the gross amount of the liabilities when the
license period has begun, the cost of the program is determinable, and the
program is accepted and available for airing.
 
    PROPERTY AND EQUIPMENT--Property and equipment is stated at cost.
Depreciation is computed principally by the straight-line method over estimated
useful lives ranging from 3 to 40 years. Depreciation expense, including
capitalized lease amortization, was $518.0 million (1997), $401.3 million (1996)
and $292.9 million (1995).
 
    Property and equipment includes capital leases of $463.1 million and $513.8
million as of December 31, 1997 and December 31, 1996, respectively, net of
accumulated amortization of $192.5 million and $123.3 million, respectively.
Amortization expense related to capital leases was $71.0 million (1997), $70.4
million (1996) and $39.1 million (1995).
 
    In 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS 121
 
                                     II-23

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
requires that long-lived assets and certain identifiable intangibles to be held
and used by the Company be reviewed for impairment whenever there is an
indication that the carrying amount of the asset may not be recoverable.
Recoverability of these assets is determined by comparing the forecasted
undiscounted net cash flows of the operation to which the assets relate, to the
carrying amount including associated intangible assets of such operation. If the
operation is determined to be unable to recover the carrying amount of its
assets, then intangible assets are written down first, followed by the other
long-lived assets of the operation, to fair value. Measurement of an impairment
loss is based on the fair value of the underlying asset. Fair value is
principally determined by discounted cash flows, depending upon the nature of
the assets. The adoption of SFAS 121 did not have a significant effect on the
consolidated financial position or results of operations.
 
    INTANGIBLE ASSETS--Intangible assets, which primarily consist of the cost of
acquired businesses in excess of the fair value of tangible assets and
liabilities acquired ("goodwill"), are generally amortized by the straight-line
method over estimated useful lives of up to 40 years. The Company evaluates the
amortization period of intangibles on an ongoing basis in light of changes in
any business conditions, events or circumstances that may indicate the potential
impairment of intangible assets. Accumulated amortization of intangible assets
at December 31 was $1.6 billion (1997) and $1.3 billion (1996).
 
    REVENUE RECOGNITION--Subscriber fees for Networks are recognized in the
period the service is provided. Advertising revenues for Networks and
Broadcasting are recognized in the period during which the spots are aired.
Revenues from the video and music stores are recognized at the time of rental or
sale. The publishing segment recognizes revenue when merchandise is shipped.
 
    THEATRICAL AND TELEVISION REVENUES--On average, the length of the initial
revenue cycle for feature films approximates four to seven years. Theatrical
revenues from domestic and foreign markets are recognized as films are
exhibited; revenues from the sale of videocassettes and discs are recognized
upon delivery of the merchandise; and revenues from all television sources are
recognized upon availability of the film for telecast.
 
    Television series initially produced for the networks and first-run
syndication are generally licensed to domestic and foreign markets concurrently.
The more successful series are later syndicated in domestic markets and in
certain foreign markets. The length of the revenue cycle for television series
will vary depending on the number of seasons a series remains in active
production. Revenues arising from television license agreements are recognized
in the period that the films or television series are available for telecast and
therefore may cause fluctuation in operating results.
 
    INTEREST--Costs associated with the refinancing or issuance of debt, as well
as with debt discount, are expensed as interest over the term of the related
debt. The Company enters into interest rate exchange agreements; the amount to
be paid or received under such agreements is accrued as interest rates change
and is recognized over the life of the agreements as an adjustment to interest
expense. Amounts paid for purchased interest rate cap agreements are amortized
as interest expense over the term of the agreement.
 
    FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS--The Company's foreign
subsidiaries' assets and liabilities are translated at exchange rates in effect
at the balance sheet date, while results of operations are translated at average
exchange rates for the respective periods. The resulting translation gains or
losses are included as a separate component of shareholders' equity. Foreign
currency transaction gains and losses have been included in "Other items, net",
and have not been material in any of the years presented.
 
    PROVISION FOR DOUBTFUL ACCOUNTS--The provision for doubtful accounts charged
to expense was $105.4 million (1997), $71.1 million (1996) and $70.8 million
(1995).
 
                                     II-24

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    NET EARNINGS PER COMMON SHARE--During February 1997, the Financial
Accounting Standards Board ("FASB") issued SFAS 128, "Earnings per Share,"
("SFAS 128") which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS 128 in
the fourth quarter of 1997. SFAS 128 replaces the presentation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share is based upon the net earnings applicable to common
shares after preferred dividend requirements and upon the weighted average
number of common shares outstanding during the period. Diluted earnings per
share reflects the effect of the assumed conversions of convertible securities
and exercise of stock options only in the periods in which such effect would
have been dilutive.
 
    For each of the full years presented, the effect of the assumed conversion
of Preferred Stock is antidilutive and therefore, not reflected in diluted net
earnings per common share. Prior period amounts have been restated to conform to
the requirements of SFAS 128. The numerator used in the calculation of both
basic and diluted EPS for each respective year reflects earnings from continuing
operations less preferred stock dividends of $60 million. The table below
presents a reconciliation of weighted average shares used in the calculation of
basic and diluted EPS:
 

<TABLE>
<CAPTION>
                                                                                             1997       1996       1995
                                                                                           ---------  ---------  ---------
<S>                                                                                        <C>        <C>        <C>
Weighted average shares for basic EPS....................................................      352.9      364.0      362.5
Plus incremental shares for:
  Stock options..........................................................................        1.4        3.4        8.2
  VCRs...................................................................................     --         --            4.4
                                                                                           ---------  ---------  ---------
Weighted average shares for diluted EPS..................................................      354.3      367.4      375.1
                                                                                           ---------  ---------  ---------
</TABLE>

 
    RECLASSIFICATIONS--Certain amounts reported for prior years have been
reclassified to conform with the current year's presentation.
 
    RECENT PRONOUNCEMENTS--In June 1997, the FASB issued SFAS 130, "Reporting
Comprehensive Income" ("SFAS 130") effective for fiscal years beginning after
December 15, 1997. The new rules establish standards for the reporting of
comprehensive income and its components in financial statements. Comprehensive
income consists of net income and other gains and losses affecting shareholders'
equity that, under generally accepted accounting principles, are excluded from
net income, such as unrealized gains and losses on investments available for
sale, foreign currency translation gains and losses and minimum pension
liability. The Company will adopt SFAS 130 in 1998 and does not expect that the
adoption will have a material effect on its financial statements.
 
    In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information", ("SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards for
public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. The Company
continues to assess the impact these revised standards will have on existing
segment disclosures; however, it does not expect that the adoption in 1998 will
have a material effect on its financial statements.
 
2) SUBSEQUENT EVENTS
 
    On February 15, 1998, the Company redeemed all $150 million of its
outstanding 9.125% Senior Subordinated Notes due 1999 and incurred a net loss of
approximately $1.7 million in the first quarter of 1998.
 
                                     II-25

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    On January 14, 1998, the Company announced its intention to sell Simon &
Schuster's educational, professional and reference publishing operations, while
retaining its consumer book business. Upon completion of this transaction, the
net proceeds will be used to repay debt.
 
3) DISCONTINUED OPERATIONS
 
    In accordance with Accounting Principles Board Opinion ("APB") 30,
"Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", the Company has presented the following lines of
business as discontinued operations: its interactive game businesses including
Virgin, Viacom Radio Stations, Viacom Cable and Madison Square Garden
Corporation.
 
    On February 19, 1997, the Company adopted a plan to dispose of its
interactive game businesses, including Viacom New Media, the operations of which
were terminated in 1997. On that same date, the Board of Directors of Spelling
approved a formal plan to dispose of Virgin. Spelling expects to complete a
transaction in 1998. For the year ended December 31, 1997, the revenues and
operating losses of the interactive game businesses were $241.3 million and
$43.5 million, respectively. These losses were provided for in the estimated
loss on disposal of $159.3 million, net of minority interest, which included a
provision for future operating losses of approximately $44.0 million, net of
minority interest, as of December 31, 1996. In the fourth quarter of 1997, an
estimated loss of $32.0 million, net of minority interest, was recorded,
reflecting anticipated future operating losses and cash funding requirements
through completion of the disposition.
 
    On July 2, 1997, the Company completed the sale of Viacom Radio Stations to
Chancellor Media Corp. for approximately $1.1 billion in cash. As a result of
the sale, the Company realized a pre-tax gain on disposition of approximately
$782.3 million, or $416.4 million net of tax, in the third quarter of 1997.
 
    On July 31, 1996, the Company completed the split-off of its Cable segment
pursuant to an exchange offer and related transactions. As a result, the Company
realized a gain of approximately $1.3 billion, reduced its debt and retired
approximately 4.1% of the Company's outstanding common shares.
 
    On March 10, 1995, the Company sold Madison Square Garden Corporation, which
included the Madison Square Garden Arena, The Paramount theater, the New York
Knickerbockers, the New York Rangers and the Madison Square Garden Network
(collectively "MSG") to a joint venture of ITT Corporation and Cablevision
Systems Corporation for closing proceeds of approximately $1.0 billion,
representing the sale price of approximately $1.075 billion, less approximately
$66 million in working capital adjustments. The Company acquired MSG during 1994
as part of Paramount with its book value recorded at fair value and therefore no
gain was recorded on its sale. Proceeds from the sale of MSG and other
dispositions were used to repay notes payable to banks, of which approximately
$600 million represented a permanent reduction of the Company's bank
commitments.
 
    For the year ended December 31, 1997, the net gain on dispositions of $405.2
million includes approximately $416.4 million, net of tax, for the Viacom Radio
Stations sale, a net reversal of approximately $20.8 million principally of
Cable split-off reserves that were no longer required partially offset by a
reserve of $32.0 million, net of minority interest, for anticipated additional
losses associated with the operations of Virgin through disposition.
 
    For the year ended December 31, 1996, the net gain on dispositions of
approximately $1.2 billion includes the Cable gain of approximately $1.3 billion
and the Company's estimated loss on disposal of its interactive game businesses
of $159.3 million.
 
                                     II-26

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    Basic earnings per share for discontinued operations was $1.19, $2.96 and
$.20 for 1997, 1996 and 1995, respectively. Diluted earnings per share for
discontinued operations was $1.18, $2.93 and $.19 for 1997, 1996 and 1995,
respectively.
 
    Summarized financial data of discontinued operations are as follows:
 
RESULTS OF DISCONTINUED OPERATIONS:
 

<TABLE>
<CAPTION>
                                                                    RADIO      CABLE    INTERACTIVE     MSG       TOTAL
                                                                  ---------  ---------  -----------  ---------  ---------
<S>                                                               <C>        <C>        <C>          <C>        <C>
FOR THE YEAR ENDED DECEMBER 31, 1997(1)
Revenues........................................................  $    57.1  $  --       $  --       $  --      $    57.1
Earnings from operations before income taxes....................       24.5     --          --          --           24.5
Provision for income taxes......................................      (10.6)    --          --          --          (10.6)
Net earnings....................................................       13.9     --          --          --           13.9
FOR THE YEAR ENDED DECEMBER 31, 1996(2)
Revenues........................................................  $   113.5  $   236.9   $   268.7   $  --      $   619.1
Earnings (loss) from operations before income taxes.............       36.3       50.5      (157.6)     --          (70.8)
Provision for income taxes......................................      (16.1)     (21.5)       (1.2)     --          (38.8)
Net earnings (loss).............................................       20.2       28.3      (129.0)     --          (80.5)
FOR THE YEAR ENDED DECEMBER 31, 1995(3)
Revenues........................................................  $   106.6  $   444.4   $   242.8   $    91.5  $   885.3
Earnings (loss) from operations before income taxes.............       23.8      128.1       (42.5)       12.7      122.1
Benefit (provision) for income taxes............................      (11.1)     (52.7)       13.9        (5.1)     (55.0)
Net earnings (loss).............................................       12.7       74.4       (22.7)        7.6       72.0
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                                   AT DECEMBER 31,
                                                                                                 --------------------
                                                                                                   1997       1996
                                                                                                 ---------  ---------
<S>                                                                                              <C>        <C>
FINANCIAL POSITION (4):
Current assets.................................................................................  $   114.9  $   217.8
Net property and equipment.....................................................................       14.5       30.6
Other assets...................................................................................      153.1      526.3
Total liabilities..............................................................................     (293.0)    (485.3)
                                                                                                 ---------  ---------
Net assets (liabilities) of discontinued operations............................................  $   (10.5) $   289.4
                                                                                                 ---------  ---------
                                                                                                 ---------  ---------
</TABLE>

 
- ------------------------
 
(1) Results of operations include Radio for the six months ended June 30.
    Results of operations of Interactive for 1997 were provided for in the prior
    year's estimated loss on disposal.
 
(2) Results of operations include Cable for the six months ended June 30.
 
(3) Results of operations include MSG for the period January 1 through March 9.
 
(4) Financial position data reflects Interactive at December 31, 1997 and Radio
    and Interactive at December 31, 1996.
 
    The provision for income taxes of $10.6 million for 1997, $38.8 million for
1996 and $55.0 million for 1995 represent effective tax rates of 43.3%, 54.8%
and 45.0%, respectively. The differences between the effective tax rate and the
statutory federal tax rate of 35% principally relate to certain nondeductible
expenses, the allocation of nondeductible goodwill amortization, state and local
taxes and the provision of valuation allowances attributable to net operating
losses of Virgin.
 
                                     II-27

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
4) BLOCKBUSTER CHARGES
 
    In the second quarter of 1997, Blockbuster recorded a pre-tax charge of
$322.8 million (the "Blockbuster charge"). The Blockbuster charge consists of
operating expenses of approximately $247.5 million, associated with the
reduction in the carrying value of excess retail inventory and the reorganizing
and closing of underperforming Blockbuster stores in certain international
markets as well as depreciation expense attributable to the write-off of fixed
assets of $45.9 million and write-offs attributable to international joint
ventures accounted for under the equity method of $29.4 million.
 
    During the fourth quarter of 1996, Blockbuster adopted a plan to abandon
certain Music retail stores, relocate its headquarters and eliminate third party
distributors domestically. As a result of such plan, Blockbuster recognized a
restructuring charge of approximately $88.9 million principally reflecting costs
associated with the closing of approximately 10%, or 50, of its Music retail
stores and costs associated with relocating Blockbuster's headquarters from Fort
Lauderdale to Dallas. As a result of the Music retail store closings,
Blockbuster recognized lease termination costs of $28.3 million and accrued
shut-down and other costs of $14.6 million as part of the restructuring charge.
Through December 31, 1997, the Company paid and charged approximately $20.2
million against these liabilities. The Company expects to substantially complete
the activities related to the Music retail store closings by the end of 1998.
 
                                     II-28

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    In the fourth quarter of 1996, Blockbuster recognized $25 million of
estimated severance benefits payable to approximately 650 employees of its Fort
Lauderdale headquarters who had chosen not to relocate. Blockbuster, through the
restructuring charge, also recognized $21.0 million of other costs of exiting
Fort Lauderdale and eliminating third party distributors. The Blockbuster
relocation to Dallas was completed during the second quarter of 1997. The
construction of the Blockbuster distribution center has been completed and this
facility was opened in the first quarter of 1998. Through December 31, 1997, the
Company paid and charged approximately $26.6 million against the severance
liability and other exit costs.
 
5) INVENTORIES
 
    Inventories consist of the following:
 

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                             --------------------
<S>                                                                                          <C>        <C>
                                                                                               1997       1996
                                                                                             ---------  ---------
Prerecorded music and video cassettes......................................................  $   559.2  $   564.2
Videocassette rental inventory.............................................................      722.8      668.2
Publishing:
  Finished goods...........................................................................      301.2      298.4
  Work in process..........................................................................       30.3       33.9
  Materials and supplies...................................................................       23.3       14.5
Other......................................................................................       20.6       12.3
                                                                                             ---------  ---------
                                                                                               1,657.4    1,591.5
Less current portion.......................................................................      934.8      923.3
                                                                                             ---------  ---------
                                                                                             $   722.6  $   668.2
                                                                                             ---------  ---------
Theatrical and television inventory:
  Theatrical and television productions:
  Released.................................................................................  $ 1,736.0  $ 1,811.3
  Completed, not released..................................................................       17.8       32.6
  In process and other.....................................................................      341.4      352.6
Program rights.............................................................................    1,150.7    1,173.8
                                                                                             ---------  ---------
                                                                                               3,245.9    3,370.3
Less current portion.......................................................................    1,317.9    1,419.1
                                                                                             ---------  ---------
                                                                                             $ 1,928.0  $ 1,951.2
                                                                                             ---------  ---------
Total Current Inventory....................................................................  $ 2,252.7  $ 2,342.4
                                                                                             ---------  ---------
                                                                                             ---------  ---------
Total Non-Current Inventory................................................................  $ 2,650.6  $ 2,619.4
                                                                                             ---------  ---------
                                                                                             ---------  ---------
</TABLE>

 
6) INVESTMENTS IN AFFILIATED COMPANIES
 
    The Company accounts for its investments in affiliated companies over which
the Company has significant influence or ownership of more than 20% but less
than or equal to 50% under the equity method. Such investments principally
include but are not limited to the Company's interest in Comedy Central (50%
owned), United Paramount Network (50% owned) and USA Networks (50% owned) which
was sold on October 21, 1997. Investments in affiliates are included as a
component of other assets.
 
                                     II-29

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The following is a summary of combined financial information which is based
on information provided by the equity investees.
 

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                 -------------------------------
<S>                                                                              <C>        <C>        <C>
                                                                                   1997       1996       1995
                                                                                 ---------  ---------  ---------
Results of operations:
Revenues.......................................................................  $ 2,328.4  $ 2,082.0  $ 2,152.3
Operating income (loss)........................................................     (148.4)       2.3     (360.7)
Net loss.......................................................................     (156.6)     (33.1)    (408.1)
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                                    DECEMBER 31,
                                                                                                --------------------
<S>                                                                                             <C>        <C>
                                                                                                  1997       1996
                                                                                                ---------  ---------
Financial position:
Current assets................................................................................  $   871.2  $   919.4
Noncurrent assets.............................................................................      622.7    1,091.8
Current liabilities...........................................................................      793.5      733.1
Noncurrent liabilities........................................................................      367.9      656.7
Equity........................................................................................      332.5      621.4
</TABLE>

 
    The Company, through the normal course of business, is involved in
transactions with affiliated companies that have not been material in any of the
periods presented.
 
    Equity in loss of affiliated companies, net of tax, for 1997 increased
significantly over the prior year due to the start-up losses of UPN, a 50%
interest which was acquired in January 1997, the absence of income from USA
Networks, subsequent to its sale on October 21, 1997 and charges associated with
international network ventures.
 
                                     II-30

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
7) BANK FINANCING AND DEBT
 
    Long-term debt consists of the following:
 

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                             --------------------
<S>                                                                                          <C>        <C>
                                                                                               1997       1996
                                                                                             ---------  ---------
Notes payable to banks (a).................................................................  $ 3,152.7  $ 5,253.0
6.625% Senior Notes due 1998 (e)...........................................................      150.0      150.0
5.875% Senior Notes * due 2000, net of unamortized discount of $.2 (1997) and $.4 (1996)...      149.8      149.6
7.5% Senior Notes * due 2002, net of unamortized discount of $1.7 (1997) and $2.2 (1996)...      248.3      247.8
6.75% Senior Notes due 2003, net of unamortized discount of $.2 (1997) and $.3 (1996)
  (b)......................................................................................      349.8      349.7
7.75% Senior Notes due 2005, net of unamortized discount of $7.1 (1997) and $8.1 (1996)
  (c)......................................................................................      992.9      991.9
7.625% Senior Debentures due 2016, net of unamortized discount of $1.3 (b).................      198.7      198.7
8.25% Senior Debentures * due 2022, net of unamortized discount of $2.7 (1997) and $2.8
  (1996)...................................................................................      247.3      247.2
7.5% Senior Debentures * due 2023, net of unamortized discount of $.5......................      149.5      149.5
9.125% Senior Subordinated Notes * due 1999 (e)............................................      150.0      150.0
8.75%Senior Subordinated Reset Notes * due 2001 (d)........................................      100.0      100.0
10.25% Senior Subordinated Notes * due 2001................................................      200.0      200.0
7.0% Senior Subordinated Debentures * due 2003, net of unamortized discount of $36.0 (1997)
  and $40.5 (1996).........................................................................      195.5      191.0
8.0% Merger Debentures due 2006, net of unamortized discount of $98.9 (1997) and $110.3
  (1996)...................................................................................      971.4      960.0
Other Notes................................................................................       16.6        8.7
Obligations under capital leases...........................................................      527.0      571.2
                                                                                             ---------  ---------
                                                                                             $ 7,799.5  $ 9,918.3
Less current portion.......................................................................      376.5       62.6
                                                                                             ---------  ---------
                                                                                             $ 7,423.0  $ 9,855.7
                                                                                             ---------  ---------
                                                                                             ---------  ---------
</TABLE>

 
- ------------------------
 
*   Issues of Viacom International guaranteed by the Company.
 
        (a) --Effective March 26, 1997, the Company and Viacom International
    Inc. ("Viacom International") amended and restated the $6.489 billion and
    $311 million Credit Agreements and the $1.8 billion Credit Agreement,
    originally established in 1994, to provide for credit agreements of $6.4
    billion (the "March 1997 Viacom Credit Agreement") and $100 million (the
    "March 1997 Viacom International Credit Agreement," together with the March
    1997 Viacom Credit Agreement, collectively the "March 1997 Credit
    Agreements"). The March 1997 Credit Agreements increased commitments by $400
    million, extended maturities and reduced pricing.
 
    Effective June 30, 1997, certain financial covenants in the March 1997
Credit Agreements and the film financing credit agreement were amended to
provide the Company with increased financial flexibility.
 
                                     II-31

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    Effective December 23, 1997, the Company permanently reduced its commitments
under the March 1997 Credit Agreements by $1.0 billion.
 
    The following is a summary description of the March 1997 Credit Agreements
as amended. The description does not purport to be complete and should be read
in conjunction with each of the credit agreements which have been filed as
exhibits and are incorporated by reference herein.
 
        The March 1997 Viacom Credit Agreement is comprised of (i) a $4.7
    billion senior unsecured reducing revolving loan maturing July 1, 2002 and
    (ii) a $700 million term loan maturing April 1, 2002. The March 1997 Viacom
    International Credit Agreement is comprised of a $100 million term loan
    maturing July 1, 2002.
 
        The Company guarantees the March 1997 Viacom International Credit
    Agreement and notes and debentures issued by Viacom International. Viacom
    International guarantees the March 1997 Viacom Credit Agreement and notes
    and debentures issued by the Company.
 
        The Company may prepay the loans and reduce commitments under the March
    1997 Credit Agreements in whole or in part at any time.
 
        The March 1997 Credit Agreements contain certain covenants which, among
    other things, require that the Company maintain certain financial ratios and
    impose on the Company and its subsidiaries certain limitations on
    substantial asset sales and mergers with any other company in which the
    Company is not the surviving entity.
 
        The March 1997 Credit Agreements contain certain customary events of
    default and provide that it is an event of default if NAI fails to own at
    least 51% of the outstanding voting stock of the Company.
 
    The interest rate on all loans made under the three facilities is based upon
Citibank, N.A.'s base rate or the London Interbank Offered Rate ("LIBOR") and is
affected by the Company's credit rating. At December 31, 1997, the LIBOR (upon
which the Company's borrowing rate was based) for borrowing periods of one month
and two months were 5.72% and 5.75% respectively. At December 31, 1996, LIBOR
for borrowing periods of one and two months were each 5.50%.
 
    The Company is required to pay a commitment fee based on the aggregate daily
unborrowed portion of the loan commitments. As of December 31, 1997, the Company
had $2.9 billion of available unborrowed loan commitments. The Credit Agreements
do not require compensating balances.
 
    On May 9, 1997, a subsidiary of the Company amended the 364-day film
financing credit agreement, guaranteed by Viacom International and the Company,
which extended the expiration date for one year, reduced pricing and decreased
the available credit by $30 million to $470 million.
 
        (b) --During December 1995, the Company issued an aggregate principal
    amount of $350 million of 6.75% Senior Notes due 2003 at a price to the
    public of 99.903% and $200 million of 7.625% Senior Debentures due 2016 at a
    price to the public of 99.29%. Proceeds from the issuance were used to repay
    notes payable to banks. Such notes and debentures were issued pursuant to
    the shelf registration statement described below.
 
        (c) --During May 1995, the Company issued an aggregate principal amount
    of $1.0 billion of 7.75% Senior Notes due June 1, 2005 at a price to the
    public of 99.04%. Proceeds from the issuance were used to repay notes
    payable to banks, of which approximately $400 million was a permanent
 
                                     II-32

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    reduction of the Company's bank commitments. Such notes were issued pursuant
    to the shelf registration statement described below.
 
        (d) --The $100 million aggregate principal amount of Viacom
    International's 8.75% Senior Subordinated Reset Notes ("8.75% Reset Notes")
    are due on May 15, 2001. On May 15, 1995 the interest rate was reset at the
    original interest rate of 8.75% . On May 15, 1998, unless a notice of
    redemption of the 8.75% Reset Notes on such date has been given by the
    Company, the interest rate on the 8.75% Reset Notes will, if necessary, be
    adjusted from the rate then in effect to a rate to be determined on the
    basis of market rates in effect on May 5, 1998, as the rate the 8.75% Reset
    Notes should bear in order to have a market value of 101% of principal
    amount immediately after the resetting of the rate. In no event will the
    interest rate be lower than 8.75% or higher than the average three year
    treasury rate (as defined in the indenture) multiplied by two. The interest
    rate reset on May 15, 1998 will remain in effect on the 8.75% Reset Notes
    thereafter. The 8.75% Reset Notes are redeemable at the option of the
    Company, in whole but not in part, on May 15, 1998, at a redemption price of
    101% of principal amount plus accrued interest to, but not including, the
    date of redemption.
 
        (e) --During February 1998, the Company redeemed the $150 million,
    6.625% Senior Notes, due 1998, and the $150 million, 9.125% Senior
    Subordinated Notes, due 1999.
 
    The Company filed a shelf registration statement with the Securities and
Exchange Commission registering debt securities, preferred stock and contingent
value rights of Viacom and guarantees of such debt securities by Viacom
International which may be issued for aggregate gross proceeds of $3.0 billion.
The registration statement was declared effective on May 10, 1995. The net
proceeds from the sale of the offered securities may be used by Viacom to repay,
redeem, repurchase or satisfy its obligations in respect of its outstanding
indebtedness or other securities; to make loans to its subsidiaries; for general
corporate purposes; or for such other purposes as may be specified in the
applicable Prospectus Supplement. The Company filed a post-effective amendment
to this registration statement on November 19, 1996. To date, the Company has
issued $1.55 billion of notes and debentures and has $1.45 billion remaining
availability under the shelf registration statement.
 
    Interest costs incurred, interest income and capitalized interest are
summarized below:
 

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                       -------------------------------
<S>                                                                                    <C>        <C>        <C>
                                                                                         1997       1996       1995
                                                                                       ---------  ---------  ---------
Interest Incurred....................................................................  $   781.9  $   832.8  $   864.2
Interest Income......................................................................       17.9       30.3       43.0
Capitalized Interest.................................................................        1.0        4.5       11.9
</TABLE>

 
    The Company's scheduled maturities of indebtedness through December 31,
2002, assuming full utilization of the March 1997 Credit Agreements, as amended,
are $673 million (1998), $660 million (1999), $1.7 billion (2000), $2.1 billion
(2001) and $2.0 billion (2002). The Company has classified certain short-term
indebtedness as long-term debt based upon its intent and ability to refinance
such indebtedness on a long-term basis.
 
8) FINANCIAL INSTRUMENTS
 
    The Company's carrying value of financial instruments approximates fair
value, except for differences with respect to the notes and debentures and
certain differences related to other financial instruments which are not
significant. The carrying value of the senior debt, senior subordinated debt and
subordinated
 
                                     II-33

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
debt is $4.1 billion and the fair value, which is estimated based on quoted
market prices, is approximately $4.3 billion.
 
    The Company enters into foreign currency exchange contracts in order to
reduce its exposure to changes in foreign currency exchange rates that affect
the value of its firm commitments and certain anticipated foreign currency cash
flows. These contracts generally mature within the calendar year. The Company
does not enter into foreign currency contracts for speculative purposes. To
date, the contracts utilized have been purchased options and forward contracts.
A forward contract is an agreement between two parties to exchange a specified
amount of foreign currency, at a specified exchange rate on a specified future
date. An option contract provides the right, but not the obligation, to buy or
sell currency at a fixed exchange rate on a future date. The foreign exchange
contracts have principally been used to hedge the British Pound, the Australian
Dollar, the Japanese Yen, the Canadian Dollar, the Singapore Dollar, the German
Deutschemark and the European Currency Unit/British Pound relationship. At
December 31, 1997, the Company had outstanding contracts with a notional value
of approximately $21.6 million which expire in 1998. Realized gains and losses
on contracts that hedge anticipated future cash flows are recognized in "Other
items, net" and were not material in each of the periods. Option premiums are
expensed at the inception of the contract. Deferred gains and losses on foreign
currency exchange contracts as of December 31, 1997 were not material.
 
    The Company continually monitors its positions with, and credit quality of,
the financial institutions which are counterparties to its financial
instruments. The Company is exposed to credit loss in the event of
nonperformance by the counterparties to the agreements. However, the Company
does not anticipate nonperformance by the counterparties. The Company's
receivables do not represent significant concentrations of credit risk at
December 31, 1997, due to the wide variety of customers, markets and geographic
areas to which the Company's products and services are sold.
 
9) SHAREHOLDERS' EQUITY
 
    During 1997, the Company completed its joint purchase program initially
established in September 1996 with NAI, for each to acquire up to $250 million,
or $500 million in total, of the Company's Class A Common Stock, Class B Common
Stock, and, as to the Company, Viacom Warrants. The Company repurchased 659,700
shares of Viacom Inc. Class A Common Stock, 5,816,300 shares of Viacom Inc.
Class B Common Stock and 6,824,590 Viacom Five-Year Warrants, expiring on July
7, 1999, for approximately $250 million in the aggregate. The cost of the
acquired treasury stock has been reflected separately as a reduction to
shareholders' equity. The cost of the warrants has been reflected as a reduction
to additional paid-in-capital and such warrants have been cancelled. As of
December 31, 1997, NAI has separately acquired 1,282,200 shares of Viacom Inc.
Class A Common Stock and 5,602,000 shares of Viacom Inc. Class B Common Stock
pursuant to the joint purchase program for approximately $250 million, raising
its ownership to approximately 67% of Viacom Inc. Class A Common Stock and
approximately 28% of Class A and Class B Common Stock on a combined basis.
 
    At December 31, 1997 and 1996, respectively, there were 11,522,695 and
12,889,316 outstanding Viacom Five-Year Warrants, expiring July 7, 1999 and at
December 31, 1996 there were 30,576,562 outstanding Viacom Three-Year Warrants,
which expired July 7, 1997. The decrease in the outstanding Viacom Five-Year
Warrants is primarily attributable to the stock repurchase program.
 
    On September 29, 1995 the VCRs matured. The Company issued approximately 6.1
million shares of Viacom Inc. Class B Common Stock, or .022665 of a share of
Viacom Inc. Class B Common Stock per VCR, to settle its obligation under the
VCRs.
 
                                     II-34

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    On July 7, 1995 the CVRs matured. The Company paid approximately $81.9
million in cash, or approximately $1.44 per CVR, to settle its obligation under
the CVRs.
 
    Bell Atlantic Corporation owns 24 million shares of cumulative convertible
preferred stock, par value $.01 per share, of the Company ("Preferred Stock")
valued at $1.2 billion. Preferred Stock has a liquidation preference of $50 per
share, an annual dividend rate of 5%, is convertible into shares of Viacom Inc.
Class B Common Stock at a conversion price of $70 and does not have voting
rights other than those required by law. The Preferred Stock is redeemable by
the Company at declining premiums after November 1998.
 
    LONG-TERM INCENTIVE PLANS--The purpose of the Company's 1989, 1994 and 1997
Long-Term Incentive Plans (the "Plans") is to benefit and advance the interests
of the Company by rewarding certain key employees for their contributions to the
financial success of the Company and thereby motivating them to continue to make
such contributions in the future. The Plans provide for fixed grants of
equity-based interests pursuant to awards of phantom shares, stock options,
stock appreciation rights, restricted shares or other equity-based interests
("Awards"), and for subsequent payments of cash with respect to phantom shares
or stock appreciation rights based, subject to certain limits, on their
appreciation in value over stated periods of time. The stock options generally
vest over a four to six year period from the date of grant and expire 10 years
after the date of grant.
 
    The stock options available for future grant are as follows:
 

<TABLE>
<S>                                                 <C>
December 31, 1995.................................   7,229,853
December 31, 1996.................................  20,350,841
December 31, 1997.................................  13,376,978
</TABLE>

 
    Each of the unexercised stock options to purchase Paramount or Blockbuster
common stock that was outstanding at the time of the Paramount and Blockbuster
mergers (the "Mergers") in 1994, automatically became options to purchase the
merger consideration applicable to the stock option under the same price and
terms, except that, for employees of Paramount who were employees on July 7,
1994, the date of the Paramount Merger, additional Viacom Inc. Class B Common
Stock valued in July 1995, will be issued on exercise of such options as
consideration for the cash portion of the blended purchase price per share of
Paramount that was not reflected in the Merger consideration because of the
transaction structure. These options generally became vested upon the effective
date of the Merger, and are exercisable over a three to five year period and
expire 10 years after the date of grant.
 
    The Company has adopted the disclosure-only provisions of SFAS 123,
"Accounting for Stock-Based Compensation". In accordance with the provisions of
SFAS 123, the Company applies APB 25 "Accounting for Stock Issued to Employees"
and related interpretations in accounting for the Plans and accordingly, does
not recognize compensation expense for its stock option plans because the
Company typically does not issue options at exercise prices below the market
value at date of grant. Had compensation expense for its stock option plans been
determined based upon the fair value at the grant date for awards consistent
with the methodology prescribed by SFAS 123, the Company's consolidated pretax
income would have decreased by $36.3 million ($22.2 million after tax or $.06
per basic and diluted common share), $18.3 million ($11.0 million after tax or
$.03 per basic and diluted common share) and $.8 million ($.5 million after tax)
in 1997, 1996 and 1995, respectively. The 1995 earnings per share effect was
less than $.01 per share. These pro forma effects may not be representative of
future amounts since the estimated fair value of stock options on the date of
grant is amortized to expense over the vesting period, and additional options
may be granted in future years.
 
                                     II-35

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
 

<TABLE>
<CAPTION>
                                                                                             1997       1996       1995
                                                                                           ---------  ---------  ---------
<S>                                                                                        <C>        <C>        <C>
Expected dividend yield(a)...............................................................     --         --         --
Expected stock price volatility..........................................................      31.74%     32.50%     32.04%
Risk-free interest rate..................................................................       6.04%      6.19%      5.80%
Expected life of options (years).........................................................        6.0        6.0        6.0
</TABLE>

 
- ------------------------
 
(a) The Company has not declared any cash dividends on its common stock for any
    of the periods presented and has no present intention of so doing.
 
    The weighted-average fair value of each option as of the grant date was
$13.16, $16.27 and $20.44 in 1997, 1996 and 1995, respectively.
 
    The following table summarizes the Company's stock option activity under the
various plans:
 

<TABLE>
<CAPTION>
                                                                                      OPTIONS     WEIGHTED-AVERAGE
                                                                                    OUTSTANDING    EXERCISE PRICE
                                                                                    ------------  -----------------
<S>                                                                                 <C>           <C>
Balance at December 31, 1994......................................................    25,015,116      $   30.08
                                                                                    ------------
  Granted.........................................................................       295,184          46.61
  Exercised.......................................................................    (5,312,711)         28.58
  Canceled........................................................................    (1,429,268)         31.09
                                                                                    ------------
Balance at December 31, 1995......................................................    18,568,321          30.70
                                                                                    ------------
  Granted.........................................................................     6,263,800          37.51
  Exercised.......................................................................    (3,838,649)         30.35
  Canceled........................................................................    (1,347,965)         37.55
                                                                                    ------------
Balance at December 31, 1996......................................................    19,645,507          32.47
                                                                                    ------------
  Granted.........................................................................     9,203,000          30.67
  Exercised.......................................................................    (2,733,874)         28.81
  Canceled........................................................................    (3,506,346)         36.48
                                                                                    ------------
Balance at December 31, 1997......................................................    22,608,287      $   31.56
                                                                                    ------------
                                                                                    ------------
</TABLE>

 
                                     II-36


<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The following table summarizes information concerning currently outstanding
and exercisable stock options of the Company at December 31, 1997:
 

<TABLE>
<CAPTION>
                                                      OUTSTANDING                            EXERCISABLE
                                     ---------------------------------------------   ----------------------------
<S>                                  <C>             <C>            <C>              <C>           <C>
                                                      REMAINING       WEIGHTED-                      WEIGHTED-
             RANGE OF                                CONTRACTUAL       AVERAGE                        AVERAGE
          EXERCISE PRICES               OPTIONS      LIFE (YEARS)   EXERCISE PRICE     OPTIONS     EXERCISE PRICE
- -----------------------------------  -------------   ------------   --------------   -----------   --------------
$20 to $30.........................        843,093       3.7            $26.49           728,093       $26.07
30 to 40...........................     15,927,154       8.7             33.00         1,401,879        34.32
40 to 50...........................        715,000       7.7             45.12           249,999        45.46
50 to 60...........................        488,574       6.0             54.17           424,937        54.72
5 to 50(a).........................      3,707,162(a)    5.3             29.05         3,707,162        29.05
30 to 60(b)........................        927,304(b)    4.8             42.92           885,779        42.72
                                     -------------                                   -----------
                                        22,608,287                                     7,397,849
                                     -------------                                   -----------
                                     -------------                                   -----------
</TABLE>

 
- ------------------------
 
(a) Represents information for options assumed with the merger of Blockbuster.
 
(b) Represents information for options assumed with the merger of Paramount.
 
    SHARES ISSUABLE UNDER EXERCISABLE STOCK OPTIONS:
 

<TABLE>
<S>                                                               <C>
  December 31, 1995.............................................  13,120,626
  December 31, 1996.............................................  11,243,220
  December 31, 1997.............................................   7,397,849
</TABLE>

 
    The Company has reserved a total of 487,762 shares of Viacom Inc. Class A
Common Stock and 39,268,908 shares of Viacom Inc. Class B Common Stock
principally for exercise of stock options and warrants, and the conversion of
the Preferred Stock.
 
    SPELLING STOCK OPTION PLANS--Spelling currently has stock option plans under
which both incentive and nonqualified stock options have been granted to certain
key employees, consultants and directors. Options have generally been granted
with an exercise price equal to the fair market value of the underlying Common
Stock on the date of grant, although nonqualified options may be granted with an
exercise price not less than 50% of such fair market value. Each option is
granted subject to various terms and conditions established on the date of
grant, including vesting periods and expiration dates. The options typically
become exercisable at the rate of 20% or 25% annually, beginning one year after
the date of grant. Options must expire no later than 10 years from their date of
grant.
 
    The Spelling stock options available for future grant are as follows:
 

<TABLE>
<S>                                                                <C>
December 31, 1995................................................  3,158,343
December 31, 1996................................................  5,094,251(a) (b)
December 31, 1997................................................  3,030,838
</TABLE>

 
- ------------------------
 
(a) Includes 1,622,500 shares granted and 5,000,000 shares available for grant,
    which were pending shareholder approval of an increase to the number of
    shares available for grant under the plans and were subsequently approved at
    the Annual Meeting of Shareholders on May 21, 1997.
 
(b) Includes 1,360,866 shares available for grant under a plan which expired on
    April 13, 1997.
 
                                     II-37

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The weighted average fair value of each option as of the grant date was
$2.65, $2.66 and $3.89 for 1997, 1996 and 1995, respectively. The fair value of
each Spelling option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
 

<TABLE>
<CAPTION>
                                                                      1997       1996       1995
                                                                    ---------  ---------  ---------
<S>                                                                 <C>        <C>        <C>
Expected dividend yield(a)........................................     --         --         --
Expected stock price volatility...................................      30.91%     28.45%     29.91%
Risk-free interest rate...........................................       5.75%      6.60%      6.88%
Expected life of options (years)..................................        5.2        4.8        4.8
</TABLE>

 
- ------------------------
 
(a) During 1997, 1996 and 1995, Spelling has not declared any cash dividends on
    its common stock.
 
    The following table summarizes Spelling's stock option activity:
 

<TABLE>
<CAPTION>
                                       OPTIONS    WEIGHTED-AVERAGE
                                     OUTSTANDING   EXERCISE PRICE
                                     -----------  ----------------
<S>                                  <C>          <C>
Balance at December 31, 1994.......    7,123,669       $ 7.23
                                     -----------
  Granted..........................      200,000        10.31
  Exercised........................     (974,649)        6.04
  Canceled.........................     (589,802)        6.84
                                     -----------
Balance at December 31, 1995.......    5,759,218         7.72
                                     -----------
  Granted..........................    3,750,010(a)      7.13
  Exercised........................     (841,943)        4.91
  Canceled.........................     (688,967)        7.02
                                     -----------
Balance at December 31, 1996.......    7,978,318         7.80
                                     -----------
  Granted..........................    1,171,000         6.90
  Exercised........................     (362,008)        6.29
  Canceled.........................     (588,519)        8.90
                                     -----------
Balance at December 31, 1997.......    8,198,791       $ 7.66
                                     -----------
</TABLE>

 
- ------------------------
 
(a) Includes 1,622,500 shares granted and 5,000,000 shares available for grant,
    which were pending shareholder approval of an increase to the number of
    shares available for grant under the plans and were subsequently approved at
    the Annual Meeting of Shareholders on May 21, 1997.
 
                                     II-38

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The following table summarizes Spelling's information concerning currently
outstanding and exercisable stock options at December 31, 1997:
 

<TABLE>
<CAPTION>
                                     OUTSTANDING                          EXERCISABLE
                     -------------------------------------------  ---------------------------
<S>                  <C>          <C>              <C>            <C>         <C>
                                                     WEIGHTED-
                                     REMAINING        AVERAGE                    WEIGHTED-
     RANGE OF                       CONTRACTUAL      EXERCISE                     AVERAGE
  EXERCISE PRICES      OPTIONS     LIFE (YEARS)        PRICE       OPTIONS    EXERCISE PRICE
- -------------------  -----------  ---------------  -------------  ----------  ---------------
     $3.38 to $5.83     217,648           1.33       $    5.22       217,648     $    5.22
       6.00 to 7.49   5,987,245           7.45            6.87     2,158,844          6.46
       7.62 to 9.88     532,773           6.74            9.02       369,732          9.14
     10.00 to 12.00   1,461,125           6.69           10.77     1,067,125         10.77
                     -----------                                  ----------
                      8,198,791                                    3,813,349
                     -----------                                  ----------
                     -----------                                  ----------
</TABLE>

 

<TABLE>
<S>                                                                                <C>
SHARES ISSUABLE UNDER EXERCISABLE STOCK OPTIONS:
  December 31, 1995..............................................................  2,694,082
  December 31, 1996..............................................................  3,079,436
  December 31, 1997..............................................................  3,813,349
</TABLE>

 
    Options related to employees of Virgin and included in the tables above are
875,010 and 50,000 shares granted for the years ended December 31, 1996 and
1995, respectively. Also included are 133,582, 775,220 and 643,003 shares
exercised, and 184,269, 149,921 and 140,189 shares terminated for 1997, 1996 and
1995, respectively. No options were granted to employees of Virgin for the year
ended December 31, 1997.
 
10) INCOME TAXES
 
    Earnings from continuing operations before income taxes are attributable to
the following jurisdictions:
 

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                                -------------------------------
<S>                                                                             <C>        <C>        <C>
                                                                                  1997       1996       1995
                                                                                ---------  ---------  ---------
United States.................................................................  $   925.9  $   194.3  $   306.9
Foreign.......................................................................      296.8      286.2      272.9
                                                                                ---------  ---------  ---------
Total.........................................................................  $ 1,222.7  $   480.5  $   579.8
                                                                                ---------  ---------  ---------
                                                                                ---------  ---------  ---------
</TABLE>

 
                                     II-39

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    Components of the provision for income taxes on earnings from continuing
operations before income taxes are as follows:
 

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                       -------------------------------
<S>                                                                                    <C>        <C>        <C>
                                                                                         1997       1996       1995
                                                                                       ---------  ---------  ---------
Current:
  Federal............................................................................  $   392.1  $   194.1  $    32.2
  State and local....................................................................      123.9       36.8       48.1
  Foreign............................................................................       36.9       81.5       64.1
                                                                                       ---------  ---------  ---------
                                                                                           552.9      312.4      144.4
Deferred.............................................................................      136.8      (16.9)     222.7
                                                                                       ---------  ---------  ---------
                                                                                       $   689.7  $   295.5  $   367.1
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
</TABLE>

 
    The earnings (loss) of affiliated companies accounted for under the equity
method are shown net of tax on the Company's Statements of Operations. The tax
provision (benefits) relating to earnings (loss) from equity investments in
1997, 1996 and 1995 are ($29.0) million, $14.9 million and ($22.7) million,
respectively, which represents an effective tax rate of 15.1%, 762.1% and 29.6%,
respectively. The difference between the effective tax rates and the federal
statutory tax rate of 35% is principally due to the effect of nondeductible
goodwill amortization, state and local taxes and foreign losses for which no
benefit was provided. Excluding the non-deductible amortization of intangibles,
the annual effective tax rate would have been 44.6%, 32.2% and 39.4% for 1997,
1996 and 1995, respectively. See Note 3 for tax benefits relating to the
discontinued operations. In addition to the amounts reflected in the table
above, $7.8 million and $15.3 million of income tax benefit in 1997 and 1996,
respectively, was recorded as a component of shareholders' equity as a result of
exercised stock options.
 
    A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings from continuing operations before income taxes is
summarized as follows:
 

<TABLE>
<CAPTION>
                                                                                             YEAR ENDED DECEMBER 31,
                                                                                         -------------------------------
<S>                                                                                      <C>        <C>        <C>
                                                                                           1997       1996       1995
                                                                                         ---------  ---------  ---------
Statutory U.S. tax rate................................................................       35.0%      35.0%      35.0%
State and local taxes, net of federal tax benefit......................................        6.0        3.1        4.4
Effect of foreign operations...........................................................       (1.2)     (13.0)      (4.8)
Amortization of intangibles............................................................       11.8       29.3       23.9
Divestiture tax versus book............................................................     --             .9         .5
Other, net.............................................................................        4.8        6.2        4.3
                                                                                         ---------  ---------  ---------
Effective tax rate on earnings from continuing operations before income taxes..........       56.4%      61.5%      63.3%
                                                                                         ---------  ---------  ---------
                                                                                         ---------  ---------  ---------
</TABLE>

 
                                     II-40

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The following is a summary of the components of the deferred tax accounts:
 

<TABLE>
<CAPTION>
                                                                                                YEAR ENDED DECEMBER
                                                                                                        31,
                                                                                                --------------------
<S>                                                                                             <C>        <C>
                                                                                                  1997       1996
                                                                                                ---------  ---------
Current deferred tax assets and (liabilities):
Recognition of revenue........................................................................  $    76.7  $    70.1
Sales return and allowances...................................................................       91.5       89.3
Publishing costs..............................................................................       15.6       11.7
Employee compensation and other payroll related expenses......................................       48.0       37.9
Other differences between tax and financial statement values..................................        4.5        5.5
                                                                                                ---------  ---------
  Gross current deferred net tax assets.......................................................      236.3      214.5
                                                                                                ---------  ---------
Noncurrent deferred tax assets and (liabilities):
Depreciation/amortization of fixed assets and intangibles.....................................     (179.5)     (90.7)
Reserves including restructuring and relocation charges.......................................      296.7      253.1
Acquired net operating loss and tax credit carryforwards......................................       82.1       86.7
Amortization of discount on 8% Merger Debentures..............................................       61.3       72.8
Recognition of revenue........................................................................       15.4       23.5
Other differences between tax and financial statement values..................................       79.9       59.0
                                                                                                ---------  ---------
  Gross noncurrent deferred net tax assets....................................................      355.9      404.4
                                                                                                ---------  ---------
Valuation allowance...........................................................................     (106.8)     (81.8)
                                                                                                ---------  ---------
  Total net deferred tax assets (liabilities).................................................  $   485.4  $   537.1
                                                                                                ---------  ---------
                                                                                                ---------  ---------
</TABLE>

 
    As of December 31, 1997 and December 31, 1996, the Company had total
deferred tax assets of $771.7 million and $709.6 million, respectively, and
total deferred tax liabilities of $179.5 million and $90.7 million,
respectively.
 
    As of December 31, 1997, the Company had net operating loss carryforwards of
approximately $234.7 million which expire in various years from 1998 through
2011.
 
    The 1997 and 1996 net deferred tax asset is reduced by a valuation allowance
of $106.8 million and $81.8 million, respectively, principally relating to tax
benefits of net operating losses which are not expected to be recognized as a
result of limitations applied where there is a change of ownership.
 
    The Company's share of the undistributed earnings of foreign subsidiaries
not included in its consolidated Federal income tax return that could be subject
to additional income taxes if remitted, was approximately $1.5 billion and $1.3
billion at December 31, 1997 and December 31, 1996, respectively. No provision
has been recorded for the U.S. or foreign taxes that could result from the
remittance of such undistributed earnings since the Company intends to reinvest
these earnings outside the United States indefinitely and it is not practicable
to estimate the amount of such taxes.
 
    On April 18, 1997, the Company announced its intention to acquire additional
shares of Spelling's outstanding common stock. During the period through
December 31, 1997, the Company acquired 5,294,600 additional shares for $46.9
million and currently owns approximately 80% of Spelling's outstanding common
stock. The purchase of additional shares permits the Company to consolidate
Spelling's results for tax purposes.
 
                                     II-41

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
11) PENSION PLANS, OTHER POSTRETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS
 
    The Company and certain of its subsidiaries have non-contributory pension
plans covering specific groups of employees. Effective January 1, 1996, the
pension plans of Paramount were merged with the Company's pension plans. The
Pension Plan for Employees of PVI Transmission Inc. and Paramount Distribution
Inc. was merged with and into the Viacom Pension Plan effective December 31,
1996. The benefits for these plans are based primarily on an employee's years of
service and pay near retirement. Participant employees are vested in the plans
after five years of service. The Company's policy for all pension plans is to
fund amounts in accordance with the Employee Retirement Income Security Act of
1974. Plan assets consist principally of common stocks, marketable bonds and
United States government securities. The Company's Class B Common Stock
represents approximately 10% and 8% of the plan assets at December 31, 1997 and
1996, respectively.
 
    Net periodic pension cost consists of the following components:
 

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                                     -------------------------------
<S>                                                                                  <C>        <C>        <C>
                                                                                       1997       1996       1995
                                                                                     ---------  ---------  ---------
Service cost--benefits earned during the period....................................  $    32.1  $    31.1  $    25.2
Interest cost on projected benefit obligation......................................       54.1       50.6       48.9
Actual (gain) loss on plan assets..................................................     (123.6)     (65.9)    (108.9)
Net amortization and deferral......................................................       71.8       18.1       66.8
                                                                                     ---------  ---------  ---------
Net periodic pension cost..........................................................  $    34.4  $    33.9  $    32.0
                                                                                     ---------  ---------  ---------
                                                                                     ---------  ---------  ---------
</TABLE>

 
    During 1996, the Company split-off its Cable segment, affecting participants
in its pension plans. The curtailment gains reduced pension cost by $2.9
million.
 
                                     II-42

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The funded status of the pension plans for the periods indicated is as
follows:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                     --------------------------------------------------------------
<S>                                                  <C>              <C>            <C>              <C>
                                                                  1997                            1996
                                                     ------------------------------  ------------------------------
 
<CAPTION>
                                                       ACCUMULATED    ASSETS EXCEED    ACCUMULATED    ASSETS EXCEED
                                                     BENEFITS EXCEED   ACCUMULATED   BENEFITS EXCEED   ACCUMULATED
                                                         ASSETS         BENEFITS         ASSETS         BENEFITS
                                                     ---------------  -------------  ---------------  -------------
<S>                                                  <C>              <C>            <C>              <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
  Vested...........................................     $   (71.1)      $  (589.9)      $   (64.5)      $  (506.4)
  Non-vested.......................................          (3.9)          (27.1)           (2.3)          (22.7)
                                                           ------     -------------        ------     -------------
  Total............................................     $   (75.0)      $  (617.0)      $   (66.8)      $  (529.1)
                                                           ------     -------------        ------     -------------
                                                           ------     -------------        ------     -------------
Projected benefit obligation.......................     $   (85.7)      $  (699.6)      $   (78.8)      $  (589.0)
Plan assets at fair value..........................            --           697.3              .9           605.3
                                                           ------     -------------        ------     -------------
Projected benefit obligation less than (in excess
  of) plan assets..................................         (85.7)           (2.3)          (77.9)           16.3
Unrecognized net (gain) losses.....................           9.2           (80.7)            1.9           (73.3)
Unrecognized prior service cost....................          11.5             3.6            14.2             1.3
Unrecognized transition obligation.................            .9            (5.2)            3.2            (7.9)
Adjustment to recognize minimum liability..........         (11.0)             --            (8.3)             --
                                                           ------     -------------        ------     -------------
Pension liability at year end......................     $   (75.1)      $   (84.6)      $   (66.9)      $   (63.6)
                                                           ------     -------------        ------     -------------
                                                           ------     -------------        ------     -------------
</TABLE>

 
    The following assumptions were used in accounting for the pension plans:
 

<TABLE>
<CAPTION>
                                                                                   1997       1996        1995
                                                                                 ---------  ---------  -----------
<S>                                                                   <C>        <C>        <C>        <C>
Discount rate.......................................................                 7.25%      7.75%         7.25%
Expected return on plan assets......................................                 9.5 %      9.5 %         9.5%
Rate of increase in future compensation.............................                 5.0 %      5.0 %      5.0-5.5%
</TABLE>

 
    In addition, the Company contributes to multiemployer pension plans which
provide benefits to certain employees under collective bargaining agreements.
The pension expense for these plans was $40.0 million (1997) and $27.8 million
(1996).
 
    The Company sponsors a welfare plan which provides certain postretirement
health care and life insurance benefits to retired employees and their covered
dependents who are eligible for these benefits if they meet certain age and
service requirements. The welfare plan is contributory and contains cost-sharing
features such as deductibles and coinsurance which are adjusted annually. The
plan is not funded. The Company continues to fund these benefits as claims are
paid.
 
                                     II-43

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    The reconciliations of the funded status of the postretirement benefit plans
are as follows:
 

<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                                                                 --------------------
<S>                                                                                              <C>        <C>
                                                                                                   1997       1996
                                                                                                 ---------  ---------
Accumulated postretirement benefit obligation attributable to:
  Current retirees.............................................................................  $    83.2  $    86.0
  Fully eligible active plan participants......................................................       13.9       17.6
  Other active plan participants...............................................................        6.5        6.0
Unrecognized prior service cost................................................................       25.1       28.3
Unrecognized net gain..........................................................................       30.1       27.1
                                                                                                 ---------  ---------
  Total accrued expense........................................................................  $   158.8  $   165.0
                                                                                                 ---------  ---------
                                                                                                 ---------  ---------
</TABLE>

 
    The components of net periodic postretirement benefit cost are as follows:
 

<TABLE>
<CAPTION>
                                                                                                    DECEMBER 31,
                                                                                           -------------------------------
<S>                                                                                        <C>        <C>        <C>
                                                                                             1997       1996       1995
                                                                                           ---------  ---------  ---------
Service costs-benefits earned............................................................  $     1.0  $     1.0  $     3.8
Interest cost on accumulated postretirement benefit obligation...........................        7.4        8.1       10.8
Amortization of prior service cost.......................................................       (3.2)      (3.2)    --
Amortization of gain.....................................................................       (3.1)      (1.3)      (1.4)
                                                                                           ---------  ---------  ---------
Net periodic postretirement benefit cost.................................................  $     2.1  $     4.6  $    13.2
                                                                                           ---------  ---------  ---------
                                                                                           ---------  ---------  ---------
</TABLE>

 
    The following assumptions were used in accounting for postretirement
benefits:
 

<TABLE>
<S>                                                                                         <C>        <C>        <C>
  Projected health care cost trend rate.................................................           7%         9%        11%
  Ultimate trend rate...................................................................         5.5%       5.5%       5.5%
  Year ultimate trend rate is achieved..................................................         1999       1999       2001
  Discount rate.........................................................................        7.25%      7.75%      7.25%
Effect of a 1% point increase in the health care cost trend rate:
  Postretirement benefit obligation.....................................................    $     8.7  $     9.6  $    20.6
  Aggregate of service and interest cost................................................    $     0.8  $     0.8  $     2.4
</TABLE>

 
    In addition, the Company contributed to multiemployer plans which provide
health and welfare benefits to active as well as retired employees. The Company
had costs of $12.5 million related to these benefits for both years ended
December 31, 1997 and 1996.
 
    SFAS 112, "Employers' Accounting For Postemployment Benefits" does not have
a significant effect on the Company's consolidated financial position or results
of operations.
 
12) COMMITMENTS AND CONTINGENCIES
 
    The Company has long-term noncancelable lease commitments for retail and
office space and equipment, transponders, studio facilities and vehicles.
 
                                     II-44

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
    At December 31, 1997, minimum rental payments under noncancelable leases are
as follows:
 

<TABLE>
<CAPTION>
                                                                                             LEASES
                                                                                     ----------------------
<S>                                                                                  <C>          <C>
                                                                                      OPERATING    CAPITAL
                                                                                     -----------  ---------
1998...............................................................................   $   615.8   $   124.2
1999...............................................................................       552.4       123.0
2000...............................................................................       507.5        99.8
2001...............................................................................       419.7        79.2
2002...............................................................................       313.7        70.5
2003 and thereafter................................................................     1,551.0       174.6
                                                                                     -----------  ---------
Total minimum lease payments.......................................................   $ 3,960.1       671.3
                                                                                     -----------
                                                                                     -----------
Less amounts representing interest.................................................                   144.3
                                                                                                  ---------
Present value of net minimum payments..............................................               $   527.0
                                                                                                  ---------
                                                                                                  ---------
</TABLE>

 
    The Company has also entered into capital leases for satellite transponders
with future minimum commitments commencing in future periods of approximately
$112.4 million payable over the next fourteen years. Such commitments are
contingent upon the successful operation of satellites. Future minimum capital
lease payments have not been reduced by future minimum sublease rentals of $50.3
million. Rent expense amounted to $627.9 million (1997), $501.1 million (1996)
and $475.2 million (1995).
 
    The commitments of the Company for program license fees, which are not
reflected in the balance sheet as of December 31, 1997 and are estimated to
aggregate approximately $1.6 billion, principally reflect Showtime Networks
Inc.'s ("SNI's") commitments of approximately $1.5 billion for the acquisition
of programming rights and the production of original programming. This estimate
is based upon a number of factors. A majority of such fees are payable over
several years, as part of normal programming expenditures of SNI. These
commitments to acquire programming rights are contingent upon delivery of motion
pictures which are not yet available for premium television exhibition and, in
many cases, have not yet been produced.
 
    There are various lawsuits and claims pending against the Company.
Management believes that any ultimate liability resulting from those actions or
claims will not have a material adverse effect on the Company's results of
operations, financial position or liquidity.
 
    Certain subsidiaries and affiliates of the Company from time to time receive
claims from federal and state environmental regulatory agencies and other
entities asserting that they are or may be liable for environmental cleanup
costs and related damages, principally relating to discontinued operations
conducted by its former mining and manufacturing businesses (acquired as part of
the mergers with Paramount and Blockbuster). The Company has recorded a
liability reflecting its best estimate of environmental exposure. Such liability
was not discounted or reduced by potential insurance recoveries and reflects
management's estimate of cost sharing at multiparty sites. The estimated
liability was calculated based upon currently available facts, existing
technology and presently enacted laws and regulations. On the basis of its
experience and the information currently available to it, the Company believes
that the claims it has received will not have a material adverse effect on its
results of operations, financial position or liquidity.
 
                                     II-45

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
13) BUSINESS SEGMENTS
 

<TABLE>
<CAPTION>
                                                                               YEAR ENDED OR AT DECEMBER 31,
                                                                             ----------------------------------
<S>                                                                          <C>         <C>         <C>
                                                                                1997        1996        1995
                                                                             ----------  ----------  ----------
REVENUES:
Networks and Broadcasting..................................................  $  2,717.8  $  2,404.0  $  2,030.8
Entertainment..............................................................     3,861.3     3,493.4     3,407.5
Video and Music/Theme Parks................................................     4,286.6     3,920.4     3,333.4
Publishing.................................................................     2,472.1     2,331.7     2,171.1
Intercompany elimination...................................................      (131.7)      (65.3)      (26.9)
                                                                             ----------  ----------  ----------
        Total revenues.....................................................  $ 13,206.1  $ 12,084.2  $ 10,915.9
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
OPERATING INCOME:
Networks and Broadcasting..................................................  $    747.5  $    630.2  $    520.3
Entertainment..............................................................       233.4       330.6       354.8
Video and Music/Theme Parks................................................      (248.3)      273.1       501.5
Publishing.................................................................       221.7       217.2       186.3
Corporate..................................................................      (201.5)     (176.8)     (164.2)
                                                                             ----------  ----------  ----------
        Total operating income.............................................  $    752.8  $  1,274.3  $  1,398.7
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
DEPRECIATION AND AMORTIZATION:
Networks and Broadcasting..................................................  $    134.1  $    125.1  $    107.6
Entertainment..............................................................       131.2       127.1       126.1
Video and Music/Theme Parks................................................       489.9       403.5       321.5
Publishing.................................................................       163.2       148.0       153.9
Corporate..................................................................        24.9        13.9         7.6
                                                                             ----------  ----------  ----------
        Total depreciation and amortization................................  $    943.3  $    817.6  $    716.7
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
IDENTIFIABLE ASSETS AT YEAR END:
Networks and Broadcasting..................................................  $  4,292.3  $  4,053.3  $  4,417.8
Entertainment..............................................................     7,695.4     8,096.4     7,920.1
Video and Music/Theme Parks................................................    10,120.9    10,156.8     9,611.3
Publishing.................................................................     5,439.4     5,405.1     5,343.7
Corporate..................................................................       740.7       833.0       634.5
Net assets of discontinued operations/cable systems (1995).................          --       289.4     1,063.6
                                                                             ----------  ----------  ----------
        Total identifiable assets at year end..............................  $ 28,288.7  $ 28,834.0  $ 28,991.0
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
CAPITAL EXPENDITURES:
Networks and Broadcasting..................................................  $     88.3  $     98.1  $     58.2
Entertainment..............................................................        47.2        56.0        58.1
Video and Music/Theme Parks................................................       342.0       358.4       388.5
Publishing.................................................................        36.1        37.3        52.4
Corporate..................................................................        16.7        48.8        54.1
Cable television systems...................................................          --          --       119.3
                                                                             ----------  ----------  ----------
        Total capital expenditures.........................................  $    530.3  $    598.6  $    730.6
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
</TABLE>

 
                                     II-46

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
14) OPERATIONS BY GEOGRAPHIC AREA
 

<TABLE>
<CAPTION>
                                                                               YEAR ENDED OR AT DECEMBER 31,
                                                                             ----------------------------------
<S>                                                                          <C>         <C>         <C>
                                                                                1997        1996        1995
                                                                             ----------  ----------  ----------
REVENUES:
    United States..........................................................  $ 10,376.0  $  9,514.7  $  8,887.1
    United States export sales.............................................       392.6       282.8       215.2
    International..........................................................     2,437.5     2,286.7     1,813.6
                                                                             ----------  ----------  ----------
        Total revenues.....................................................  $ 13,206.1  $ 12,084.2  $ 10,915.9
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
OPERATING INCOME:
    United States..........................................................  $    554.1  $    981.7  $  1,179.7
    International..........................................................       198.7       292.6       219.0
                                                                             ----------  ----------  ----------
        Total operating income.............................................  $    752.8  $  1,274.3  $  1,398.7
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
IDENTIFIABLE ASSETS AT YEAR END:
    United States..........................................................  $ 24,649.3  $ 25,578.7  $ 26,111.6
    Other..................................................................     3,639.4     3,255.3     2,879.4
                                                                             ----------  ----------  ----------
        Total identifiable assets..........................................  $ 28,288.7  $ 28,834.0  $ 28,991.0
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
</TABLE>

 
      Intercompany transfers between geographic areas are not significant.
 
                                     II-47

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
15) QUARTERLY FINANCIAL DATA (UNAUDITED):
 
    Summarized quarterly financial data for 1997 and 1996 appears below:
 

<TABLE>
<CAPTION>
                                                          FIRST     SECOND      THIRD     FOURTH
                                                         QUARTER    QUARTER    QUARTER    QUARTER   TOTAL YEAR
                                                        ---------  ---------  ---------  ---------  ----------
<S>                                                     <C>        <C>        <C>        <C>        <C>
1997
- -------
Revenue...............................................  $ 2,917.7  $ 3,030.9  $ 3,647.4  $ 3,610.1  $ 13,206.1
Operating income (loss)...............................  $   173.8  $  (136.8) $   442.1  $   273.7  $    752.8
Earnings (loss) from continuing operations(1)(2)......  $   (23.8) $  (216.7) $    18.4  $   596.6  $    374.5
Net earnings (loss)(3)................................  $   (18.7) $  (195.0) $   434.3  $   573.0  $    793.6
Net earnings (loss) attributable to common stock......  $   (33.7) $  (210.0) $   419.3  $   558.0  $    733.6
Basic earnings (loss) per common share:
  Earnings (loss) from continuing operations..........  $    (.11) $    (.66) $     .01  $    1.65  $      .89
  Net earnings (loss).................................  $    (.10) $    (.60) $    1.19  $    1.58  $     2.08
Diluted earnings (loss) per common share:
  Earnings (loss) from continuing operations(4).......  $    (.11) $    (.66) $     .01  $    1.60  $      .89
  Net earnings (loss)(4)..............................  $    (.10) $    (.60) $    1.19  $    1.54  $     2.07
Weighted average number of common shares:
  Basic...............................................      352.5      352.7      353.0      353.4       352.9
  Diluted(4)..........................................      352.5      352.7      353.6      372.2       354.3
1996
- -------
Revenue...............................................  $ 2,623.4  $ 2,785.0  $ 3,266.4  $ 3,409.4  $ 12,084.2
Operating income(5)...................................  $   255.7  $   274.9  $   493.7  $   250.0  $  1,274.3
Earnings from continuing operations...................  $    19.4  $    25.5  $   108.6  $    17.2  $    170.7
Net earnings (loss)(6)................................  $    27.8  $    41.1  $ 1,406.4  $  (227.4) $  1,247.9
Net earnings (loss) attributable to common stock......  $    12.8  $    26.1  $ 1,391.4  $  (242.4) $  1,187.9
Basic earnings (loss) per common share(7):
  Earnings from continuing operations.................  $     .01  $     .03  $     .26  $     .01  $      .30
  Net earnings (loss).................................  $     .03  $     .07  $    3.85  $    (.69) $     3.26
Diluted earnings (loss) per common share(7):
  Earnings from continuing operations.................  $     .01  $     .03  $     .26  $     .01  $      .30
  Net earnings (loss).................................  $     .03  $     .07  $    3.82  $    (.68) $     3.23
Weighted average number of common shares:
  Basic...............................................      370.0      371.7      361.6      352.8       364.0
  Diluted.............................................      374.7      376.0      364.0      354.9       367.4
</TABLE>

 
    The timing of the Company's results of operations is affected by the
seasonality of the educational publishing business, the typical timing of major
motion picture releases, the summer operation of the theme parks, the positive
effect of the holiday season on advertising and video store revenues, and the
impact of the broadcasting television season on television production.
 
- ------------------------
 
(1) The second quarter of 1997 included a $322.8 million charge for Blockbuster
    representing the reduction in carrying value of excess retail inventory and
    costs associated with reorganizing and closing underperforming stores in
    certain international markets (See Note 4).
 
                                     II-48

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
(2) The fourth quarter of 1997 included a gain of $640.5 million, net of tax,
    resulting from the sale of USA Networks.
 
(3) The third quarter of 1997 included a gain of $416.4 million, net of tax,
    resulting from the sale of Viacom Radio Stations.
 
(4) For the fourth quarter of 1997, the assumed conversion of preferred stock
    had a dilutive effect on earnings per share, therefore, the sum of the
    quarterly earnings per share will not equal full year earnings per share.
 
(5) The fourth quarter of 1996 included a $88.9 million restructuring charge for
    Blockbuster (See Note 4).
 
(6) The third quarter and fourth quarter of 1996 included a gain of $1,304.3
    million and a loss of $146.6 million, respectively, related to discontinued
    operations.
 
(7) SFAS 128 was adopted in the fourth quarter of 1997. All prior quarters'
    earnings per common share have been restated to conform to the requirements
    of SFAS 128 (See Note 1).
 
16) OTHER ITEMS, NET
 
    On October 21, 1997, the Company completed the sale of its half-interest in
USA Networks, including the Sci-Fi Channel, to Universal Studios, Inc. for a
total of $1.7 billion in cash. The Company realized a pre-tax gain of
approximately $1.1 billion in the fourth quarter of 1997. The net proceeds from
this transaction were used to repay debt.
 
    In addition, during 1997, the Company recorded pre-tax gains on the swap of
certain television stations of approximately $190.9 million partially offset by
write-offs of certain cost investments.
 
17) SUPPLEMENTAL CASH FLOW INFORMATION
 

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                       -------------------------------
<S>                                                                                    <C>        <C>        <C>
                                                                                         1997       1996       1995
                                                                                       ---------  ---------  ---------
Cash payments for interest net of amounts capitalized................................  $   792.1  $   808.0  $   925.9
Cash payments for income taxes.......................................................      110.9      193.0      485.7
 
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
  Equipment acquired under capitalized leases........................................       54.0      211.1      314.5
  Shares retired with Cable Split-off................................................         --      625.8         --
  Settlement of VCRs with Class B Common Stock.......................................         --         --      402.6
</TABLE>

 
18) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
 
    Viacom International is a wholly owned subsidiary of the Company. The
Company has fully and unconditionally guaranteed Viacom International debt
securities (See Note 7). The Company has determined that separate financial
statements and other disclosures concerning Viacom International are not
material to investors. The following condensed consolidating financial
statements present the results of operations, financial position and cash flows
of the Company, Viacom International (in each case carrying investments in
Non-Guarantor Affiliates under the equity method), the direct and indirect
Non-Guarantor Affiliates of the Company, and the eliminations necessary to
arrive at the information for the Company on a consolidated basis.
 
                                     II-49

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                                1997
                                                  -----------------------------------------------------------------
<S>                                               <C>          <C>           <C>         <C>           <C>
                                                                                NON-
                                                                  VIACOM     GUARANTOR                 VIACOM INC.
                                                  VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS  CONSOLIDATED
                                                  -----------  ------------  ----------  ------------  ------------
Revenues........................................   $    26.7    $  1,458.3   $ 11,747.0   $    (25.9)   $ 13,206.1
Expenses:
    Operating...................................        25.6         471.3      8,392.3        (25.9)      8,863.3
    Selling, general and administrative.........         1.8         520.3      2,124.6           --       2,646.7
    Depreciation and amortization...............         1.9          67.4        874.0           --         943.3
                                                  -----------  ------------  ----------  ------------  ------------
    Total expenses..............................        29.3       1,059.0     11,390.9        (25.9)     12,453.3
                                                  -----------  ------------  ----------  ------------  ------------
Operating income (loss).........................        (2.6)        399.3        356.1           --         752.8
Other income (expense):
    Interest expense, net.......................      (631.1)        (56.2)       (75.7)          --        (763.0)
    Other items, net............................          --         (38.7)     1,271.6           --       1,232.9
                                                  -----------  ------------  ----------  ------------  ------------
Earnings (loss) from continuing operations
  before income taxes...........................      (633.7)        304.4      1,552.0           --       1,222.7
    Benefit (provision) for income taxes........       266.1        (127.8)      (827.9)          --        (689.6)
    Equity in earnings (loss) of affiliated
      companies, net of tax.....................     1,160.9         545.3        (53.8)    (1,815.7)       (163.3)
    Minority interest...........................          --          (0.9)         5.6           --           4.7
                                                  -----------  ------------  ----------  ------------  ------------
Earnings from continuing operations.............       793.3         721.0        675.9     (1,815.7)        374.5
Discontinued operations:
    Earnings, net of tax........................         0.3           2.7         10.9           --          13.9
    Net gain (loss) on dispositions, net of
      tax.......................................          --         437.2        (32.0)          --         405.2
                                                  -----------  ------------  ----------  ------------  ------------
Net earnings....................................       793.6       1,160.9        654.8     (1,815.7)        793.6
    Cumulative convertible preferred
      stock dividend requirement................       (60.0)           --           --           --         (60.0)
                                                  -----------  ------------  ----------  ------------  ------------
    Net earnings attributable to common stock...   $   733.6    $  1,160.9   $    654.8   $ (1,815.7)   $    733.6
                                                  -----------  ------------  ----------  ------------  ------------
                                                  -----------  ------------  ----------  ------------  ------------
</TABLE>

 
                                     II-50

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                             1996
                                               -----------------------------------------------------------------
                                                                             NON-
                                                               VIACOM     GUARANTOR                 VIACOM INC.
                                               VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS  CONSOLIDATED
                                               -----------  ------------  ----------  ------------  ------------
<S>                                            <C>          <C>           <C>         <C>           <C>
Revenues.....................................   $      --    $  1,193.7   $ 10,917.8   $    (27.3)   $ 12,084.2
Expenses:
    Operating................................          --         373.5      7,259.1        (27.3)      7,605.3
    Selling, general and administrative......        (0.3)        470.1      1,828.3           --       2,298.1
    Restructuring charge.....................          --            --         88.9           --          88.9
    Depreciation and amortization............          --          60.9        756.7           --         817.6
                                               -----------  ------------  ----------  ------------  ------------
        Total expenses.......................        (0.3)        904.5      9,933.0        (27.3)     10,809.9
                                               -----------  ------------  ----------  ------------  ------------
Operating income.............................         0.3         289.2        984.8           --       1,274.3
Other income (expense):
    Interest expense, net....................      (627.7)       (102.5)       (67.8)          --        (798.0)
    Other items, net.........................          --          (0.1)         4.3           --           4.2
                                               -----------  ------------  ----------  ------------  ------------
Earnings (loss) from continuing operations
  before income taxes........................      (627.4)        186.6        921.3           --         480.5
    Benefit (provision) for income taxes.....       259.3         (84.0)      (470.8)          --        (295.5)
    Equity in earnings (loss) of affiliated
      companies, net of tax..................     1,613.0          77.2         42.6     (1,745.8)        (13.0)
    Minority interest........................          --          (1.2)        (0.1)          --          (1.3)
                                               -----------  ------------  ----------  ------------  ------------
Earnings from continuing operations..........     1,244.9         178.6        493.0     (1,745.8)        170.7
Discontinued operations:
    Earnings (loss), net of tax..............         3.0           2.5        (86.0)          --         (80.5)
    Net gain (loss) on dispositions, net of
      tax....................................          --       1,292.0       (134.3)          --       1,157.7
                                               -----------  ------------  ----------  ------------  ------------
Net earnings.................................     1,247.9       1,473.1        272.7     (1,745.8)      1,247.9
    Cumulative convertible preferred stock
      dividend requirement...................       (60.0)           --           --           --         (60.0)
                                               -----------  ------------  ----------  ------------  ------------
Net earnings attributable to common stock....   $ 1,187.9    $  1,473.1   $    272.7   $ (1,745.8)   $  1,187.9
                                               -----------  ------------  ----------  ------------  ------------
                                               -----------  ------------  ----------  ------------  ------------
</TABLE>

 
                                     II-51

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                            1995
                                              -----------------------------------------------------------------
                                                                            NON-
                                                              VIACOM     GUARANTOR                 VIACOM INC.
                                              VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS  CONSOLIDATED
                                              -----------  ------------  ----------  ------------  ------------
<S>                                           <C>          <C>           <C>         <C>           <C>
Revenues....................................  $        --   $    947.4   $  9,979.2   $    (10.7)   $ 10,915.9
Expenses:
    Operating...............................           --        309.6      6,390.6        (10.7)      6,689.5
    Selling, general and administrative.....          4.2        412.2      1,694.6           --       2,111.0
    Depreciation and amortization...........           --         47.8        668.9           --         716.7
                                              -----------  ------------  ----------  ------------  ------------
        Total expenses......................          4.2        769.6      8,754.1        (10.7)      9,517.2
                                              -----------  ------------  ----------  ------------  ------------
Operating income (loss).....................         (4.2)       177.8      1,225.1           --       1,398.7
Other income (expense):
    Interest expense, net...................       (653.3)       (98.1)       (57.9)          --        (809.3)
    Other items, net........................           --          1.7        (11.3)          --          (9.6)
                                              -----------  ------------  ----------  ------------  ------------
Earnings (loss) from continuing operations
  before income taxes.......................       (657.5)        81.4      1,155.9           --         579.8
    Benefit (provision) for income taxes....        282.8        (44.8)      (605.1)          --        (367.1)
    Equity in earnings (loss) of affiliated
      companies, net of tax.................        593.9        150.7        (18.2)      (779.3)        (52.9)
    Minority interest.......................           --         (0.7)        (8.6)          --          (9.3)
                                              -----------  ------------  ----------  ------------  ------------
Earnings from continuing operations.........        219.2        186.6        524.0       (779.3)        150.5
Discontinued operations:
    Earnings (loss), net of tax.............          3.3        (11.2)        79.9           --          72.0
                                              -----------  ------------  ----------  ------------  ------------
Net earnings................................        222.5        175.4        603.9       (779.3)        222.5
    Cumulative convertible preferred stock
      dividend requirement..................        (60.0)          --           --           --         (60.0)
                                              -----------  ------------  ----------  ------------  ------------
Net earnings attributable to common stock...  $     162.5   $    175.4   $    603.9   $   (779.3)   $    162.5
                                              -----------  ------------  ----------  ------------  ------------
                                              -----------  ------------  ----------  ------------  ------------
</TABLE>

 
                                     II-52

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                            1997
                                              -----------------------------------------------------------------
                                                                            NON-
                                                              VIACOM     GUARANTOR                 VIACOM INC.
                                              VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS  CONSOLIDATED
                                              -----------  ------------  ----------  ------------  ------------
<S>                                           <C>          <C>           <C>         <C>           <C>
 
<CAPTION>
                   ASSETS
<S>                                           <C>          <C>           <C>         <C>           <C>
Current Assets:
    Cash and cash equivalents...............  $        .1   $     91.5   $    200.7   $       --    $    292.3
    Receivables, net........................         10.2        384.0      2,047.0        (43.5)      2,397.7
    Inventory...............................         13.3        100.5      2,138.9           --       2,252.7
    Other current assets....................         (6.1)        55.6        719.4          1.9         770.8
                                              -----------  ------------  ----------  ------------  ------------
        Total current assets................         17.5        631.6      5,106.0        (41.6)      5,713.5
                                              -----------  ------------  ----------  ------------  ------------
Property and equipment......................         12.4        478.9      3,828.9           --       4,320.2
    Less accumulated depreciation...........          2.2        131.9        988.4           --       1,122.5
                                              -----------  ------------  ----------  ------------  ------------
    Net property and equipment..............         10.2        347.0      2,840.5           --       3,197.7
Inventory...................................           --        318.2      2,332.4           --       2,650.6
Intangibles, at amortized cost..............        112.4        534.4     14,052.8           --      14,699.6
Investments in consolidated subs............      8,256.9      9,303.0           --    (17,559.9)           --
Other assets................................        (11.3)       238.0      1,719.7         80.9       2,027.3
                                              -----------  ------------  ----------  ------------  ------------
                                              $   8,385.7   $ 11,372.2   $ 26,051.4   $(17,520.6)   $ 28,288.7
                                              -----------  ------------  ----------  ------------  ------------
                                              -----------  ------------  ----------  ------------  ------------
<CAPTION>
 
    LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                           <C>          <C>           <C>         <C>           <C>
Current Liabilities:
    Accounts payable........................  $        --   $     36.0   $    803.3   $   (139.6)   $   $699.7
    Accrued compensation....................           --        122.4        319.3           --         441.7
    Participants share, residuals and
      royalties payable.....................           --           --        951.3           --         951.3
    Income taxes payable....................         (6.2)     1,405.9       (307.2)      (536.2)        556.3
    Current portion of long-term debt.......        150.0        156.5         70.0           --         376.5
    Accrued expenses and other..............        113.3        542.1      1,274.1         97.5       2,027.0
                                              -----------  ------------  ----------  ------------  ------------
        Total current liabilities...........        257.1      2,262.9      3,110.8       (578.3)      5,052.5
                                              -----------  ------------  ----------  ------------  ------------
Long-term debt..............................      4,760.5      1,953.9        708.6           --       7,423.0
Other liabilities...........................    (14,112.9)    (4,498.2)    20,248.7        792.0       2,429.6
 
Shareholders' equity:
    Convertible Preferred Stock.............      1,200.0           --           --           --       1,200.0
    Common Stock............................          3.6        256.6        835.3     (1,091.9)          3.6
    Additional paid-in capital..............     10,333.2      6,745.9      1,071.0     (7,817.0)     10,333.1
    Retained earnings.......................      6,173.7      4,590.6        155.7     (8,825.4)      2,094.6
    Net unrealized gain on investments
      available for sale....................           --         29.3           --           --          29.3
    Minimum pension liability...............           --         (8.4)          --           --          (8.4)
    Cumulative translation adjustment.......           --         39.6        (78.7)          --         (39.1)
                                              -----------  ------------  ----------  ------------  ------------
                                                 17,710.5     11,653.6      1,983.3    (17,734.3)     13,613.1
      Less treasury stock, at cost..........        229.5           --           --           --         229.5
                                              -----------  ------------  ----------  ------------  ------------
        Total shareholders' equity..........     17,481.0     11,653.6      1,983.3    (17,734.3)     13,383.6
                                              -----------  ------------  ----------  ------------  ------------
                                              $   8,385.7   $ 11,372.2   $ 26,051.4   $(17,520.6)   $ 28,288.7
                                              -----------  ------------  ----------  ------------  ------------
                                              -----------  ------------  ----------  ------------  ------------
</TABLE>

 
                                     II-53

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                             1996
                                               -----------------------------------------------------------------
                                                                             NON-
                                                               VIACOM     GUARANTOR                 VIACOM INC.
                                               VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS  CONSOLIDATED
                                               -----------  ------------  ----------  ------------  ------------
<S>                                            <C>          <C>           <C>         <C>           <C>
 
<CAPTION>
                   ASSETS
<S>                                            <C>          <C>           <C>         <C>           <C>
Current Assets:
    Cash and cash equivalents................   $    19.0    $     61.2   $    128.8   $       --    $    209.0
    Receivables, net.........................          --         308.6      1,878.1        (33.6)      2,153.1
    Inventory................................          --         135.5      2,206.9           --       2,342.4
    Other current assets.....................          --         117.2        580.3         26.3         723.8
    Net assets of discontinued operations....        47.3          41.3        200.8           --         289.4
                                               -----------  ------------  ----------  ------------  ------------
        Total current assets.................        66.3         663.8      4,994.9         (7.3)      5,717.7
                                               -----------  ------------  ----------  ------------  ------------
Property and equipment.......................          --         458.1      3,431.6           --       3,889.7
    Less accumulated depreciation............          --          96.6        637.3           --         733.9
                                               -----------  ------------  ----------  ------------  ------------
    Net property and equipment...............          --         361.5      2,794.3           --       3,155.8
Inventory....................................          --         233.8      2,385.6           --       2,619.4
Intangibles, at amortized cost...............          --         550.0     14,344.2           --      14,894.2
Investments in consolidated subs.............     7,536.8      10,773.2           --    (18,310.0)           --
Other assets.................................        74.2         313.3      2,107.6        (48.2)      2,446.9
                                               -----------  ------------  ----------  ------------  ------------
                                                $ 7,677.3    $ 12,895.6   $ 26,626.6   ($18,365.5)   $ 28,834.0
                                               -----------  ------------  ----------  ------------  ------------
                                               -----------  ------------  ----------  ------------  ------------
<CAPTION>
    LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                            <C>          <C>           <C>         <C>           <C>
Current Liabilities:
    Accounts payable.........................   $      --    $     40.3   $    785.1   $    (16.6)   $    808.8
    Accrued compensation.....................          --         118.8        308.4         (1.5)        425.7
    Participants share, residuals and
     royalties payable.......................          --            --        856.6           --         856.6
    Current portion of long-term debt........          --           7.3         55.3           --          62.6
    Accrued expenses and other...............       282.2       1,227.3      1,174.3       (568.8)      2,115.0
                                               -----------  ------------  ----------  ------------  ------------
        Total current liabilities............       282.2       1,393.7      3,179.7       (586.9)      4,268.7
                                               -----------  ------------  ----------  ------------  ------------
Long-term debt...............................     6,844.0       2,159.0        952.7       (100.0)      9,855.7
Other liabilities............................   (12,665.3)     (3,703.6)    21,178.3     (2,686.3)      2,123.1
Shareholders' equity:
    Convertible Preferred Stock..............     1,200.0            --           --           --       1,200.0
    Common Stock.............................         3.5         157.6        770.1       (927.6)          3.6
    Additional paid-in capital...............    10,226.9       8,944.0      1,056.7     (9,985.5)     10,242.1
    Retained earnings........................     2,009.6       3,917.5       (486.9)    (4,079.2)      1,361.0
    Minimum pension liability................          --          (7.9)          --           --          (7.9)
    Cumulative translation adjustment........          --          35.3        (24.0)          --          11.3
                                               -----------  ------------  ----------  ------------  ------------
                                                 13,440.0      13,046.5      1,315.9    (14,992.3)     12,810.1
      Less treasury stock, at cost...........       223.6            --           --           --         223.6
                                               -----------  ------------  ----------  ------------  ------------
        Total shareholders' equity...........    13,216.4      13,046.5      1,315.9    (14,992.3)     12,586.5
                                               -----------  ------------  ----------  ------------  ------------
                                                $ 7,677.3    $ 12,895.6   $ 26,626.6   $(18,365.5)   $ 28,834.0
                                               -----------  ------------  ----------  ------------  ------------
                                               -----------  ------------  ----------  ------------  ------------
</TABLE>

 
                                     II-54

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                              1997
                                               ------------------------------------------------------------------
                                                                             NON-
                                                               VIACOM     GUARANTOR                  VIACOM INC.
                                               VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS   CONSOLIDATED
                                               -----------  ------------  ----------  -------------  ------------
<S>                                            <C>          <C>           <C>         <C>            <C>
Net cash flow provided by (used in) operating
  activities.................................   $ 1,275.7    $    109.6   $ (1,045.3)   $      --     $    340.0
                                               -----------  ------------  ----------        -----    ------------
Investing Activities:
Proceeds from dispositions...................          --       1,096.5      1,918.4           --        3,014.9
Acquisitions, net of cash acquired...........       (46.9)           --       (308.2)          --         (355.1)
Capital expenditures.........................          --         (77.9)      (452.4)          --         (530.3)
Investments in and advances to affiliated
  companies..................................          --         (47.5)      (252.9)          --         (300.4)
Proceeds from sale of short-term
  investments................................          --         139.8           --           --          139.8
Purchases of short-term investments..........          --         (81.3)          --           --          (81.3)
Other, net...................................          --            .1         18.1           --           18.2
                                               -----------  ------------  ----------        -----    ------------
Net cash flow provided by (used in) investing
  activities.................................       (46.9)      1,029.7        923.0           --        1,905.8
                                               -----------  ------------  ----------        -----    ------------
Financing Activities:
Repayments of credit agreements, net.........    (1,972.0)       (148.0)        27.7           --       (2,092.3)
Increase (decrease) in intercompany
  payables...................................       734.3        (939.2)       204.9           --             --
Proceeds from exercise of stock options and
  warrants...................................        69.6            --           --           --           69.6
Payment on capital lease obligations.........          --         (21.8)       (44.4)          --          (66.2)
Payment of Preferred Stock dividends.........       (60.0)           --           --           --          (60.0)
Purchase of treasury stock...................        (9.8)           --           --           --           (9.8)
Deferred financing fees......................        (9.8)           --           --           --           (9.8)
Other, net...................................          --            --          6.0           --            6.0
                                               -----------  ------------  ----------        -----    ------------
Net cash flow provided by (used in) financing
  activities.................................    (1,247.7)     (1,109.0)       194.2           --       (2,162.5)
                                               -----------  ------------  ----------        -----    ------------
Net increase (decrease) in cash and cash
  equivalents................................       (18.9)         30.3         71.9           --           83.3
Cash and cash equivalents at beginning of
  year.......................................        19.0          61.2        128.8           --          209.0
                                               -----------  ------------  ----------        -----    ------------
Cash and cash equivalents at end of year.....   $      .1    $     91.5   $    200.7    $      --     $    292.3
                                               -----------  ------------  ----------        -----    ------------
                                               -----------  ------------  ----------        -----    ------------
</TABLE>

 
                                     II-55

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                             1996
                                               -----------------------------------------------------------------
                                                                             NON-
                                                               VIACOM     GUARANTOR                 VIACOM INC.
                                               VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS  CONSOLIDATED
                                               -----------  ------------  ----------  ------------  ------------
<S>                                            <C>          <C>           <C>         <C>           <C>
Net cash flow provided by (used in) operating
  activities.................................   $ 1,150.6    $ (1,583.2)  $    503.1   $       --    $     70.5
                                               -----------  ------------  ----------  ------------  ------------
Investing Activities:
Proceeds from dispositions...................          --       1,700.0        138.1           --       1,838.1
Acquisitions, net of cash acquired...........          --            --       (299.8)          --        (299.8)
Capital expenditures.........................          --        (125.5)      (473.1)          --        (598.6)
Investments in and advances to affiliated
  companies..................................          --         (57.3)       (31.5)          --         (88.8)
Proceeds from sale of short-term
  investments................................          --         137.9           --           --         137.9
Purchases of short-term investments..........          --        (149.2)          --           --        (149.2)
Other, net...................................          --            --           --           --            --
                                               -----------  ------------  ----------  ------------  ------------
Net cash flow provided by (used in) investing
  activities.................................          --       1,505.9       (666.3)          --         839.6
                                               -----------  ------------  ----------  ------------  ------------
Financing Activities:
Repayments of credit agreements, net.........    (1,293.8)        407.0         27.3           --        (859.5)
Increase (decrease) in intercompany
  payables...................................       320.7        (464.3)       143.6           --            --
Proceeds from exercise of stock options and
  warrants...................................        95.1            --           --           --          95.1
Payment on capital lease obligations.........          --         (15.5)       (33.4)          --         (48.9)
Payment of Preferred Stock dividends.........       (60.0)           --           --           --         (60.0)
Purchase of treasury stock...................      (223.6)           --           --           --        (223.6)
Repayments of other notes....................          --         (12.0)       (38.9)          --         (50.9)
Other, net...................................       (17.4)           --           --           --         (17.4)
                                               -----------  ------------  ----------  ------------  ------------
Net cash flow provided by (used in) financing
  activities.................................    (1,179.0)        (84.8)        98.6           --      (1,165.2)
                                               -----------  ------------  ----------  ------------  ------------
Net decrease in cash and cash equivalents....       (28.4)       (162.1)       (64.6)          --        (255.1)
Cash and cash equivalents at beginning of
  year.......................................        47.4         223.3        193.4           --         464.1
                                               -----------  ------------  ----------  ------------  ------------
Cash and cash equivalents at end of year.....   $    19.0    $     61.2   $    128.8   $       --    $    209.0
                                               -----------  ------------  ----------  ------------  ------------
                                               -----------  ------------  ----------  ------------  ------------
</TABLE>

 
                                     II-56

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
            (TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                            1995
                                              -----------------------------------------------------------------
                                                                            NON-
                                                              VIACOM     GUARANTOR                 VIACOM INC.
                                              VIACOM INC.  INTERNATIONAL AFFILIATES  ELIMINATIONS  CONSOLIDATED
                                              -----------  ------------  ----------  ------------  ------------
<S>                                           <C>          <C>           <C>         <C>           <C>
Net cash flow provided by (used in)
  operating activities......................  $     224.6   $    (66.5)  $   (102.5)  $       --    $     55.6
                                              -----------  ------------  ----------  ------------  ------------
Investing Activities:
Proceeds from dispositions..................           --      1,036.1        406.8           --       1,442.9
Acquisitions, net of cash acquired..........           --           --       (616.2)          --        (616.2)
Capital expenditures........................          (.1)       (93.8)      (636.7)          --        (730.6)
Investments in and advances to affiliated
  companies.................................           --        (72.4)       (65.7)          --        (138.1)
Proceeds from sale of short-term
  investments...............................           --        281.3           --           --         281.3
Purchases of short-term investments.........           --       (301.2)          --           --        (301.2)
Other, net..................................           .1         (3.1)       (14.7)          --         (17.7)
                                              -----------  ------------  ----------  ------------  ------------
Net cash flow provided by (used in)
  investing activities......................           --        846.9       (926.5)          --         (79.6)
                                              -----------  ------------  ----------  ------------  ------------
Financing Activities:
Repayments of credit agreements, net........     (1,556.5)          --         (3.7)          --      (1,560.2)
Increase (decrease) in intercompany
  payables..................................       (147.0)      (607.3)       754.3           --            --
Proceeds from issuance of senior notes......      1,538.6           --           --           --       1,538.6
Proceeds from exercise of stock options and
  warrants..................................        125.6           --           --           --         125.6
Payment on capital lease obligations........           --         (8.9)       (27.4)          --         (36.3)
Payment of Preferred Stock dividends........        (60.0)          --           --           --         (60.0)
Deferred financing fees.....................        (23.4)          --           --           --         (23.4)
Settlement of CVRs..........................        (81.9)          --           --           --         (81.9)
Other, net..................................         (6.2)        (4.3)        (1.5)          --         (12.0)
                                              -----------  ------------  ----------  ------------  ------------
Net cash flow provided by (used in)
  financing activities......................       (210.8)      (620.5)       721.7           --        (109.6)
                                              -----------  ------------  ----------  ------------  ------------
Net increase (decrease) in cash and cash
  equivalents...............................         13.8        159.9       (307.3)          --        (133.6)
Cash and cash equivalents at beginning of
  year......................................         33.6         63.4        500.7           --         597.7
                                              -----------  ------------  ----------  ------------  ------------
Cash and cash equivalents at end of year....  $      47.4   $    223.3   $    193.4   $       --    $    464.1
                                              -----------  ------------  ----------  ------------  ------------
                                              -----------  ------------  ----------  ------------  ------------
</TABLE>

 
                                     II-57

<PAGE>

 
                                   PART III
 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
 
    The information contained in the Viacom Inc. Definitive Proxy Statement
under the captions "Information Concerning Directors and Nominees" and
"Compliance with Section 16(a) Beneficial Ownership Reporting Compliance" is
incorporated herein by reference.
 

ITEM 11. EXECUTIVE COMPENSATION.
 
    The information contained in the Viacom Inc. Definitive Proxy Statement
under the captions "Directors' Compensation" and "Executive Compensation" is
incorporated herein by reference.
 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
    The information contained in the Viacom Inc. Definitive Proxy Statement
under the caption "Security Ownership of Certain Beneficial Owners and
Management" is incorporated herein by reference.
 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
    The information contained in the Viacom Inc. Definitive Proxy Statement
under the captions "Compensation Committee Interlocks and Insider Participation"
and "Related Transaction" is incorporated herein by reference.
 
                                     III-1

<PAGE>

                                    PART IV
 

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
    (a) and (d) Financial Statements and Schedules (see Index on Page F-1)
 
    (b) Reports on Form 8-K
 
      None
 
    (c) Exhibits (see index on Page E-1)
 
                                      IV-1

<PAGE>

                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Viacom Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
 

<TABLE>
<S>                             <C>  <C>
                                VIACOM INC.
 
                                By             /s/ SUMNER M. REDSTONE
                                     -----------------------------------------
                                                Sumner M. Redstone,
                                        CHAIRMAN OF THE BOARD OF DIRECTORS,
                                              CHIEF EXECUTIVE OFFICER
 
                                By            /s/ GEORGE S. SMITH, JR.
                                     -----------------------------------------
                                               George S. Smith, Jr.,
                                               SENIOR VICE PRESIDENT,
                                              CHIEF FINANCIAL OFFICER
 
                                By              /s/ SUSAN C. GORDON
                                     -----------------------------------------
                                                  Susan C. Gordon,
                                            VICE PRESIDENT, CONTROLLER,
                                              CHIEF ACCOUNTING OFFICER
</TABLE>

 
Date: March 31, 1998
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of Viacom Inc. and in
the capacities and on the dates indicated:
 

<TABLE>
<CAPTION>
          SIGNATURE                        TITLE                    DATE
- ------------------------------  ---------------------------  -------------------
<C>                             <S>                          <C>
 
              *                 Director                       March 31, 1998
- ------------------------------
       George S. Abrams
 
    /s/ PHILIPPE P. DAUMAN      Director                       March 31, 1998
- ------------------------------
      Philippe P. Dauman
 
              *                 Director                       March 31, 1998
- ------------------------------
       Thomas E. Dooley
 
              *                 Director                       March 31, 1998
- ------------------------------
          Ken Miller
 
              *                 Director                       March 31, 1998
- ------------------------------
      Brent D. Redstone
 
              *                 Director                       March 31, 1998
- ------------------------------
        Shari Redstone
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
          SIGNATURE                        TITLE                    DATE
- ------------------------------  ---------------------------  -------------------
<C>                             <S>                          <C>
    /s/ SUMNER M. REDSTONE      Director                       March 31, 1998
- ------------------------------
      Sumner M. Redstone
 
              *                 Director                       March 31, 1998
- ------------------------------
     Frederic V. Salerno
 
              *                 Director                       March 31, 1998
- ------------------------------
       William Schwartz
 
              *                 Director                       March 31, 1998
- ------------------------------
       Ivan Seidenberg
</TABLE>

 

<TABLE>
<S>   <C>                        <C>                         <C>
*By    /s/ PHILIPPE P. DAUMAN
      -------------------------
         Philippe P. Dauman                                    March 31, 1998
          ATTORNEY-IN-FACT
          FOR THE DIRECTORS
</TABLE>


<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
                               INDEX TO EXHIBITS

                                   ITEM 14(C)
 

<TABLE>
<CAPTION>
      EXHIBIT
        NO.                                             DESCRIPTION OF DOCUMENT                                     PAGE NO.
    -----------       -------------------------------------------------------------------------------------------  -----------
<S>        <C>        <C>                                                                                          <C>
(2)                   PLAN OF ACQUISITION
           (a)        Agreement and Plan of Merger dated as of January 7, 1994, as amended as of June 15, 1994,
                      between Viacom Inc. and Blockbuster Entertainment Corporation (incorporated by reference to
                      Exhibit 2.1 to the Registration Statement on Form S-4 filed by Viacom Inc.) (File No.
                      33-55271).
           (b)        Amended and Restated Agreement and Plan of Merger dated as of February 4, 1994 between
                      Viacom Inc. and Paramount Communications Inc., as further amended as of May 26, 1994, among
                      Viacom, Viacom Sub Inc. and Paramount Communications Inc. (incorporated by reference to
                      Exhibit 2.1, included as Annex I, to the Registration Statement on Form S-4 filed by Viacom
                      Inc.) (File No. 33-53977).
(3)                   ARTICLES OF INCORPORATION AND BY-LAWS
           (a)        Restated Certificate of Incorporation of Viacom Inc. (incorporated by reference to Exhibit
                      3(a) to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended December
                      31, 1992, as amended by Form 10-K/A Amendment No. 1 dated November 29, 1993 and as further
                      amended by Form 10-K/A Amendment No. 2 dated December 9, 1993) (File No. 1-9553).
           (b)        Amendment to Restated Certificate of Incorporation of Viacom Inc. (incorporated by
                      reference to Exhibit 3.2 to the Registration Statement on Form S-4 filed by Viacom Inc.)
                      (File No. 33-55271).
           (c)        Certificate of Merger merging Blockbuster Entertainment Corporation with and into Viacom
                      Inc. (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-3
                      filed by Viacom Inc.) (File No. 33-55785).
           (d)        Certificate of the Designations, Powers, Preferences and Relative, Participating or other
                      Rights, and the Qualifications, Limitations or Restrictions thereof, of Series B Cumulative
                      Convertible Preferred Stock ($0.01 par value) of Viacom Inc. (incorporated by reference to
                      Exhibit 4.1 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended
                      September 30, 1993) (File No. 1-9553).
           (e)        By-laws of Viacom Inc. (incorporated by reference to Exhibit 3.3 to the Registration
                      Statement on Form S-4 filed by Viacom Inc.) (File No. 33-13812).
(4)                   INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
           (a)        Specimen certificate representing the Viacom Inc. Voting Common Stock (currently Class A
                      Common Stock) (incorporated by reference to Exhibit 4.1 to the Registration Statement on
                      Form S-4 filed by Viacom Inc.) (File No. 33-13812).
           (b)        Specimen certificate representing Viacom Inc. Class B Non-Voting Common Stock (incorporated
                      by reference to Exhibit 4(a) to the Quarterly Report on Form 10-Q of Viacom Inc. for the
                      quarter ended June 30, 1990) (File No. 1-9553).
           (c)        Specimen certificate representing Viacom Inc. Series B Cumulative Convertible Preferred
                      Stock of Viacom Inc. (incorporated by reference to Exhibit 4(d) to the Annual Report on
                      Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1993, as amended by Form
                      10-K/A Amendment No. 1 dated May 2, 1994) (File No. 1-9553).
</TABLE>

 
                                      E-1

<PAGE>

<TABLE>
<CAPTION>
      EXHIBIT
        NO.                                             DESCRIPTION OF DOCUMENT                                     PAGE NO.
    -----------       -------------------------------------------------------------------------------------------  -----------
<S>        <C>        <C>                                                                                          <C>
           (d)        Form of Warrant Agreement between Viacom Inc. and Harris Trust and Savings Bank, as Warrant
                      Agent with respect to the Warrants expiring July 1, 1999 of Viacom Inc. (including the Form
                      of Warrant expiring July 1, 1999) (incorporated by reference to Exhibit 4.8 to the
                      Registration Statement on Form S-4 filed by Viacom Inc.) (File No. 33-53977).
           (e)        Amended and Restated Credit Agreement dated as of March 26, 1997 among Viacom Inc.; the
                      Bank parties thereto; The Bank of New York ("BNY"), Citibank N.A. ("Citibank"), Morgan
                      Guaranty Trust Company of New York ("Morgan Guaranty"), Bank of America NT&SA ("BofA") and
                      The Chase Manhattan Bank ("Chase"), as Managing Agents; BNY, as Documentation Agent;
                      Citibank, as Administrative Agent; JP Morgan Securities Inc. ("JP Morgan") and BofA, as
                      Syndication Agents; and the Agents and Co-Agents named therein (incorporated by reference
                      to Exhibit 4(f) to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended
                      December 31, 1996) and Amended and Restated Credit Agreement dated as of March 26, 1997
                      among Viacom International Inc.; the Bank parties thereto; BNY, Citibank, Morgan Guaranty,
                      BofA and Chase, as Managing Agents; BNY, as Documentation Agent; Citibank, as
                      Administrative Agent; JP Morgan and BofA, as Syndication Agents; and the Agents and Co-
                      Agents named therein (incorporated by reference to Exhibit 4(f) to the Annual Report on
                      Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1996)(File No. 1-9553) as
                      amended by Amendment No. 1, dated as of June 30, 1997 (incorporated by reference to Exhibit
                      10.1 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30,
                      1997) (File No. 1-9553) and as further amended by Amendment No. 2, dated as of December 19,
                      1997 (filed herewith).
           (f)        Film Finance Credit Agreement, dated as of May 10, 1996, among Viacom Film Funding Company
                      Inc. as Borrower; Viacom Inc. and Viacom International Inc. as Guarantors; the Bank parties
                      thereto; The Bank of New York ("BNY"), Citibank N.A. ("Citibank"), Morgan Guaranty Trust
                      Company of New York and Bank of America NT&SA, as Managing Agents; BNY, as Documentation
                      Agent; Citibank, as Administrative Agent; JP Morgan Securities Inc., as Syndication Agent;
                      and the Agents and Co-Agents named therein (incorporated by reference to Exhibit 10.2 to
                      the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30, 1996) (File
                      No. 1-9553) as amended by Amendment No. 1, dated as of May 9, 1997 (incorporated by
                      reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Viacom Inc. for the
                      quarter ended March 31, 1997) (File No. 1-9553) and as further amended by Amendment No. 2,
                      dated as of June 30, 1997 (incorporated by reference to Exhibit 10.2 to the Quarterly
                      Report on Form 10-Q of Viacom Inc. for the quarter ended June 30, 1997) (File No. 1-9553).
           (g)        The instruments defining the rights of holders of the long-term debt securities of Viacom
                      Inc. and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of
                      Regulation S-K. Viacom Inc. hereby agrees to furnish copies of these instruments to the
                      Securities and Exchange Commission upon request.
</TABLE>

 
                                      E-2

<PAGE>

<TABLE>
<CAPTION>
      EXHIBIT
        NO.                                             DESCRIPTION OF DOCUMENT                                     PAGE NO.
    -----------       -------------------------------------------------------------------------------------------  -----------
<S>        <C>        <C>                                                                                          <C>
(10)                  MATERIAL CONTRACTS
           (a)        Viacom Inc. 1989 Long-Term Management Incentive Plan (as amended and restated through April
                      23, 1990, as further amended and restated through April 27, 1995, and as further amended
                      and restated through November 1, 1996) (incorporated by reference to Exhibit 10(a) to the
                      Annual Report on Form 10-K of Viacom Inc. for the final year ended December 31, 1996) (File
                      No. 1-9553).*
           (b)        Viacom Inc. 1994 Long-Term Management Incentive Plan (as amended and restated through April
                      27, 1995 and as further amended and restated through November 1, 1996) (incorporated by
                      reference to Exhibit 10(b) to the Annual Report on Form 10-K of Viacom Inc. for the fiscal
                      year ended December 31, 1996) (File No. 1-9553).*
           (c)        Viacom Inc. 1997 Long-Term Management Incentive Plan (incorporated by reference to Exhibit
                      A to Viacom Inc.'s Definitive Proxy Statement dated April 17, 1997).*
           (d)        Viacom Inc. Senior Executive Short-Term Incentive Plan (as amended and restated through
                      March 27, 1996) (incorporated by reference to Exhibit 10(c) to the Annual Report on Form
                      10-K of Viacom Inc. for the fiscal year ended December 31, 1995).*
           (e)        Viacom Inc. Long-Term Incentive Plan (Divisional) (incorporated by reference to Exhibit
                      10.2 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30,
                      1993) (File No. 1-9553).*
           (f)        Viacom International Inc. Deferred Compensation Plan for Non-Employee Directors (as amended
                      and restated through December 17, 1992) (incorporated by reference to Exhibit 10(e) to the
                      Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1992, as
                      amended by Form 10-K/A Amendment No. 1 dated November 29, 1993 and as further amended by
                      Form 10-K/A Amendment No. 2 dated December 9, 1993) (File No. 1-9553).*
           (g)        Viacom Inc. and Viacom International Inc. Retirement Income Plan for Non-Employee Directors
                      (incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10-K of Viacom
                      Inc., for the fiscal year ended December 31, 1989) (File No. 1-9553).*
           (h)        Viacom Inc. Stock Option Plan for Outside Directors (incorporated by reference to Exhibit
                      10.2 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30,
                      1993) (File No. 1-9553).*
           (i)        Viacom Inc. 1994 Stock Option Plan for Outside Directors (incorporated by reference to
                      Exhibit B to Viacom Inc.'s Definitive Proxy Statement dated April 28, 1995).*
           (j)        Viacom Inc. Excess Investment Plan (incorporated by reference to Exhibit 4.1 to the Viacom
                      Inc. Registration Statement on Form S-8) (File No. 1-9553).*
           (k)        Excess Pension Plan for Certain Key Employees of Viacom International Inc. (incorporated by
                      reference to Exhibit 10(i) to the Annual Report on Form 10-K of Viacom Inc. for the fiscal
                      year ended December 31, 1990) (File No. 1-9553).*
</TABLE>

 
- ------------------------
 
*   Management contract or compensatory plan required to be filed as an exhibit
    to this form pursuant to Item 14(c).
 
                                      E-3

<PAGE>

<TABLE>
<CAPTION>
      EXHIBIT
        NO.                                    DESCRIPTION OF DOCUMENT                            PAGE NO.
    -----------       -------------------------------------------------------------------------  -----------
<S>        <C>        <C>                                                                        <C>          <C>  <C>
           (l)        Agreement, dated as of January 1, 1996, between Viacom Inc. and Philippe P. Dauman
                      (incorporated by reference to Exhibit 10(l) to the Annual Report on Form 10-K of Viacom
                      Inc. for the fiscal year ended December 31, 1995) (File No. 1-9553).*
           (m)        Agreement, dated as of January 1, 1996, between Viacom Inc. and Thomas E. Dooley
                      (incorporated by reference to Exhibit 10(m) to the Annual Report on Form 10-K of Viacom
                      Inc. for the fiscal year ended December 31, 1995) (File No. 1-9553).*
           (n)        Agreement, dated as of January 1, 1996, between Viacom Inc. and William A. Roskin, as
                      amended by an Agreement dated as of March 30, 1998 (filed herewith).*
           (o)        Agreement, dated as of April 1, 1995, between Viacom Inc. and George S. Smith, Jr., as
                      amended by an Agreement dated as of March 30, 1998 (filed herewith).*
           (p)        Agreement, dated as of August 1, 1990, between Viacom International Inc. and Mark M.
                      Weinstein (incorporated by reference to Exhibit 10(p) to the Annual Report on Form 10-K of
                      Viacom Inc. for the fiscal year ended December 31, 1990) (File No. 1-9553), as amended by
                      an Agreement dated as of February 1, 1993 (incorporated by reference to Exhibit 10(n) to
                      the Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1992,
                      as amended by Form 10-K/A Amendment No. 1 dated November 29, 1993 and as further amended by
                      Form 10-K/A Amendment No. 2 dated December 9, 1993) (File No. 1-9553), and as further
                      amended by an Agreement dated February 7, 1995 (incorporated by reference to Exhibit 10(m)
                      to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended December 31,
                      1994)(File No. 1-9553).*
           (q)        Service Agreement, dated as of March 1, 1994, between George S. Abrams and Viacom Inc.
                      (incorporated by reference to Exhibit 10(q) to the Annual Report on Form 10-K of Viacom
                      Inc. for the fiscal year ended December 31, 1994) (File No. 1-9553).*
           (r)        Blockbuster Entertainment Corporation ("BEC") stock option plans* assumed by Viacom Inc.
                      after the Blockbuster Merger consisting of the following:
</TABLE>

 

<TABLE>
<S>        <C>        <C>        <C>                                                                 <C>
                      (i)        BEC's 1989 Stock Option Plan (incorporated by reference to BEC's
                                 Proxy Statement dated March 31, 1989).
                      (ii)       Amendments to BEC's 1989 Stock Option Plan (incorporated by
                                 reference to BEC's Proxy Statement dated April 3, 1991).
                      (iii)      BECs 1990 Stock Option Plan (incorporated by reference to BEC's
                                 Proxy Statement dated March 29, 1990).
                      (iv)       Amendments to BEC's 1990 Stock Option Plan (incorporated by
                                 reference to BEC's Proxy Statement dated April 15, 1991).
                      (v)        BEC's 1991 Employee Director Stock Option Plan (incorporated by
                                 reference to BEC's Proxy Statement dated April 15, 1991).
                      (vi)       BEC's 1991 Non-Employee Director Stock Option Plan (incorporated
                                 by reference to BEC's Proxy Statement dated April 15, 1991).
</TABLE>

 
- ------------------------
 
*   Management contract or compensatory plan required to be filed as an exhibit
    to this form pursuant to Item 14(c).
 
                                      E-4

<PAGE>

<TABLE>
<CAPTION>
      EXHIBIT         DESCRIPTION
        NO.           OF DOCUMENT                              PAGE NO.
    -----------       ---------                               --------
<S>        <C>        <C>        <C>                                                                 <C>          <C>
                      (vii)                                                                                        BEC's 1994
                                                                                                                        Stock
                                                                                                                   Option Plan
                                                                                                                   (incorporated
                                                                                                                   by reference
                                                                                                                   to Exhibit
                                                                                                                     10.35 to
                                                                                                                   the Annual
                                                                                                                    Report on
                                                                                                                    Form 10-K
                                                                                                                   of BEC for
                                                                                                                   the fiscal
                                                                                                                   year ended
                                                                                                                     December
                                                                                                                    31, 1993)
                                                                                                                    (File No.
                                                                                                                    0-12700).
 
           (s)        Parents Agreement dated as of July 24, 1995 among Viacom Inc., Tele-
                      Communications, Inc. and TCI Communications, Inc. (incorporated by
                      reference to Exhibit 10.1 to the Registration Statement on Form S-4 filed
                      by Viacom International Inc.) (File No. 33-64467).
           (t)        Implementation Agreement dated as of July 24, 1995 between Viacom
                      International Inc. and Viacom International Services Inc. (incorporated
                      by reference to Exhibit 10.2 to the Registration Statement on Form S-4
                      filed by Viacom International Inc.) (File No. 33-64467).
           (u)        Subscription Agreement dated as of July 24, 1995 among Viacom
                      International Inc., Tele-Communications, Inc. and TCI Communications,
                      Inc. (incorporated by reference to Exhibit 10.3 to the Registration
                      Statement on Form S-4 filed by Viacom International Inc.) (File No.
                      33-64467).
           (v)        Stock Purchase Agreement, dated as of February 16, 1997, between Viacom
                      International Inc. and Evergreen Media Corporation of Los Angeles
                      (incorporated by reference to Exhibit 10(u) to the Annual Report on Form
                      10-K of Viacom Inc. for the fiscal year ended December 31, 1996) (File
                      No. 1-9553).
(11)                  STATEMENTS RE COMPUTATION OF NET EARNINGS PER SHARE
(21)                  SUBSIDIARIES OF VIACOM INC.
(23)                  CONSENTS OF EXPERTS AND COUNSEL
           (a)        Consent of Price Waterhouse LLP
(24)                  POWERS OF ATTORNEY
(27)                  FINANCIAL DATA SCHEDULES
</TABLE>

 
                                      E-5

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
 

ITEM 14A
 
    The following consolidated financial statements and schedule of the
registrant and its subsidiaries are submitted herewith as part of this report:
 

<TABLE>
<CAPTION>
                                                                                                                REFERENCE
                                                                                                                (PAGE/S)
                                                                                                             ---------------
<S>        <C>                                                                                               <C>
 
1.         Report of Independent Accountants...............................................................            II-16
 
2.         Management's Statement of Responsibility for Financial Reporting................................            II-17
 
3.         Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995......            II-18
 
4.         Consolidated Balance Sheets as of December 31, 1997 and 1996....................................            II-19
 
5.         Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995......            II-20
 
6.         Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997, 1996 and
             1995..........................................................................................            II-21
 
7.         Notes to Consolidated Financial Statements......................................................      II-22-II-57
 
Financial Statement Schedule:
 
           II. Valuation and qualifying accounts...........................................................              F-2
</TABLE>

 
    All other Schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule.
 
                                      F-1

<PAGE>
                          VIACOM INC. AND SUBSIDIARIES
 
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
                             (MILLIONS OF DOLLARS)
 

<TABLE>
<CAPTION>
                                                               COL. B
                                                              ---------
                                                               BALANCE            COL. C                           COL. E
                                                                 AT       -----------------------                ----------
                           COL. A                             BEGINNING   CHARGED TO   CHARGED TO     COL. D     BALANCE AT
- ------------------------------------------------------------     OF       COSTS AND      OTHER      ----------     END OF
DESCRIPTION                                                    PERIOD      EXPENSES     ACCOUNTS    DEDUCTIONS     PERIOD
- ------------------------------------------------------------  ---------   ----------   ----------   ----------   ----------
<S>                                                           <C>         <C>          <C>          <C>          <C>
Allowance for doubtful accounts:
  Year ended December 31, 1997..............................     $101.3     $105.4      $  (6.2)      $100.7       $ 99.8
  Year ended December 31, 1996..............................     $126.0     $ 71.1      $   3.1       $ 98.9(B)    $101.3
  Year ended December 31, 1995..............................     $ 75.8     $ 70.8(C)   $  37.4(A)    $ 58.0(B)    $126.0
 
Valuation allowance on deferred tax assets:
  Year ended December 31, 1997..............................     $81.8      $ 25.0           --        --          $106.8
  Year ended December 31, 1996..............................     $81.8       --              --        --          $ 81.8
  Year ended December 31, 1995..............................     $75.7       --         $   6.1(A)     --          $ 81.8
 
Reserves for inventory obsolescence:
  Year ended December 31, 1997..............................     $105.8     $245.8           --       $201.0(D)    $150.6
  Year ended December 31, 1996..............................     $129.6     $ 45.7      $ (24.7)      $ 44.8(B)    $105.8
  Year ended December 31, 1995..............................     $125.3     $ 31.0(C)   $  13.7       $ 40.4(B)    $129.6
</TABLE>

 
- ------------------------
 
Notes:
 
(A) Includes amounts charged to goodwill as part of the determination of the
    fair value of net assets acquired.
 
(B) Includes amounts written off, net of recoveries and amounts related to
    discontinued operations.
 
(C) Prior year amounts charged to the Statement of Operations have been restated
    to conform with the current discontinued operations presentation.
 
(D) Primarily related to the second quarter 1997 Blockbuster charge associated
    with the reduction in the carrying value of excess retail inventory.
 
                                      F-2





<PAGE>

                                                           EXHIBIT 4(e)


                                                                  EXECUTION COPY

            AMENDMENT NO. 2, dated as of December 19, 1997 (the "Amendment") to
the AMENDED AND RESTATED CREDIT AGREEMENT (the "Credit Agreement"), dated as of
March 26, 1997, among VIACOM INC. a Delaware corporation (the "Borrower"), the
Bank parties thereto from time to time, THE BANK OF NEW YORK, as a Managing
Agent and as the Documentation Agent, CITIBANK, N.A., as a Managing Agent and as
the Administrative Agent, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a
Managing Agent, THE BANK OF AMERICA NT&SA, as a Managing Agent, THE CHASE
MANHATTAN BANK, as a Managing Agent, JP MORGAN SECURITIES INC., as a Syndication
Agent, BANCAMERICA ROBERTSON STEPHENS (formerly known as BANCAMERICA SECURITIES,
INC.), as a Syndication Agent, the Banks identified as Agents on the signature
pages hereof, as Agents, and the Banks identified as Co-Agents on the signature
pages thereof, as Co-Agents.

                                   WITNESSETH:

            WHEREAS, the parties who have heretofore entered into the Credit
Agreement now desire to amend certain provisions thereof to provide for changes
in the reduction of loan commitment provisions of the Credit Agreement.

            NOW THEREFORE, the parties hereto agree as follows:

            SECTION 1. Amendment. (a) Section 2.3(b) of the Credit Agreement is
amended by adding at the end thereof the following provision:

      "; notwithstanding the second proviso above, optional reductions in an
      amount of up to $1.5 billion (reduced by the amount of any prepayments
      made pursuant to the last sentence of Section 3.4) made prior to June 30,
      1998, may be allocated against Scheduled Revolving Loan Commitment
      Reduction Dates in any manner requested by the Borrower."

            (b) Section 3.4 of the Credit Agreement is amended by adding at the
end thereof the following sentence:

      "Notwithstanding the foregoing, prepayments in an amount of up to $1.5
      billion (reduced by the amount of any optional reductions made pursuant to
      the last clause of Section 2.3(b)) made prior to June 30, 1998, may be
      allocated among remaining maturities in any manner requested by the
      Borrower."


<PAGE>

            SECTION 2. Effectiveness. Following the execution of counterparts
hereof by the Borrower and each of the Facility Agents and Managing Agents on
their own behalf and on behalf of the Banks consenting to the execution of this
Amendment, and the execution of written consents by the Majority Banks, this
Amendment will be effective as of December 19, 1997.

            SECTION 3. Representations and Warranties. The Borrower hereby
represents and warrants that as of the date hereof, after giving effect to this
Amendment that (i) the representations and warranties contained in Article VI of
the Credit Agreement (other than those stated to be made as of a particular
date) are true and correct in all material respects on and as of the date hereof
as though made on the date hereof, and (ii) no Default or Event of Default shall
exist or be continuing under the Credit Agreement.

            SECTION 4. Miscellaneous. (a) Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.

            (b) Except as amended hereby, all of the terms of the Credit
Agreement shall remain and continue in full force and effect and are hereby
confirmed in all respects.

            (c) This Amendment shall be a Loan Document for the purposes of the
Credit Agreement.

            (d) This Amendment may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
were upon the same instrument. Delivery of an executed counterpart of a
signature page of this Amendment by telecopier shall be effective as delivery of
a manually executed counterpart of this Amendment.

            (e) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.


                                       -2-

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.

                              VIACOM INC., as Borrower


                              By: /s/ George S. Smith
                                 ------------------------------------
                                 Name: George S. Smith
                                 Title: Chief Financial Officer



                              Managing Agents

                              THE BANK OF NEW YORK, as Managing
                              Agent, the Documentation Agent and
                              a Bank



                              By:  /s/ Geoffrey C. Brooks
                                 ------------------------------------
                                  Name: Geoffrey C. Brooks
                                  Title: Vice President


                              CITIBANK, N.A., as Managing Agent,
                              the Administrative Agent and a Bank



                              By: /s/ Robert H. Johnson, Jr.
                                 ------------------------------------
                                 Name: Robert H. Johnson, Jr.
                                 Title: Attorney-In-Fact


                              MORGAN GUARANTY TRUST COMPANY OF
                              NEW YORK, as Managing Agent and a
                                      Bank


                              By: /s/  Adam J. Silver
                                 ------------------------------------
                                 Name: Adam J. Silver
                                 Title: Associate


                                       -3-

<PAGE>

                              THE BANK OF AMERICA NT&SA, as
                              Managing Agent and a Bank



                              By:/s/ Carl F. Salas
                                 ------------------------------------
                                 Name:  Carl F. Salas
                                 Title: Vice President

                              CHASE MANHATTAN BANK, as Managing
                              Agent and a Bank



                              By: /s/ John P. Haltmaier
                                 ------------------------------------
                                 Name: John P. Haltmaier
                                 Title: Vice President

                              Syndication Agents


                              JP MORGAN SECURITIES INC., as
                              Syndication Agent



                              By: /s/ Stephen J. Kenneally
                                 ------------------------------------
                                 Name: Stephen J. Kenneally
                                 Title: Vice President

                              BANCAMERICA ROBERTSON STEPHENS
                              (formerly known as BANCAMERICA
                              SECURITIES, INC.), as Syndication
                              Agent



                              By: /s/ Robert Karen
                                 ------------------------------------
                                 Name: Robert Karen
                                 Title: Vice President


                                 -4-





<PAGE>

                                                           EXHIBIT 10(n)


                                                         As of January 1, 1996


William A. Roskin
11 East 86th Street, Penthouse
New York, NY 10028

Dear Mr. Roskin:


      Viacom Inc. ("Viacom"), having an address at 1515 Broadway, New York, New
York 10036, agrees to employ you and you agree to accept such employment upon
the following terms and conditions:

      l. Term. The term of your employment hereunder shall commence on January
1, 1996 and, unless terminated by Viacom or you pursuant to paragraph 8 hereof,
shall continue through and until December 31, 1998. The period from January 1,
1996 through December 31, 1998 shall hereinafter be referred to as the
"Employment Term" notwithstanding any earlier termination pursuant to paragraph
8.

      2. Duties. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Viacom and its
subsidiaries. You will be Senior Vice President, Human Resources and
Administration of Viacom and you agree to perform such duties, and such other
duties reasonable and consistent with such office as may be assigned to you from
time to time by the Deputy Chairman and Executive Vice President, General
Counsel and Chief Administrative Officer of Viacom or such other individual as
may be designated
 by the Chief Executive Officer of Viacom (the "CEO"). Your
principal place of business shall be at Viacom's headquarters in the New York
City metropolitan area.

      3.    Compensation.

            (a) Salary: For all the services rendered by you in any capacity
hereunder, Viacom agrees to pay you the sum of Four Hundred Fifty Thousand
Dollars ($450,000) per annum ("Salary"), payable in accordance with Viacom's
then effective payroll practices. Your Salary will be increased on January 1,
1997 to Five Hundred Thousand Dollars ($500,000) and on January 1, 1998 to Five
Hundred Fifty Thousand Dollars ($550,000).


<PAGE>

William A. Roskin
January 1, 1996
Page 2


            (b) Bonus Compensation: In addition to your Salary, you shall be
entitled to receive bonus compensation for each of the calendar years during the
Employment Term, determined and payable as follows ("Bonus"):

            (i)   Your Bonus for each of the calendar years during the
                  Employment Term will be based upon a measurement of
                  performance against objectives in accordance with the Viacom
                  Short-Term Incentive Plan, as the same may be amended from
                  time to time.

            (ii)  Your Target Bonus for each of the calendar years during the
                  Employment Term shall be 50% of Salary.

            (iii) Your Bonus for any calendar year shall be payable by February
                  28 of the following year.

            (c) Long-Term Incentive Plans: You will be eligible to participate
in one or more of Viacom's long-term incentive plans at a level appropriate to
your position as determined by the Viacom Board of Directors.

      4. Benefits. You shall be entitled to participate in such vacation,
medical, dental and life insurance, 401(k), pension and other plans as Viacom
may have or establish from time to time and in which you would be entitled to
participate pursuant to the terms thereof. The foregoing, however, shall not be
construed to require Viacom to establish any such plans or to prevent the
modification or termination of such plans once established, and no such action
or failure thereof shall affect this Agreement. It is further understood and
agreed that all benefits you may be entitled to as an employee of Viacom shall
be based upon your Salary, as set forth in paragraph 3(a) hereof, and not upon
any bonus compensation due, payable or paid to you hereunder, except where the
benefit plan expressly provides otherwise.

      5. Business Expenses. During the Employment Term, you shall be reimbursed
for such reasonable travel and other expenses incurred in the performance of
your duties hereunder as are customarily reimbursed to senior executives of
Viacom. You shall be entitled to a car allowance in accordance with Viacom's
policy.

<PAGE>

William A. Roskin
January 1, 1996
Page 3


      6.    Exclusive Employment, Confidential Information, Etc.

            (a) Non-Competition. You agree that your employment hereunder is on
an exclusive basis, and that during the shorter of (x) the Employment Term and
(y) one (1) year after the termination of your employment pursuant to paragraph
8(b) or 8(c) hereof or eighteen (18) months after the termination of your
employment pursuant to paragraph 8(a) hereof (the "Non-Compete Period"), you
will not engage in any other business activity which is in conflict with your
duties and obligations hereunder. You agree that during the Non-Compete Period
you shall not directly or indirectly engage in or participate as an officer,
employee, director, agent of or consultant for any business directly competitive
with that of Viacom, nor shall you make any investments in any company or
business competing with Viacom; provided, however, that nothing herein shall
prevent you from investing as less than a one (1%) percent shareholder in the
securities of any company listed on a national securities exchange or quoted on
an automated quotation system.

            (b) Confidential Information. You agree that you shall not, during
the Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Viacom or any of its affiliates (except as may be
required by law or in the performance of your duties hereunder consistent with
Viacom's policies) and that you will comply with any confidentiality obligations
of Viacom to a third party, whether under agreement or otherwise.
Notwithstanding the foregoing, confidential information shall be deemed not to
include information which (i) is or becomes generally available to the public
other than as a result of a disclosure by you or any other person who directly
or indirectly receives such information from you or at your direction or (ii) is
or becomes available to you on a non-confidential basis from a source which is
entitled to disclose it to you.

            (c) No Employee Solicitation. You agree that, during the Employment
Term and for one (1) year thereafter, you shall not, directly or indirectly,
engage, employ, or solicit the employment of any person who is then or has been
within six (6) months prior thereto, an employee of Viacom or any of Viacom's
affiliates.


<PAGE>

William A. Roskin
January 1, 1996
Page 4


            (d) Viacom Ownership. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Viacom and/or any of its affiliates
and any works in progress, shall be works-made-for-hire and Viacom shall be
deemed the sole owner throughout the universe of any and all rights of
whatsoever nature therein, whether or not now or hereafter known, existing,
contemplated, recognized or developed, with the right to use the same in
perpetuity in any manner Viacom determines in its sole discretion without any
further payment to you whatsoever. If, for any reason, any of such results and
proceeds shall not legally be a work-for-hire and/or there are any rights which
do not accrue to Viacom under the preceding sentence, then you hereby
irrevocably assign and agree to assign any and all of your right, title and
interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Viacom, and Viacom shall have the right to use the
same in perpetuity throughout the universe in any manner Viacom determines
without any further payment to you whatsoever. You shall, from time to time, as
may be requested by Viacom, do any and all things which Viacom may deem useful
or desirable to establish or document Viacom's exclusive ownership of any and
all rights in any such results and proceeds, including, without limitation, the
execution of appropriate copyright and/or patent applications or assignments. To
the extent you have any rights in the results and proceeds of your services that
cannot be assigned in the manner described above, you unconditionally and
irrevocably waive the enforcement of such rights. This paragraph 6(d) is subject
to, and shall not be deemed to limit, restrict, or constitute any waiver by
Viacom of any rights of ownership to which Viacom may be entitled by operation
of law by virtue of Viacom or any of its affiliates being your employer.

            (e) Litigation. You agree that, during the Employment Term, for one
(1) year thereafter and, if longer, during the pendancy of any litigation or
other proceeding, (i) you shall not communicate with anyone (other than your own
attorneys and tax advisors and, except to the extent necessary in the
performance of your duties hereunder) with respect to the facts or subject
matter of any pending or potential litigation, or regulatory or administrative
proceeding involving any of Viacom's affiliates, other than any litigation or
other proceeding in which you are a party-in-opposition, without giving prior
notice to Viacom or Viacom's counsel, and (ii) in the event that any other party


<PAGE>

William A. Roskin
January 1, 1996
Page 5


attempts to obtain information or documents from you with respect to matters
possibly related to such litigation or other proceeding, you shall promptly so
notify Viacom's counsel.

            (f) No Right to Give Interviews or Write Books, Articles, Etc.
During the Employment Term, except as authorized by Viacom, you shall not (i)
give any interviews or speeches, or (ii) prepare or assist any person or entity
in the preparation of any books, articles, television or motion picture
productions or other creations, in either case, concerning Viacom or any of
Viacom's affiliates or any of their officers, directors, agents, employees,
suppliers or customers.

            (g) Return of Property. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Viacom or any of its affiliates shall remain the
exclusive property of Viacom. In the event of the termination of your employment
for any reason, Viacom reserves the right, to the extent permitted by law and in
addition to any other remedy Viacom may have, to deduct from any monies
otherwise payable to you the following: (i) the full amount of any debt you owe
to Viacom or any of its affiliates at the time of or subsequent to the
termination of your employment with Viacom, and (ii) the value of the Viacom
property which you retain in your possession after the termination of your
employment with Viacom. In the event that the law of any state or other
jurisdiction requires the consent of an employee for such deductions, this
Agreement shall serve as such consent.

            (h) Non-Disparagement. You agree that you shall not, during the
Employment Term and for one (1) year thereafter, in any communications with any
customer or client of Viacom or any of Viacom's affiliates, criticize, ridicule
or make any statement which disparages or is derogatory of Viacom or Viacom's
affiliates or any of their officers, directors, agents or employees.

            (i) Injunctive Relief. Viacom has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable damage to Viacom, and, accordingly, Viacom may obtain
injunctive and other equitable relief for any breach or 


<PAGE>

William A. Roskin
January 1, 1996
Page 6


threatened breach of such paragraphs, in addition to any other remedies
available to Viacom.

            (j) Survival; Modification of Terms. Your obligations under
paragraphs 6(a) through (i) hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to paragraph 8 hereof or otherwise; provided, however, that your
obligations under paragraph 6(a) shall cease if you terminate your employment
for "Good Reason" or Viacom terminates your employment without "cause" (as such
terms are defined in paragraph 8) and you notify Viacom in writing that you have
elected to waive your right to receive, or to continue to receive, payments and
benefits pursuant to clauses (i), (ii), (iii), (iv) and (v) of paragraph 8(d).
You and Viacom agree that the restrictions and remedies contained in paragraphs
6(a) through (i) are reasonable and that it is your intention and the intention
of Viacom that such restrictions and remedies shall be enforceable to the
fullest extent permissible by law. If it shall be found by a court of competent
jurisdiction that any such restriction or remedy is unenforceable but would be
enforceable if some part thereof were deleted or the period or area of
application reduced, then such restriction or remedy shall apply with such
modification as shall be necessary to make it enforceable.

      7. Incapacity. In the event you become totally medically disabled and
cannot substantially perform your duties at any time during the Employment Term,
the CEO, at any time after such disability has continued for 30 consecutive
days, may determine that Viacom requires such duties and responsibilities be
performed by another executive. In the event you become disabled, you will first
receive benefits under Viacom's short-term disability program for the first 26
weeks of consecutive absence. Thereafter, you will be eligible to receive
benefits under Viacom's Long-Term Disability ("LTD") program in accordance with
its terms. Upon receipt of benefits under the LTD program, you will also be
entitled to receive a pro-rated Target Bonus for the calendar year in which such
benefits commence.

      8. Termination.

            (a) Termination for Cause. Viacom may, at its option, terminate this
Agreement forthwith for "cause", and Viacom shall thereafter have no further
obligations under this Agreement, including, without limitation, any obligation
to pay Salary or Bonus or provide benefits under this Agreement. For purposes of


<PAGE>

William A. Roskin
January 1, 1996
Page 7


this Agreement, termination of this Agreement for "cause" shall mean termination
for embezzlement, fraud or other conduct which would constitute a felony,
conviction of a felony, or willful unauthorized disclosure of confidential
information, or if you at any time materially breach this Agreement (including,
without limitation, your failure, neglect of or refusal to substantially perform
your obligations hereunder as set forth in paragraphs 2 and 11 hereof), except
in the event of your disability as set forth in paragraph 7. Anything herein to
the contrary notwithstanding, Viacom will give you written notice prior to
terminating this Agreement for your material breach setting forth the exact
nature of any alleged breach and the conduct required to cure such breach. You
shall have ten (10) business days from the giving of such notice within which to
cure.

            (b) Good Reason Termination. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Viacom not more than thirty (30) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
later than ten (10) business days after the date it is given. Good Reason shall
mean, without your prior written consent, other than in connection with the
termination of your employment for "cause" (as defined above) or in connection
with your permanent disability, the assignment to you by Viacom of duties
substantially inconsistent with your positions, duties, responsibilities, titles
or offices, the withdrawal of a material part of your responsibilities as set
forth in paragraph 2, or the material breach by Viacom of its material
obligations hereunder.

            (c) Termination Without Cause. Viacom may terminate your employment
hereunder without "cause" (as defined above) at any time during the Employment
Term by written notice to you.

            (d) Termination Payments, Etc. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:

            (i)   your Salary as provided in paragraph 3(a) until the end of the
                  Employment Term, payable in accordance with Viacom's then
                  effective payroll practices;

            (ii)  bonus compensation for each calendar year during the
                  Employment Term equal to your Target Bonus as set forth in
                  paragraph 3(b);

<PAGE>

William A. Roskin
January 1, 1996
Page 8


            (iii) your car allowance as provided in paragraph 5 until the end of
                  the Employment Term, payable in accordance with Viacom's then
                  effective payroll practices;

            (iv)  medical and dental insurance coverage under COBRA until the
                  end of the Employment Term or, if earlier, the date on which
                  you become eligible for medical and dental coverage from a
                  third party employer; during this period, Viacom will pay an
                  amount equal to the applicable COBRA premiums (or such other
                  amounts as may be required by applicable law) (which amount
                  will be included in your income for tax purposes to the extent
                  required by applicable law); at the end of such period, you
                  may elect to continue your medical and dental insurance
                  coverage at your own expense for the balance, if any, of the
                  period required by law;

            (v)   life insurance coverage until the end of the Employment Term
                  (the amount of Salary covered by such insurance to be reduced
                  by the amount of any salary payable to you by a third party);
                  and

            (vi)  the following with respect to grants to you under Viacom's
                  1989 and 1994 Long-Term Management Incentive Plans and any
                  successor plans (collectively, the "LTMIP"):

                  (x)   stock options granted to you under the LTMIP which are
                        exercisable on or prior to the date of the termination
                        of your employment under paragraph 8(b) or 8(c) that
                        would have vested and become exercisable on or before
                        the last day of the Employment Term will be exercisable
                        until six (6) months after the date of such termination
                        or, if earlier, the expiration date of the stock
                        options; and

                  (y)   payments on the phantom shares granted to you under the
                        LTMIP in 1989 will be calculated in the manner and made
                        at such times as provided in the LTMIP;

<PAGE>

William A. Roskin
January 1, 1996
Page 9


provided, however, you shall be required to mitigate the amount of any payment
provided for in (i), (ii) and (iii) of this paragraph 8(d) by seeking other
employment or otherwise, and the amount of any such payment provided for in (i),
(ii) and (iii) shall be reduced by any compensation earned by you from a third
person except that mitigation shall not be required for twelve (12) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Viacom plan that
may now or hereafter exist. The payments and benefits to be provided pursuant to
this paragraph 8(d) shall constitute liquidated damages, and shall be deemed to
satisfy and be in full and final settlement of all obligations of Viacom to you
under this Agreement.

      (e) Termination of Benefits. Notwithstanding anything in this Agreement to
the contrary (except as otherwise provided in paragraph 8(d) with respect to
medical, dental and life insurance), coverage under all Viacom benefit plans and
programs (including, without limitation, vacation, 401(k) and excess 401(k)
plans, pension and excess pension plans, LTD, car insurance and accidental death
and dismemberment and business travel and accident insurance) will terminate
upon the termination of your employment except to the extent otherwise expressly
provided in such plans or programs.

      (f) Non-Renewal Notice, Etc. Viacom shall notify you in writing in the
event that Viacom elects not to extend or renew this Agreement. If Viacom gives
you such notice less than twelve (12) months before the end of the Employment
Term, or your employment terminates pursuant to paragraph 8(b) or 8(c) hereof
during the final twelve (12) months of the Employment Term, you shall be
entitled to receive Salary as provided in paragraph 3(a), payable in accordance
with Viacom's then effective payroll practices, subject to applicable
withholding requirements, for the period commencing after the end of the
Employment Term which, when added to the portion of the Employment Term, if any,
remaining when the notice is given or the termination occurs, equals twelve (12)
months; provided, however, you shall be required to mitigate the amount of any
payment pursuant to this paragraph 8(f) by seeking other employment or
otherwise, and the amount of any such payment shall be reduced by any
compensation earned by you from a third person. The payments provided for in
this paragraph 8(f) are in lieu of any severance or income 



<PAGE>

William A. Roskin
January 1, 1996
Page 10


continuation or protection under any Viacom plan that may now or hereafter
exist.

      9. Death. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date on
which the death occurs and a pro-rated Target Bonus.

      10. Section 317 and 507 of the Federal Communications Act. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services or other valuable consideration from or to
anyone other than Viacom for the inclusion of any matter as part of any film,
television program or other production produced, distributed and/or developed by
Viacom and/or any of its affiliates.

      11. Equal Opportunity Employer. You acknowledge that Viacom is an equal
opportunity employer. You agree that you will comply with Viacom policies
regarding employment practices and with applicable federal, state and local laws
prohibiting discrimination on the basis of race, color, creed, national origin,
age, sex or disability.

      12. Indemnification.

            (a) Viacom shall indemnify and hold you harmless, to the maximum
extent permitted by law and by the Restated Certificate of Incorporation and/or
the Bylaws of Viacom, against judgments, fines, amounts paid in settlement of
and reasonable expenses incurred by you in connection with the defense of any
action or proceeding (or any appeal therefrom) in which you are a party by
reason of your position as Senior Vice President, Human Resources and
Administration of Viacom or by reason of any prior positions held by you with
Viacom, or for any acts or omissions made by you in good faith in the
performance of any of your duties as an officer of Viacom.

            (b) To the extent that Viacom maintains officers' and directors'
liability insurance, you will be covered under such policy.

      13. Notices. All notices required to be given hereunder shall be given in
writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and in the case of Viacom, to the attention of the
General 

<PAGE>

William A. Roskin
January 1, 1996
Page 11


Counsel of Viacom. Any notice given by mail shall be deemed to have been given
three days following such mailing.

      14. Assignment. This is an Agreement for the performance of personal
services by you and may not be assigned by you or Viacom except that Viacom may
assign this Agreement to any affiliate of or any successor in interest to
Viacom.

      15. New York Law, Etc. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of New York applicable to
contracts entered into and performed entirely therein. Any action to enforce
this Agreement shall be brought in the state or federal courts located in the
City of New York.

      16. No Implied Contract. Nothing contained in this Agreement shall be
construed to impose any obligation on Viacom to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.

      17. Entire Understanding. This Agreement contains the entire understanding
of the parties hereto relating to the subject matter herein contained, and can
be changed only by a writing signed by both parties hereto.

      18. Void Provisions. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.

      19. Supersedes Previous Agreement. This Agreement supersedes and cancels
all prior agreements relating to your employment by Viacom or any of its
affiliates, including, without limitation, your employment agreement with
Viacom, dated as of April 1, 1994.

<PAGE>

William A. Roskin
January 1, 1996
Page 12


      If the foregoing correctly sets forth our understanding, please sign one
copy of this letter and return it to the undersigned, whereupon this letter
shall constitute a binding agreement between us.

                               Very truly yours,

                               VIACOM INC.


                               By: /S/ PHILIPPE P. DAUMAN
                                   -------------------------------------------
                                   Name:   Philippe P. Dauman
                                   Title:  Deputy Chairman and
                                           Executive Vice President, General
                                           Counsel and Chief Administrative
                                           Officer

ACCEPTED AND AGREED:


/S/ WILLIAM A. ROSKIN
- ------------------------------
     William A. Roskin



<PAGE>


                                        March 31, 1998


William A. Roskin
11 East 86th Street, Penthouse
New York, New York  10028


Dear Mr. Roskin:


     Reference is made to that certain employment agreement between you and
Viacom Inc. ("Viacom"), dated as of January 1, 1996 (your "Employment
Agreement").  All defined terms used without definitions shall have the meanings
provided in your Employment Agreement.  

     This letter, when fully executed below, shall amend your Employment
Agreement as follows:  

     1.   TERM.  Paragraph 1 shall be amended to change the date representing
the end of the Employment Term in the first and second sentences from
"December 31, 1998" to "December 31, 2000".  

     2.   COMPENSATION / SALARY.  Paragraph 3(a) shall be amended to replace the
second sentence with the following sentence:  

          "Your Salary will be increased on January 1, 1999 to Six Hundred
          Thousand Dollars ($600,000) per annum and on January 1, 2000 to Six
          Hundred Fifty Thousand Dollars ($650,000) per annum."  

     3.   TERMINATION / TERMINATION FOR CAUSE.  Paragraph 8(a) shall be amended
to replace the last sentence with the following:

          "Except for a breach which cannot by its nature be cured, you shall
          have ten (10) business days from the giving of such notice within
          which to cure."  



<PAGE>

William A. Roskin
March 31, 1998
Page 2


     4.   TERMINATION / GOOD REASON TERMINATION.  Paragraph 8(b) shall be
amended to replace the second sentence with the following sentences:  

          "Such notice shall state an effective date no earlier than thirty (30)
          business days after the date it is given.  Viacom shall have ten (10)
          business days from the giving of such notice within which to cure."  

     Except as herein amended, all other terms and conditions of your Employment
Agreement shall remain the same and your Employment Agreement as herein amended
shall remain in full force and effect.  

     If the foregoing correctly sets forth our understanding, please sign one
(1) copy of this letter and return it to the undersigned, whereupon this letter
shall constitute a binding amendment to your Employment Agreement.  

                                        Very truly yours,

                                        VIACOM INC.



                                        By: /s/  Philippe P. Dauman
                                            ------------------------------------
                                            Name:   Philippe P. Dauman
                                            Title:  Deputy Chairman and
                                                    Executive Vice President,
ACCEPTED AND AGREED:                                General Counsel and
                                                    Chief Administrative Officer

   /s/ William A. Roskin
- ----------------------------
       William A. Roskin





<PAGE>

                                                           EXHIBIT 10(o)


                                          As of April 1, 1995

George S. Smith, Jr.
52 Devonshire Drive
Morganville, New Jersey  07751

Dear Mr. Smith:

      Viacom Inc. ("Viacom"), having an address at 1515 Broadway, New York,
New York 10036, agrees to employ you and you agree to accept such employment
upon the following terms and conditions:

      l. Term. The term of your employment hereunder shall commence on April 1,
1995 and, unless terminated by Viacom or you pursuant to paragraph 8 hereof,
shall continue through and until March 31, 1998. The period from April 1, 1995
through March 31, 1998 shall hereinafter be referred to as the "Employment Term"
notwithstanding any earlier termination pursuant to paragraph 8.

      2. Duties. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Viacom and its
subsidiaries. You will be Senior Vice President, Chief Financial Officer of
Viacom and you agree to perform such duties, and such other duties reasonable
and consistent with such office as may be assigned to you from time to time by
the Executive Vice President - Finance, Corporate Development and Communications
of Viacom or the Chief Executive Officer of Viacom (the "CEO") or any Executive
Vice President designated
 by the CEO provided such Executive Vice President does
not only fulfill the finance function. Your principal place of business shall be
at Viacom's headquarters in the New York City metropolitan area.

      3. Compensation.

            (a) Salary: For all the services rendered by you in any capacity
hereunder, Viacom agrees to pay you the sum of Four Hundred Seventy-Five
Thousand Dollars ($475,000) per annum ("Salary"), payable in accordance with
Viacom's then effective payroll practices. Your Salary will be increased on
April 1, 1996 to Five Hundred Twenty-Five Thousand Dollars ($525,000) per


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 2


annum and on April 1, 1997 to Five Hundred Seventy-Five Thousand Dollars
($575,000) per annum.

            (b) Bonus Compensation: In addition to your Salary, you shall be
entitled to receive bonus compensation for each of the calendar years during the
Employment Term, determined and payable as follows ("Bonus"):

            (i)   Your Bonus for each of the calendar years during the
                  Employment Term will be based upon a measurement of
                  performance against objectives in accordance with the Viacom
                  Short-Term Incentive Plan, as the same may be amended from
                  time to time.

            (ii)  Your Target Bonus for each of the calendar years during the
                  Employment Term shall be 50% of Salary which may be
                  prorated for any partial calendar year during the
                  Employment Term.  In no event shall your Bonus for any
                  calendar year during the Employment Term be less than 50%
                  of your Target Bonus for such calendar year (which may be
                  prorated for any partial calendar year); provided, however,
                  that no portion of your Bonus shall be guaranteed for any
                  calendar year during the Employment Term if you are one of
                  the five named executive officers whose compensation for
                  such calendar year must be disclosed in the Viacom proxy
                  statement for the following year.

            (iii) Your Bonus for any calendar year shall be payable by February
                  28 of the following year.

            (c) Long-Term Incentive Plans: You will be eligible to participate
in one or more of Viacom's long-term incentive plans at a level appropriate to
your position as determined by the Viacom Board of Directors.

      4. Benefits. You shall be entitled to participate in such vacation,
medical, dental and life insurance, 401(k), pension and other plans as Viacom,
as applicable, may have or establish from time to time and in which you would be
entitled to participate pursuant to the terms thereof. The foregoing, however,
shall not be construed to require Viacom to establish any such plans or to
prevent the modification or termination of such plans once established, and no
such action or failure thereof shall affect 


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 3


this Agreement. It is further understood and agreed that all benefits you may be
entitled to as an employee of Viacom shall be based upon your Salary, as set
forth in paragraph 3(a) hereof, and not upon any bonus compensation due, payable
or paid to you hereunder, except where the benefit plan expressly provides
otherwise.

      5. Business Expenses. During the Employment Term, you shall be reimbursed
for such reasonable travel and other expenses incurred in the performance of
your duties hereunder as are customarily reimbursed to senior executives of
Viacom. You shall be entitled to a car allowance in accordance with Viacom's
policy.

      6. Exclusive Employment, Confidential Information, Etc.

            (a) Non-Competition. You agree that your employment hereunder is on
an exclusive basis, and that during the Employment Term, you will not engage in
any other business activity which is in conflict with your duties and
obligations hereunder. You agree that during the Employment Term you shall not
directly or indirectly engage in or participate as an officer, employee,
director, agent of or consultant for any business directly competitive with that
of Viacom, nor shall you make any investments in any company or business
competing with Viacom; provided, however, that nothing herein shall prevent you
from investing as less than a one (1%) percent shareholder in the securities of
any company listed on a national securities exchange or quoted on an automated
quotation system.

            (b) Confidential Information. You agree that you shall not, during
the Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Viacom or any of its affiliates (except as may be
required by law or in the performance of your duties hereunder consistent with
Viacom's policies) and that you will comply with any confidentiality obligations
of Viacom to a third party, whether under agreement or otherwise.
Notwithstanding the foregoing, confidential information shall be deemed not to
include information which (i) is or becomes generally available to the public
other than as a result of a disclosure by you or any other person who directly
or indirectly receives such information from you or at your direction or (ii) is
or becomes available to you on a non-confidential basis from a source which is
entitled to disclose it to you.


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 4


            (c) No Employee Solicitation. You agree that, during the Employment
Term and for one (1) year thereafter, you shall not, directly or indirectly,
engage, employ, or solicit the employment of any person who is then or has been
within six (6) months prior thereto, an employee of Viacom or any of Viacom's
affiliates.

            (d) Viacom Ownership. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Viacom and/or any of its affiliates
and any works in progress, shall be works-made-for-hire and Viacom shall be
deemed the sole owner throughout the universe of any and all rights of
whatsoever nature therein, whether or not now or hereafter known, existing,
contemplated, recognized or developed, with the right to use the same in
perpetuity in any manner Viacom determines in its sole discretion without any
further payment to you whatsoever. If, for any reason, any of such results and
proceeds shall not legally be a work-for-hire and/or there are any rights which
do not accrue to Viacom under the preceding sentence, then you hereby
irrevocably assign and agree to assign any and all of your right, title and
interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Viacom, and Viacom shall have the right to use the
same in perpetuity throughout the universe in any manner Viacom determines
without any further payment to you whatsoever. You shall, from time to time, as
may be requested by Viacom, do any and all things which Viacom may deem useful
or desirable to establish or document Viacom's exclusive ownership of any and
all rights in any such results and proceeds, including, without limitation, the
execution of appropriate copyright and/or patent applications or assignments. To
the extent you have any rights in the results and proceeds of your services that
cannot be assigned in the manner described above, you unconditionally and
irrevocably waive the enforcement of such rights. This paragraph 6(d) is subject
to, and shall not be deemed to limit, restrict, or constitute any waiver by
Viacom of any rights of ownership to which Viacom may be entitled by operation
of law by virtue of Viacom or any of its affiliates being your employer.

            (e) Litigation. You agree that, during the Employment Term, for one
(1) year thereafter and, if longer, during the 


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 5


pendancy of any litigation or other proceeding, (i) you shall not communicate
with anyone (other than your own attorneys and tax advisors and except to the
extent necessary in the performance of your duties hereunder) with respect to
the facts or subject matter of any pending or potential litigation, or
regulatory or administrative proceeding involving any of Viacom's affiliates,
other than any litigation or other proceeding in which you are a
party-in-opposition, without giving prior notice to Viacom or Viacom's counsel,
and (ii) in the event that any other party attempts to obtain information or
documents from you with respect to matters possibly related to such litigation
or other proceeding, you shall promptly so notify Viacom's counsel.

            (f) No Right to Give Interviews or Write Books, Articles, Etc.
During the Employment Term, except as authorized by Viacom, you shall not (i)
give any interviews or speeches, or (ii) prepare or assist any person or entity
in the preparation of any books, articles, television or motion picture
productions or other creations, in either case, concerning Viacom or any of
Viacom's affiliates or any of their officers, directors, agents, employees,
suppliers or customers.

            (g) Return of Property. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Viacom or any of its affiliates shall remain the
exclusive property of Viacom. In the event of the termination of your employment
for any reason, Viacom reserves the right, to the extent permitted by law and in
addition to any other remedy Viacom may have, to deduct from any monies
otherwise payable to you the following: (i) the full amount of any debt you owe
to Viacom or any of its affiliates at the time of or subsequent to the
termination of your employment with Viacom, and (ii) the value of the Viacom
property which you retain in your possession after the termination of your
employment with Viacom. In the event that the law of any state or other
jurisdiction requires the consent of an employee for such deductions, this
Agreement shall serve as such consent.

            (h) Non-Disparagement. You agree that you shall not, during the
Employment Term and for one (1) year thereafter, in any communications with any
customer or client of Viacom or any of Viacom's affiliates, criticize, ridicule
or make any statement which disparages or is derogatory of Viacom or Viacom's


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 6


affiliates or any of their officers, directors, agents or employees.

            (i) Injunctive Relief. Viacom has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable damage to Viacom, and, accordingly, Viacom may obtain
injunctive and other equitable relief for any breach or threatened breach of
such paragraphs, in addition to any other remedies available to Viacom.

            (j) Survival; Modification of Terms. Your obligations under
paragraphs 6(a) through (i) hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to paragraph 8 hereof or otherwise; provided, however, that your
obligations under paragraph 6(a) shall cease if you terminate your employment
for "Good Reason" or Viacom terminates your employment without "cause" (as such
terms are defined in paragraph 8) and you notify Viacom in writing that you have
elected to waive your right to receive, or to continue to receive, payments and
benefits pursuant to clauses (i), (ii), (iii), (iv) and (v) of paragraph 8(d).
You and Viacom agree that the restrictions and remedies contained in paragraphs
6(a) through (i) are reasonable and that it is your intention and the intention
of Viacom that such restrictions and remedies shall be enforceable to the
fullest extent permissible by law. If it shall be found by a court of competent
jurisdiction that any such restriction or remedy is unenforceable but would be
enforceable if some part thereof were deleted or the period or area of
application reduced, then such restriction or remedy shall apply with such
modification as shall be necessary to make it enforceable.

      7. Incapacity. You agree to enroll in the Viacom Long-Term Disability
program, as the same may exist from time to time ("LTD"). In the event you
become totally medically disabled and cannot substantially perform your duties
at any time during the Employment Term, the CEO, at any time after such
disability has continued for 30 consecutive days, may determine that Viacom
requires such duties and responsibilities be performed by another executive. In
the event the CEO makes such a determination, you shall be placed on a "medical
payroll". You will first receive benefits under Viacom's short-term disability
program for the first 26 weeks of consecutive absence. Thereafter, you will be


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 7


eligible to receive benefits under the LTD program in accordance with its terms.
Upon receipt of benefits under the LTD program, you will also be entitled to
receive a pro-rated Target Bonus for the calendar year in which such benefits
commence.

      8. Termination.

            (a) Termination for Cause. Viacom may, at its option, terminate this
Agreement forthwith for "cause", and Viacom shall thereafter have no further
obligations under this Agreement, including, without limitation, any obligation
to pay Salary or Bonus or provide benefits under this Agreement. For purposes of
this Agreement, termination of this Agreement for "cause" shall mean termination
for dishonesty, conviction of a felony, or willful unauthorized disclosure of
confidential information, or if you at any time materially breach this Agreement
(including, without limitation, your failure, neglect of or refusal to
substantially perform your obligations hereunder as set forth in paragraphs 2
and 11 hereof) except in the event of your disability as set forth in paragraph
7. Anything herein to the contrary notwithstanding, Viacom will give you written
notice prior to terminating this Agreement for your material breach setting
forth the exact nature of any alleged breach and the conduct required to cure
such breach. You shall have ten (10) business days from the giving of such
notice within which to cure.

            (b) Good Reason Termination. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Viacom not more than thirty (30) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
later than ten (10) business days after the date it is given. Good Reason shall
mean, without your prior written consent, other than in connection with the
termination of your employment for "cause" (as defined above) or in connection
with your permanent disability, the assignment to you by Viacom of duties
substantially inconsistent with your positions, duties, responsibilities, titles
or offices, the withdrawal of a material part of your responsibilities as set
forth in paragraph 2, or the breach by Viacom of any of its material obligations
hereunder.

            (c) Termination Without Cause. Viacom may terminate your employment
hereunder without "cause" (as defined above) at any time during the Employment
Term by written notice to you.


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 8


            (d) Termination Payments, Etc. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:

            (i)   your Salary as provided in paragraph 3(a) until the end of the
                  Employment Term, payable in accordance with Viacom's then
                  effective payroll practices;

            (ii)  bonus compensation for each calendar year during the
                  Employment Term equal to your Target Bonus as set forth in
                  paragraph 3(b);

            (iii) your car allowance as provided in paragraph 5 until the end of
                  the Employment Term, payable in accordance with Viacom's then
                  effective payroll practices;

            (iv)  medical and dental insurance coverage under COBRA until the
                  end of the Employment Term or, if earlier, the date on
                  which you become eligible for medical and dental coverage
                  from a third party employer; during this period, Viacom
                  will pay an amount equal to the applicable COBRA premiums
                  (or such other amounts as may be required by applicable
                  law) (which amount will be included in your income for tax
                  purposes to the extent required by applicable law); at the
                  end of such period, you may elect to continue your medical
                  and dental insurance coverage at your own expense for the
                  balance, if any, of the period required by law;

            (v)   life insurance coverage until the end of the Employment Term
                  (the amount of Salary covered by such insurance to be reduced
                  by the amount of any salary payable to you by a third party);
                  and

            (vi)  the following with respect to grants to you under Viacom's
                  1989 and 1994 Long-Term Management Incentive Plans and any
                  successor plans (collectively, the "LTMIP"):

                  (x)   stock options granted to you under the LTMIP which
                        are exercisable on or prior to the date 


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 9


                        of the termination of your employment under paragraph
                        8(b) or 8(c) or that would have vested and become
                        exercisable on or before the last day of the Employment
                        Term will be exercisable until six (6) months after the
                        date of such termination or, if earlier, the expiration
                        date of the stock options; and

                  (y)   payments on the phantom shares granted to you under the
                        LTMIP in 1989 will be calculated in the manner and made
                        at such times as provided in the LTMIP;

provided, however, you shall be required to mitigate the amount of any payment
provided for in (i), (ii) and (iii) of this paragraph 8(d) by seeking other
employment or otherwise, and the amount of any such payment provided for in (i),
(ii) and (iii) shall be reduced by any compensation earned by you from a third
person except that mitigation shall not be required for twelve (12) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Viacom plan that
may now or hereafter exist. The payments and benefits to be provided pursuant to
this paragraph 8(d) shall constitute liquidated damages, and shall be deemed to
satisfy and be in full and final settlement of all obligations of Viacom to you
under this Agreement.

            (e) Termination of Benefits. Notwithstanding anything in this
Agreement to the contrary (except as otherwise provided in paragraph 8(d) with
respect to medical, dental and life insurance), coverage under all Viacom
benefit plans and programs (including, without limitation, vacation, 401(k) and
excess 401(k) plans, pension and excess pension plans, LTD, car insurance and
accidental death and dismemberment and business travel and accident insurance)
will terminate upon the termination of your employment except to the extent
otherwise expressly provided in such plans or programs.

            (f) Non-Renewal Notice, Etc.. Viacom shall notify you in writing in
the event that Viacom elects not to extend or renew this Agreement. If Viacom
gives you such notice less than twelve (12) months before the end of the
Employment Term, or your employment terminates pursuant to paragraph 8(b) or
8(c) hereof 


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 10


during the final twelve (12) months of the Employment Term, you shall be
entitled to receive Salary as provided in paragraph 3(a), payable in accordance
with Viacom's then effective payroll practices, subject to applicable
withholding requirements, for the period commencing after the end of the
Employment Term which, when added to the portion of the Employment Term
remaining when the notice is given or the termination occurs, equals twelve (12)
months; provided, however, you shall be required to mitigate the amount of any
payment pursuant to this paragraph 8(f) by seeking other employment or
otherwise, and the amount of any such payment shall be reduced by any
compensation earned by you from a third person. The payments provided for in
this paragraph 8(f) are in lieu of any severance or income continuation or
protection under any Viacom plan that may now or hereafter exist.

      9. Death. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date on
which the death occurs and a pro-rated Target Bonus.

      10. Section 317 and 507 of the Federal Communications Act. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services or other valuable consideration from or to
anyone other than Viacom for the inclusion of any matter as part of any film,
television program or other production produced, distributed and/or developed by
Viacom and/or any of its affiliates.

      11. Equal Opportunity Employer. You acknowledge that Viacom is an equal
opportunity employer. You agree that you will comply with Viacom policies and
applicable federal, state and local laws prohibiting discrimination on the basis
of race, color, creed, national origin, age, sex or disability.

      12. Notices. All notices required to be given hereunder shall be given in
writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and in the case of Viacom, to the attention of the
General Counsel of Viacom. Any notice given by mail shall be deemed to have been
given three days following such mailing.

      13. Assignment. This is an Agreement for the performance of personal
services by you and may not be assigned by you or Viacom except that Viacom may
assign this Agreement to any affiliate or any successor in interest to Viacom.


<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 11


      14. New York Law, Etc. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of New York applicable to
contracts entered into and performed entirely therein. Any action to enforce
this Agreement shall be brought in the state or federal courts located in the
City of New York.

      15. No Implied Contract. Nothing contained in this Agreement shall be
construed to impose any obligation on Viacom to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.

      16. Entire Understanding. This Agreement contains the entire understanding
of the parties hereto relating to the subject matter herein contained, and can
be changed only by a writing signed by both parties hereto.

      17. Void Provisions. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.

      18.   Supersedes Previous Agreement.  This Agreement supersedes and
cancels all prior agreements relating to your employment by Viacom or any of
its affiliates.

<PAGE>

George S. Smith, Jr.
As of April 1, 1995
Page 12


      If the foregoing correctly sets forth our understanding, please sign one
copy of this letter and return it to the undersigned, whereupon this letter
shall constitute a binding agreement between us.

                                    Very truly yours,

                                    VIACOM INC.


                                    By:  /S/ WILLIAM A. ROSKIN
                                       -----------------------------------
                                       Name:   William A. Roskin
                                       Title:  Senior Vice President,
                                               Human Resources and
                                               Administration

ACCEPTED AND AGREED:


 /S/ GEORGE S. SMITH, JR.
- --------------------------
  George S. Smith, Jr.


<PAGE>



                                             March 31, 1998


George S. Smith, Jr.
52 Devonshire Drive
Morganville, New Jersey  07751


Dear Mr. Smith:


     Reference is made to that certain employment agreement between you and
Viacom Inc. ("Viacom"), dated as of April 1, 1995 (your "Employment Agreement").
All defined terms used without definitions shall have the meanings provided in
your Employment Agreement.  

     This letter, when fully executed below, shall amend your Employment
Agreement as follows:  

     1.   TERM.  Paragraph 1 shall be amended to change the date representing
the end of the Employment Term in the first and second sentences from "March 31,
1998" to "March 31, 2001".  

     2.   COMPENSATION / SALARY.  Paragraph 3(a) shall be amended to add the
following sentences at the end thereof:  

          "Your Salary will be increased on April 1, 1998 to Six Hundred Twenty
          Five Thousand Dollars ($625,000) per annum.  Your Salary will be
          reviewed on April 1, 1999 and April 1, 2000 and will, at that time, be
          increased by a percentage that is determined by Viacom after
          discussion with you."  

     3.   EXCLUSIVE EMPLOYMENT, ETC. / NON-COMPETITION.  Paragraph 6(a) shall be
amended to read in its entirety as follows:  

          "You agree that your employment hereunder is on an exclusive basis,
          and that during the shorter of (x) the Employment Term and (y) one (1)
          year after the termination of your employment pursuant to paragraph
          8(b) or 8(c) hereof or eighteen (18) months after the termination of
          your employment pursuant to paragraph 8(a) hereof (the "Non-Compete
          Period"), you will not engage in any other business activity which is
          in conflict with your duties and obligations hereunder.  You agree
          that during the Non-Compete Period you shall not directly 



<PAGE>

George S. Smith, Jr.
March 31, 1998
Page 2


          or indirectly engage in or participate as an officer, employee,
          director, agent of or consultant for any business directly competitive
          with that of Viacom, nor shall you make any investments in any company
          or business competing with Viacom; PROVIDED, HOWEVER, that nothing
          herein shall prevent you from investing as less than a one (1%)
          percent shareholder in the securities of any company listed on a
          national securities exchange or quoted on an automated quotation
          system."  

     4.   INCAPACITY.  Paragraph 7 shall be amended to read in its entirety as
follows:

          "In the event you become totally medically disabled and cannot
          substantially perform your duties at any time during the Employment
          Term, the CEO, at any time after such disability has continued for 30
          consecutive days, may determine that Viacom requires such duties and
          responsibilities be performed by another executive.  In the event that
          you become disabled, you will first receive benefits under Viacom's
          short-term disability program for the first 26 weeks of consecutive
          absence.  Thereafter, you will be eligible to receive benefits under
          Viacom's Long-Term Disability ("LTD") program in accordance with its
          terms.  Upon receipt of benefits under the LTD program, you will also
          be entitled to receive a pro-rated Target Bonus for the calendar year
          in which such benefits commence."  

     5.   TERMINATION / TERMINATION FOR CAUSE.  Paragraph 8(a) shall be amended
to replace the last sentence with the following:

          "Except for a breach which cannot by its nature be cured, you shall
          have ten (10) business days from the giving of such notice within
          which to cure."  

     6.   TERMINATION / GOOD REASON TERMINATION.  Paragraph 8(b) shall be
amended to replace the second sentence with the following sentences:  

          "Such notice shall state an effective date no earlier than thirty (30)
          business days after the date it is given.  Viacom shall have ten (10)
          business days from the giving of such notice within which to cure."  



<PAGE>

George S. Smith, Jr.
March 31, 1998
Page 3


     Except as herein amended, all other terms and conditions of your Employment
Agreement shall remain the same and your Employment Agreement as herein amended
shall remain in full force and effect.  

     If the foregoing correctly sets forth our understanding, please sign one
(1) copy of this letter and return it to the undersigned, whereupon this letter
shall constitute a binding amendment to your Employment Agreement.  

                                             Very truly yours,

                                             VIACOM INC.



                                             By:  /s/   William A. Roskin      
                                                 -------------------------------
                                                 Name:  William A. Roskin
                                                 Title: Senior Vice President,
                                                        Human Resources and
                                                        Administration
ACCEPTED AND AGREED:



 /s/  George S. Smith, Jr.   
- ------------------------------
      George S. Smith, Jr.




<PAGE>


<TABLE>
<CAPTION>

                                                                                           Exhibit 11


                                       VIACOM INC. AND SUBSIDIARIES
                                  COMPUTATION OF NET EARNINGS PER SHARE

                                                                      Year ended December 31,
                                                                      -----------------------
                                                                 1997          1996            1995
                                                                 ----          ----            ----
                                                              (In millions, except per share amounts)

<S>                                                            <C>          <C>              <C>
EARNINGS:
Earnings from continuing operations . . . . . . . . . . .       $374.5       $  170.7         $150.5
Cumulative convertible preferred stock dividend
 requirement. . . . . . . . . . . . . . . . . . . . . . .         60.0           60.0           60.0
                                                                ------       --------         ------
Earnings from continuing operations attributable to common
 stock. . . . . . . . . . . . . . . . . . . . . . . . . .        314.5          110.7           90.5
Earnings (loss) from discontinued operations, net of tax.         13.9          (80.5)          72.0
Net gain on discontinued operations, net of tax . . . . .        405.2        1,157.7             --
                                                                ------       --------         ------
Net earnings. . . . . . . . . . . . . . . . . . . . . . .       $733.6       $1,187.9         $162.5
                                                                ======       ========         ======

BASIC COMPUTATION:
- ------------------
SHARES:
Weighted average number of common shares. . . . . . . . .        352.9          364.0          362.5
                                                                ======       ========         ======

EARNINGS PER COMMON SHARE:
Earnings from continuing operations . . . . . . . . . . .       $ 0.89       $   0.30         $ 0.25
Earnings (loss) from discontinued operations, net of tax.         0.04          (0.22)          0.20
Net gain on discontinued operations, net of tax . . . . .         1.15           3.18             --
                                                                ------       --------         ------
Net earnings. . . . . . . . . . . . . . . . . . . . . . .       $ 2.08       $   3.26         $ 0.45
                                                                ======       ========         ======

DILUTED COMPUTATION:
- --------------------
SHARES:
Weighted average number of common shares (basic). . . . .        352.9          364.0          362.5
 Common shares potentially issuable in connection
   with:
   Stock options and warrants . . . . . . . . . . . . . .          1.4            3.4            8.2
   Variable common rights (1) . . . . . . . . . . . . . .           --             --            4.4
   Preferred Stock (2)  . . . . . . . . . . . . . . . . .           --             --             --
                                                                ------       --------         ------
Weighted average number of common shares (diluted). . . .        354.3          367.4          375.1
                                                                ======       ========         ======

EARNINGS PER COMMON SHARE:
Earnings from continuing operations
 . . . . . . . . . . .       $ 0.89       $   0.30         $ 0.24
Earnings (loss) from discontinued operations,
  net of tax. . . . . . . . . . . . . . . . . . . . . . .         0.04          (0.22)          0.19
Net gain on discontinued operations, net of tax . . . . .         1.14           3.15             --
                                                                ------       --------         ------
Net earnings. . . . . . . . . . . . . . . . . . . . . . .       $ 2.07       $   3.23         $ 0.43
                                                                ======       ========         ======

</TABLE>


(1) The variable common rights (the "VCRs") matured on September 29, 1995.  The
    Company issued approximately 6.1 million shares of Viacom Inc. Class B
    Common Stock, or .022665 of a share of Viacom Inc. Class B Common Stock per
    VCR, to settle its obligation under the VCRs.

(2) For the years ended December 31, 1997, 1996, and 1995, the assumed
    conversion of preferred stock had an anti-dilutive effect on earnings per
    share, resulting from the assumed reduction in preferred stock dividends,
    and therefore was excluded from the diluted earnings per share calculation.





<PAGE>

                                                           EXHIBIT 21



                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

100% Raw Productions Inc.                 Viacom International Inc.                 Delaware          100      BB      D

101 Properties Corp.                      Viacom International Inc.                 Florida           100      BB      D

1020917 Ontario Inc.                      Maarten Investerings Partnership          Canada            100      PCIHF   F
                                                                                    (Ontario)

176309 Canada Inc.                        Paramount Pictures (Canada) Inc.          Canada            100      XPPCF   F
                                                                                    (Federal)

2 Day Video, Inc.                         Blockbuster Entertainment Inc.            Texas             100      BB      D

2 Day Video, Inc. of Georgia              2 Day Video, Inc.                         Georgia           100      BB      D

200 S. Andrews, Inc.                      Blockbuster Entertainment Inc.            Delaware          100      BB      D

2853-5912 Quebec Inc.                     Paramount Pictures (Canada) Inc.          Canada (Quebec)   100      XPPCF   F

37th Floor Productions Inc.               Nickelodeon Movies Inc.                   Delaware          100      NICK    D

5555 Communications Inc.                  Paramount Pictures Corporation            Delaware          100      PPC     D

730806 Alberta Ltd.                       Viacom International Inc.                 Canada            100      VIHF    F
                                                                                    (Alberta)

730995 Ontario Inc.                       Famous Players Inc.                       Canada            100      FMPL    F
                                                                                    (Ontario)

779991 Ontario Inc.                       Famous Players Inc.                       Canada            100      FMPL    F
                                                                                    (Ontario)

950931 Ontario Inc.                       Famous Players Inc.                       Canada (Ontario)   49      FMPL    F

Abaco Farms, Limited                      International Raw Materials Limited       Bahamas           100      PCIHF   F

Addax Music Co., Inc.                     Famous Music Corporation
                  Delaware          100      MUS     D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Aetrax International Corporation          Paramount Pictures (Canada) Inc.          Delaware           87.41   THTR    D

                                          Viacom International Canada Ltd.                             12.57

                                          Famous Players Investments B.V.                                .02

Ages Electronics, Inc.                    Ages Entertainment Software, Inc.         Delaware          100      XPPC    D

Ages Entertainment Software, Inc.         French Street Management Inc.             Delaware          100      XPPC    D

Agnes Limited Partnership, The            Paramount Pictures Corporation            New York           25      PPC     D/LP

Ahsuog Inc.                               Simon & Schuster, Inc.                    California        100      PBSS    D

AHV Holding Corporation                   Viacom International Inc.                 Delaware          100      BB      D

All Is Forgiven Productions               Paramount Pictures Corporation            California         50      PPC     D/P

All Media Inc.                            Showtime Networks Inc.                    Delaware          100      SHO     D

All News Channel                          Viacom Satellite News Inc.                                   50      VIH     D/JV

America Today                             Paramount Pictures Corporation            California         50      PPC     D/JV

Anall Pty. Limited                        Viacom International Pty. Limited         Australia          50      VIHF    F

                                          Australian Consolidated Press Holdings                       50      

Antics G.P. Inc.                          Remote Productions Inc.                   Delaware          100      MTV     D

Antics Inc.                               Games Productions Inc.                    Delaware          100      NICK    D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Appleton & Lange, Inc.                    Prentice-Hall, Inc.                       Delaware          100      PBPH    D

A-R Acquisition Corp.                     Simon & Schuster, Inc.                    Delaware          100      PBSS    D

Arco Publishing, Inc.                     Prentice-Hall, Inc.                       Delaware          100      PBPH    D

Aros N.V.                                 Viacom International (Netherlands) B.V.   Netherlands       100      PCIHF   F
                                                                                    Antilles

Around the Block Productions, Inc.        Virgin Interactive Entertainment, Inc.    Delaware          100      VRG     D

Atlantic Associates, Inc.                 Blockbuster Entertainment Inc.            Delaware          100      BB      D

Atlantic Home Video                       AHV Holding Corporation                   Delaware           80      BB      D/P

Avalon Vertriebs GmbH                     Virgin Interactive Entertainment          Germany           100      VRG     F
                                          (Investments) Ltd.                        

Bardwire Inc.                             Games Productions Inc.                    Delaware          100      SIGV    D

Belhaven Limited                          International Raw Materials Limited       Bahamas           100      PCIHF   F

Beta Theatres Inc.                        Aetrax International Corporation          Delaware          100      THTR    D

Big Planet Video, Inc.                    Blockbuster Entertainment Inc.            New Hampshire     100      BB      D

Big Shows Inc.                            Remote Productions Inc.                   Delaware          100      MTV     D

Biscondi Sdn Bhd                          Cinema International B.V.                 Malaysia           95      CICUIP  F
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Blockbuster Airship Holding Corporation   Viacom International Inc.                 Delaware          100      BB      D

Blockbuster Airships, Inc.                Blockbuster Airship Holding Corporation   Delaware          100      BB      D

Blockbuster Amphitheater Corporation      Blockbuster Entertainment Inc.            Delaware          100      BB      D

Blockbuster Australia Pty Ltd.            Blockbuster Video International           Australia         100      BBF     F
                                          Corporation                               

Blockbuster Computer Systems Corporation  Blockbuster Entertainment Inc.            Florida           100      BB      D

Blockbuster Discovery Investment Inc.     Blockbuster Amusement Holding             Delaware          100      BB      D
                                          Corporation                               

Blockbuster Distribution, Inc.            Blockbuster Entertainment Inc.            Delaware          100      BB      D

Blockbuster Entertainment (Ireland) Ltd.  Viacom International (Netherlands) B.V.   Ireland           100      BBF     F

Blockbuster Entertainment Inc.            Viacom International Inc.                 Delaware          100      BB      D

Blockbuster Entertainment Limited         Viacom UK Limited                         United Kingdom    100      BBF     F

Blockbuster Express Limited               Cityvision plc                            United Kingdom    100      BBF     F

Blockbuster Family Fun, Inc.              Blockbuster Fun & Fitness Holding         Delaware          100      BB      D
                                          Corporation                               

Blockbuster Global Services Inc.          Viacom International Inc.                 Delaware          100      VIH     D

Blockbuster International Spain Inc.      Blockbuster Video International           Delaware          100      BB      D
                                          Corporation

Blockbuster Ireland Entertainment Ltd.    Viacom International (Netherlands) B.V.   United Kingdom    100      BBF     F

Blockbuster Japan Ltd.                    Blockbuster Video International           Japan              50      BBF     F
                                          Corporation                               

Blockbuster Mid-America, Inc.             Blockbuster Video Acquisition Corp.       Delaware          100      BB      D

Blockbuster Music Holding Corporation     Viacom International Inc.                 Delaware          100      BB      D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Blockbuster Music Retail, Inc.            Blockbuster Music Holding Corporation     Delaware          100      BB      D

Blockbuster On-Line Services, Inc.        Blockbuster Technology Holding            Delaware          100      BB      D
                                          Corporation                               

Blockbuster Park Holding Corp.            Viacom International Inc.                 Delaware          100      BB      D

Blockbuster Park Lands, Inc.              Blockbuster Park Holding Corp.            Florida           100      BB      D

Blockbuster Park, Inc.                    Blockbuster Park Holding Corp.            Delaware          100      BB      D

Blockbuster Productions Corporation       Blockbuster Pictures Holding Corporation  Delaware          100      BB      D

Blockbuster Promotions Inc.               Viacom International Inc.                 Delaware          100      BB      D

Blockbuster SC Holding Corporation        Viacom International Inc.                 Delaware          100      BB      D

Blockbuster SC Music Corporation          Blockbuster SC Holding Corporation        Delaware          100      BB      D

Blockbuster SC Video Holding Corporation  Blockbuster SC Holding Corporation        Delaware          100      BB      D

Blockbuster SC Video Operating            Blockbuster SC Video Holding Corporation  Delaware          100      BB      D
Corporation                               

Blockbuster Services Inc.                 Blockbuster Videos, Inc.                  Delaware          100      BB      D

Blockbuster Technology Holding            Blockbuster Entertainment Inc.            Delaware          100      BB      D
Corporation                               

Blockbuster Video (New Zealand) Ltd.      Blockbuster Video International           New Zealand       100      BBF     F
                                          Corporation                               

Blockbuster Video Acquisition Corp.       Blockbuster Entertainment Inc.            Delaware          100      BB      D

Blockbuster Video de Mexico S de RL       Viacom International (Netherlands) B.V.   Mexico             80      BBF     F

Blockbuster Video Deutschland GmbH        Blockbuster Video International           Germany            51      BBF     F
                                          Corporation.                              

Blockbuster Video Espana, S.L.            Blockbuster Video International Corp.     Spain              88      BBF     F

Blockbuster Video International           Viacom International Inc.                 Delaware          100      BB      D
Corporation                               

Blockbuster Video Italy, Inc.             Blockbuster Video International           Delaware          100      BB      D
                                          Corporation                               

Blockbuster Video Superstores             Blockbuster Australia Pty Ltd.            Australia         100      BBF     F
(Australia) Pty Limited                   
</TABLE>




<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Blockbuster Videos, Inc.                  Blockbuster Entertainment Inc.            Delaware          100      BB      D

Blue Cow Inc.                             Bombay Hook Limited                       Delaware          100      DCM     D

Bombay Hook Limited                       French Street Management Inc.             Delaware          100      DCM     D

Brady Communications Company, Inc.        Prentice-Hall, Inc.                       District of       100      PBPH    D
                                                                                    Columbia

Branded Productions Inc.                  Torand Productions, Inc.                  California        100      SPE     D

Broadcast Leasing Inc.                    Viacom International Inc.                 Delaware          100      VIH     D

Brookvale Developments No. 1 Pty.         Prentice-Hall of Australia Pty. Limited   Australia (NSW)   100      PBPHF   F
Limited                                   

Brookvale Developments No. 2 Pty.         Prentice-Hall of Australia Pty. Limited   Australia (NSW)   100      PBPHF   F
Limited                                   

Bruin Music Company                       Ensign Music Corporation                  Delaware          100      MUS     D

BS Hotel, Inc.                            Blockbuster Technology Holding            Delaware          100      BB      D
                                          Corporation                               

BVJV Corporation                          Blockbuster Music Holding Corporation     Delaware          100      BB      D

C.A. Cinematografica Blancica             United International Pictures SRL         Venezuela          50      CICUIP  F

C/FP Distribution Inc.                    950931 Ontario Inc.                       Canada             49.95   FMPL    F
                                                                                    (Federal)

C/FP Distribution Limited                 950931 Ontario Inc.                       Canada             50.05   FMPL    F
                                                                                    (Ontario)

California Holdings LLC                   Cinamerica Theatres, L.P.                 Delaware          100      THTR
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Center for Applied Research in            Prentice-Hall, Inc.                       Delaware          100      PBPH    D
Education, Inc., The                      

Central Park Theatres Limited             Famous Players Inc.                       Canada            100      FMPL    F
                                                                                    (Alberta)

Centurion Satellite Broadcast Inc.        Theatre 59 Ltd.                           Delaware          100      THTR    D

Century Entertainment Ltd.                Blockbuster Entertainment Corporation     United Kingdom    100      BBF     F
                                          Ltd.                                      

Charlotte Amphitheater Corporation        Blockbuster Amphitheater Corporation      Delaware          100      BB      D

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Chenille International B.V.               Viacom International B.V.                 Netherlands       100      NICKF   F

CIC Editions S.N.C.                       CIC Video SNC                             France             99      CICUIP  F

CIC Film Properties                       Cinema International Corporation (U.K.)   United Kingdom    100      CICUIP  F

CIC Home Video GmbH                       Cinema International B.V.                 Switzerland        95      CICUIP  F

CIC International B.V.                    Cinema International Corporation N.V.     Netherlands        95      CICUIP  F

                                          CIC Television B.V.                                           5

CIC Television B.V.                       Cinema International Corporation N.V.     Netherlands       100      CICUIP  F

CIC Theatre Group                         Cinema International Corporation  (U.K.)  United Kingdom    100      CICUIP  F

CIC Theatres B.V.                         Cinema International Corporation N.V.     Netherlands       100      CICUIP  F

CIC Video                                 Cinema International B.V.                 United Kingdom     95      CICUIP  F
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
CIC Video (Denmark) I/S                   CIC Video International B.V.              Denmark            95      CICUIP  F

CIC Video (Far East) Ltd.                 Cinema International B.V.                 Japan             100      CICUIP  F

CIC Video (Finland) OY [in liquidation]   Cinema International B.V.                 Finland            95      CICUIP  F

CIC Video (Hong Kong) Ltd.                Cinema International B.V.                 Hong Kong          95      CICUIP  F

CIC Video (New Zealand) Ltd.              Cinema International B.V.                 New Zealand        95      CICUIP  F

CIC Video (Norway) ANS                    CIC Video International B.V.              Norway             95      CICUIP  F

CIC Video (Proprietary) Limited           CIC Home Video GmbH                       South Africa      100      CICUIP  F

CIC Video Australia Pty.                  Cinema International B.V.                 Australia          95      CICUIP  F

CIC Video B.V.                            Cinema International B.V.                 Netherlands        95      CICUIP  F

CIC Video GmbH                            United Cinemas International Multiplex    Germany            95      CICUIP  F
                                          GmbH                                      

CIC Video International U.K.              Cinema International B.V.                 United Kingdom     95      CICUIP  F

CIC Video Limitada                        Cinema International B.V.                 Brazil             94.99   CICUIP  F

CIC Video SNC                             Cinema International B.V.                 France             94.80   CICUIP  F

CIC Video SRL                             Cinema International B.V.                 Italy              95      CICUIP  F

CIC Video Superannuation Fund Pty         Cinema International Corporation Pty.     Australia         100      CICUIP  F
Limited                                   

CIC Video y CIA SRC                       Cinema International B.V.                 Spain              94      CICUIP  F

                                          CIC Video B.V.                                                1

CIC-Taft Video Pty. Ltd.                  CIC Video Australia Pty. Ltd.             Australia          66.67   CICUIP  F

CIC-Victor Video, Limited K.K.            Cinema International B.V.                 Japan              75      CICUIP  F

Cinamerica Service Corporation            Cinamerica Theatres, L.P.                 Delaware          100      THTR    D

Cinamerica Theatres, L.P.                 Festival Inc.                             Delaware           49.99966 THTR   D/LP

                                          Beta Theatres Inc.                                             .00034
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
                                                                                    Dominican
Cinema Dominicana S.A.                    Front Street Management Inc.              Republic          100      PPCF    F

Cinema International (Germany) B.V.       Cinema International B.V.                 Netherlands        95      CICUIP  F

Cinema International B.V.                 Viacom International (Netherlands) B.V.   Netherlands        49      CICUIP  F

Cinema International Corporation          Film Properties International B.V.        Israel             95      CICUIP  F

                                          Securitas Services Limited                                    5

Cinema International Corporation (1991)   Cinema International B.V.                 Malaysia           95      CICUIP  F
SDN                                       (shares in names of 2 natural persons     
                                          as nominees)                              

Cinema International Corporation          Gemini International B.V.                 Dominican          95      CICUIP  F
(Dominicana) S.A.                                                                   Republic 

Cinema International Corporation (Sao     Cinema International Corporation N.V.     Portugal           99      CICUIP  F
Jorge) y Cia                              

Cinema International Corporation          Cinema International B.V.                 Sweden             95      CICUIP  F
(Sweden) AB                               

Cinema International Corporation (U.K.)   Cinema International Corporation N.V.     United Kingdom     95      CICUIP  F

Cinema International Corporation GmbH     Cinema International Corporation N.V.     Switzerland        95      CICUIP  F
(Schweiz)                                 

Cinema International Corporation          Cinema International Corporation N.V.     Uruguay            95      CICUIP  F
Limitada Suiza (Uruguay Branch ) Liq.     

Cinema International Corporation N.V.     Paramount Pictures Corporation            Netherlands        49      CICUIP  F

Cinema International Corporation Pty.     Cinema International B.V.                 Australia          95      CICUIP  F

Cinema International Corporation S.A.     Cinema International Corporation N.V.     Dominican          95      CICUIP  F
                                                                                    Republic

Cinema International Corporation SARL     Gemini International B.V.                 Lebanon            90      CICUIP  F

                                          Cinema International Corporation N.V.                         5      

Cinema International Corporation y Cia    Cinema International Corporation N.V.     Panama             99      CICUIP  F
SC                                        

Cinematic Arts B.V.                       Viacom International (Netherlands) B.V.   Netherlands       100      PCIHF   F

Cinesa - Compania de Iniciativas y        Cinesa/UCI B.V.                           Spain              67.30   CICUIP  F
Spectaculos, S.A.                         Cinema International Corporation N.V.                        32.40
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Cinesa/UCI B.V.                           United Cinemas International Multiplex    Netherlands       100      CICUIP  F
                                          B.V.                                      

Cityvision plc                            Blockbuster (UK) Group Ltd.               United Kingdom    100      BBF     F

Cityvision Videotheken Ges.M.B.H.         Cityvision plc                            Austria           100      BBF     F

Columbus Circle Films Inc.                Bombay Hook Limited                       Delaware          100      XPPC    D

Comedy Partners                           Viacom Ha! Holding Company                New York           50      VIH     D/JV

Computer Curriculum Corporation           Prentice-Hall, Inc.                       Delaware          100      PBPH    D

Desilu Music Corp.                        Famous Music Corporation                  New York           50      MUS     D

Desilu Productions, Inc.                  Paramount Pictures Corporation            Delaware          100      PPC     D

Direct Court Productions, Inc.            Wilshire Court Productions, Inc.          Delaware          100      SIGP    D

Direct Response Associates, Inc.          Prentice-Hall, Inc.                       Connecticut       100      PBPH    D

Doghouse Films Inc.                       Paramount Pictures Corporation (Canada)   Canada (B.C.)     100      PPCF    F
                                          Inc.                                      

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Editora Prentice-Hall do Brazil Ltda.     Prentice-Hall International, Inc.         Brazil             50      PBPHF   F

Educational Management Group, Inc.        Prentice-Hall, Inc.                       Illinois          100      PBPH    D

Eighth Century Corporation                French Street Management Inc.             Delaware          100      PPC     D

Electronic Publishing, Inc.               Prentice-Hall, Inc.                       New York          100      PBPH    D

Ellis Horwood Limited                     International Book Distributors Limited   United Kingdom    100      PBPHF   F

Empire-Ritz (Leicester Square)            CIC Film Properties                       United Kingdom     95      CICUIP  F

Energy Development Associates, Inc.       French Street Management Inc.             Delaware          100      PCIH    D

Ensign Music Corporation                  Famous Music Corporation                  Delaware          100      MUS     D

Entertainment Tonight                     Paramount Pictures Corporation            California         50      PPC     D/JV

EPI Music Company                         Evergreen Programs, Inc.                  California        100      SPE     D

Erol's Inc.                               Viacom International Inc.                 Delaware          100      BB      D

Esquire Films, Inc.                       French Street Management Inc.             Delaware          100      PBSS    D

Evergreen Programs, Inc.                  Worldvision Enterprises, Inc.             New York          100      SPE     D

EWB Corporation                           Front Street Management Inc.              Delaware          100      DCM     D

Executive Reports Corporation             Prentice-Hall, Inc.                       New Jersey        100      PBPH    D

Executive Tax Reports, Inc.               Prentice-Hall, Inc.                       New York          100      PBPH    D

EXP Limited                               Virgin Interactive Entertainment          United Kingdom    100      VRG     F
                                          (Investments) Ltd.                        

EXP Music Publishing Limited              Virgin Interactive Entertainment          United Kingdom    100      VRG     F
                                          (Investments) Ltd.                        

Family Entertainment Centers, Inc.        Blockbuster Entertainment Inc.            Florida           100      BB      D

Famous Music Corporation                  French Street Management Inc.             Delaware          100      MUS     D

Famous Music Publishing Limited           Paramount Television Limited              United Kingdom     75      MUSF    F

                                          Viacom International (Netherlands) B.V.                      25
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Famous Orange Productions Inc.            Nickelodeon Movies Inc.                   Delaware          100      NICK    D

Famous Players Inc.                       Paramount Pictures (Canada) Inc.          Canada            100      FMPL    F
                                                                                    (Federal)   

Famous Players International B.V.         Paramount Productions Inc.                Netherlands       100      FMPL    F

Famous Players Investments B.V.           Viacom International Canada Ltd.          Netherlands       100      FMPL    F

Festival Inc.                             Theatre 59 Ltd.                           Delaware          100      THTR    D

Film Distribution & Service S.C.          United International Pictures and         Belgium            49      CICUIP  F
                                          Company SNC                               

Film Intex Corporation                    Viacom International Inc.                 Delaware          100      VIH     D

Film Investments International (FII)      Film Properties International B.V.        Netherlands       100      CICUIP  F
N.V.                                                                                Antilles          

Film Properties International B.V.        Cinema International Corporation N.V.     Netherlands       100      CICUIP  F

Films Paramount S.A.                      Famous Players International B.V.         France            100      PPCF    F

Fitzwilliam Publishing Limited            Woodhead-Faulkner (Publishers) Limited    United Kingdom    100      PBPHF   F

FLC Holding Corp.                         Blockbuster Entertainment Inc.            Florida           100      BB      D

Focus Video Pty. Ltd.                     BlockbusterVideo International            Australia         100      BBF     F
                                          Corporation                               

Forty-Fourth Century Corporation          Paramount Pictures Corporation            Delaware          100      PPC     D

French Street Management Inc.             Viacom International Inc.                 Delaware          100      DCM     D

Front Street Management Inc.              French Street Management Inc.             Delaware          100      DCM     D

FT Productions Inc.                       Paramount Pictures Corporation            Delaware          100      PPC     D

Future General Corporation                Paramount Pictures Corporation            Delaware          100      PPC     D

G & W Leasing Company                     French Street Management Inc.             Delaware          100      PCIH    D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Games Animation Inc.                      Games Productions Inc.                    Delaware          100      VIH     D

Games Productions Inc.                    Viacom International Inc.                 Delaware          100      VIH     D

GC Productions Inc.                       Pet II Productions Inc.                   Delaware          100      XPPC    D

Gemini International B.V.                 Cinema International Corporation N.V.     Netherlands       100      CICUIP  F

Glendale Property Corp.                   Viacom International Inc.                 Delaware          100      VIH     D

Global Film Distributors B.V.             Viacom International (Netherlands) B.V.   Netherlands       100      PCIHF   F

Globe Fearon Inc                          French Street Management Inc.             California        100      PBSS    D

GNS Productions Inc.                      Columbus Circle Films Inc.                Delaware          100      XPPC    D

Golden UIP Film Distributions Limited     United International Pictures B.V.        Hong Kong          49      CICUIP  F

                                          I.F.H. International Film Holdings B.V.                       1

GPCL Publishing (Canada) Limited          Prentice-Hall Canada Inc.                 Canada            100      PBPHF   F
                                                                                    (Federal)

Gramps Company, Inc., The                 Pet II Productions Inc.                   Delaware          100      XPPC    D

Grand Company Limited Partnership, The    Paramount Pictures Corporation            New York           20      PPC     D/LP

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Green Tiger Press, Inc.                   Simon & Schuster, Inc.                    California        100      PBSS    D

Greenvale Editorial Services, Inc.        Prentice-Hall, Inc.                       New York          100      PBPH    D

Gulf & Western Holdings Limited           Viacom International Canada Ltd.          Bahamas           100      PCIHF   F

Gulf & Western Indonesia, Inc.            French Street Management Inc.             Delaware          100      PCIH    D

Gulf & Western Intercontinental                                                     Netherlands
Investments N.V.                          Viacom International (Netherlands) B.V.   Antilles          100      PCIHF   F

Gulf & Western International Finance      Viacom International (Netherlands) B.V.   Netherlands       100      PCIHF   F
N.V.                                                                                Antilles    

Gulf & Western International N.V.         Viacom International (Netherlands) B.V.   Netherlands       100      PCIHF   F
                                                                                    Antilles     

Gulf & Western Limited                    Gulf & Western Holdings Limited           Bahamas           100      PCIHF   F

Gulf DTH Holdings Co. LDC                 Viacom Middle East Holdings VOF.          Cayman Islands     25      VIHF    F

Gulf DTH LDC                              Viacom Middle East Holdings VOF.          Cayman Islands     25      VIHF    F

Gulf DTH Production                       Gulf DTH LDC                              United Kingdom     99      VIHF    F

                                          Gulf DTH Holdings Co. LDC                                     1     

Gulf DTH Services                         Gulf DTH LDC                              United Kingdom     99      VIHF    F

                                          Gulf DTH Holdings Co. LDC                                     1     


</TABLE>




<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Harper Collins/Chek Chart                 Ashuog Inc.                               New York           50      PBSS    D/JV

Harvester Press Limited, The              International Book Distributors Limited   United Kingdom    100      PBPHF   F

HBO Pacific Partners, C.V.                Paramount Films of Southeast Asia Inc.    Netherlands        16.67   PPCF    F/JV
                                                                                    Antilles   

High Command Productions Limited          Ages Entertainment Software, Inc.         United Kingdom     99      PPCF    F

                                          Viacom Group Finance Limited                                  1

Hollywood Express Limited                 United Cinemas International (U.K.)       United Kingdom     50      CICUIP  F
                                          Limited                                      

                                          UCI Exhibition (U.K.) Limited                                50

Houston Video Management Inc.             Blockbuster Videos, Inc.                  Texas             100      BB      D

Houston Video Venture, Inc.               Viacom International Inc.                 Florida           100      BB      D

IMR Acquisition Corp.                     Simon & Schuster, Inc.                    Delaware          100      PBSS    D

Inmobiliaria y Spectaculos, S.A. [in      Cinesa                                    Spain             100      CICUIP  F
liquidation]

Institute for Business Planning, Inc.     Prentice-Hall, Inc.                       New York          100      PBPH    D

International Book Distributors Limited   Viacom UK Limited                         United Kingdom     75      PBPHF   F

                                          Paramount Television Ltd.                                    19      

                                          Front Street Management Inc.                                  6      

International Bureau of Software Test,    Prentice-Hall, Inc.                       Delaware          100      PBPH    D
Inc.                                   
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
International Film Productions (IFP)      Viacom International (Netherlands) B.V.   Netherlands
N.V.                                      (PPI Division)                            Antilles           50      XPPCF   F

International Overseas Film Services,
Inc.                                      Front Street Management Inc.              Delaware           66.67   XPPC    D

International Overseas Productions, Inc.  Front Street Management Inc.              California         66.67   XPPC    D

International Raw Materials Limited       Front Street Management Inc.              Bahamas           100      PCIHF   F

Interstitial Programs Inc.                Showtime Networks Inc.                    Delaware          100      SHO     D

Invest Learning Corporation               Prentice-Hall, Inc.                       Delaware          100      PBPH    D

J. K. Lasser, Inc.                        Simon & Schuster, Inc.                    Delaware          100      PBSS    D

Joseph Productions Inc.                   Paramount Pictures Corporation            Delaware          100      PPC     D

Jossey-Bass, Inc., Publishers             Macmillan, Inc.                           California        100      PBPH    D

Katled Systems Inc.                       Front Street Management Inc.              Delaware           99.9    PBDIS   D

                                          Viacom International (Netherlands) B.V.                        .1

Kilo Mining Corporation                   G & W Natural Resources Company, Inc.     Pennsylvania      100      PCDIS   D

Kings Island Company                      French Street Management Inc.             Delaware           97.02   PRKS    D

                                          Mattalex Corporation                                          2.98   

KSLQ, Inc.                                Chartcom, Inc.                            Missouri          100      SPDIS   D

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

List Productions Inc.                     Viacom Canadian Productions Inc.          Canada            100      XPPCF   F
                                                                                    (Ontario)

Living Color Financial Displays, Inc.     Prentice-Hall, Inc.                       Florida           100      PBPH    D

Lizarb B.V.                               Viacom International (Netherlands) B.V.   Netherlands        95      PCIHF   F

                                          Viacom International Holdings B.V.                            5      

Long Road Productions                     Paramount Pictures Corporation            Illinois           75      PPC     D/P

Low Key Productions Inc.                  Viacom Productions Inc.                   Delaware          100      SIGV    D

M.R.E. Enterprises, Inc.                  Viacom International  Inc.                Florida           100      BB      D

Maarten Investerings Partnership          French Street Management Inc.             New York           96.0618 PCIH    D/P 

                                          Mattalex Corporation                                          3.9382             
                                                                                    
MacGyver Productions                      Paramount Pictures Corporation            California         50      PPC     D/P

Macmillan College Publishing Company,     Macmillan, Inc.                           Delaware          100      PBPH    D
Inc.                                   

Macmillan, Inc.                           Prentice-Hall, Inc.                       Delaware          100      PBPH    D

Magicam, Inc.                             Future General Corporation                Delaware           83.5    PPC     D

Majestic Theatres Limited                 Famous Players Inc.                       Canada            100      FMPL    F
                                                                                    (Alberta)     

Major Video Corp.                         Viacom International Inc.                 Nevada            100      BB      D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Major VIdeo National Advertising          Major Video Corp.                         Nevada            100      BB      D/NFP
Council Corporation               

Major Video Super Stores, Inc.            Major Video Corp.                         Nevada            100      BB      D

Markt & Technik GmbH                      Paramount Publishing Europe B.V.          Germany           100      PBPHF   F

Mars Film Produzione S.P.A.               Viacom International (Netherlands) B.V.   Italy             100      XPPCF   F

Master Data Center, Inc.                  Prentice-Hall, Inc.                       Michigan          100      PBPH    D

Matlock Company, The                      Viacom Productions Inc.                   Delaware          100      SIGV    D

Mattalex Corporation                      French Street Management Inc.             Delaware          100      DCM     D

Merritt Inc.                              French Street Management Inc.             Delaware          100      DCM     D

Michaela Productions Inc.                 Paramount Pictures Corporation            Delaware          100      XPPC    D

Modern Curriculum Inc.                    Silver Burdett Ginn Inc.                  California        100      PBSS    D

Montgomery Acquisition, Inc.              Blockbuster Entertainment Inc.            Delaware          100      BB      D

MTV Animation Inc.                        Viacom International Inc.                 Delaware          100      MTV     D

MTV Asia Development Company Inc.         Viacom International Inc.                 Delaware          100      MTV     D

MTV Asia LDC                              MTV Asia Ownership One LDC                Cayman Islands     25      MTVF    F

                                          MTV Asia Ownership Two LDC                                   25

MTV Asia Ownership One LDC                Viacom International Inc.                 Cayman Islands     50      MTVF    F/JV

                                          MTV Asia Development Company Inc.                            50

MTV Asia Ownership Two LDC                Viacom International Inc.                 Cayman Islands     50      MTVF    F/JV

                                          MTV Asia Development Company Inc.                            50
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
MTV Asia Ventures (India) Pte. Limited    MTV India LDC                             India              40      MTVF    F

MTV Asia Ventures Co.                     MTV Asia LDC                              Cayman Islands    100      MTVF    F

MTV Australia Inc.                        Viacom International Inc.                 Delaware          100      MTV     D

MTV Brasil Limitada.                      Viasem Brasil Holdings Limitada.          Brazil             50      MTVF    F/JV

MTV Europe                                Viacom Networks Europe Inc.               United Kingdom     50.01   MTVF    F/P

                                          MTV Networks Europe Inc.                                     49.99  

MTV Hong Kong. Limited                    MTV Asia Ventures Co.                     Hong Kong         100      MTVF    F

MTV India Development Company Inc.        Viacom International Inc.                 Delaware          100      MTV     D

MTV India LDC                             MTV Asia Ownership One LDC                Cayman Islands     25      MTVF    F

                                          MTV Asia Ownership Two LDC                                   25

MTV India Private Limited                 MTV Asia Ventures (India) Pte. Ltd.       India             100      MTVF    F

MTV Networks AB                           Viacom Networks Europe Inc.               Sweden             50.01   MTVF    F

                                          MTV Networks Europe Inc.                                     49.99

MTV Networks B.V.                         Viacom Networks Europe Inc.               Netherlands        50.01   MTVF    F

                                          MTV Networks Europe Inc.                                     49.99

MTV Networks Company                      Viacom International Inc.                 Delaware          100      MTV     D

MTV Networks de Mexico S. de R.L. de      Viacom International (Netherlands) B.V.   Mexico             95      MTVF    F
C.V.                                      

                                          Viacom International Holdings B.V.                           5

MTV Networks Europe Inc.                  Viacom International Inc.                 Delaware          100      MTV     D

MTV Networks Global Services Inc.         Viacom International Inc.                 Delaware          100      MTV     D

MTV Networks GmbH                         Viacom Networks Europe Inc.               Germany            50.01   MTVF    F

                                          MTV Networks Europe Inc.                                     49.99
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
MTV Networks Latin America Inc.           Viacom International Inc.                 Delaware          100      MTV     D

MTV Networks SARL                         Viacom Networks Europe Inc.               France             50.01   MTVF    F

                                          MTV Networks Europe Inc.                                     49.99

MTV Networks Shopping Inc.                Viacom International Inc.                 Delaware          100      MTV     D

MTV Networks South Africa Inc.            Viacom International Inc.                 Delaware          100      MTV     D

MTV Networks Srl                          Viacom Networks Europe Inc.               Italy              50.01   MTVF    F

                                          MTV Networks Europe Inc.                                     49.99

MTV SA LDC                                Viacom International (Netherlands) B.V.   Cayman Islands     95      MTVF    F

                                          Viacom International Holdings B.V.                            5

MTV Songs Inc.                            Viacom International Inc.                 Delaware          100      MTV     D

MTV Taiwan LDC                            MTV Asia LDC                              Cayman Islands     99      MTVF    F

                                          MTV Asia Ventures Co.                                         1      

MTVN Online Inc.                          Viacom International Inc.                 Delaware          100      MTV     D

MTVN Shopping Inc.                        Viacom International Inc.                 Delaware          100      MTV     D

Music By Nickelodeon Inc.                 Viacom International Inc.                 Delaware          100      NICK    D

Music By Video Inc.                       Viacom International Inc.                 Delaware          100      MTV     D

Naked City Productions Inc.               Viacom International Canada Limited       Canada            100      XPPCF   F
                                                                                    (Ontario)

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Network Media Services Ltd.               Viacom UK Limited                         United Kingdom    100      VIHF    F

New Leaf Entertainment Corporation        Blockbuster Technology Holding            Delaware          100      BB      D
                                          Corporation                               

New River Entertainment Corporation       Blockbuster Pictures Holding Corporation  Delaware          100      BB      D

Newdon Productions                        Paramount Pictures Corporation            Illinois           76      PPC     D/P

Nick At Nite's TV Land Retromercials      Games Productions Inc.                    Delaware          100      SIGV    D
Inc.                                 

Nickelodeon (Deutschland) & Co KG         Nickelodeon (Deutschland) Beteiligungen   Germany            90      NICKF   F
                                          GmbH                                       

Nickelodeon (Deutschland) Beteiligungen   Viacom Holdings (Germany) B.V.            Germany            99      NICKF   F
GmbH                                      

                                          Viacom Holdings (Germany) II B.V.                             1     

Nickelodeon (Deutschland) Verwaltung      Nickelodeon (Deutschland) Beteiligungen   Germany            90      NICKF   F
GmbH                                      GmbH                                    

Nickelodeon Animation Inc.                Viacom International Inc.                 Delaware          100

Nickelodeon Australia Inc.                Viacom International Inc.                 Delaware          100      NICK    D

Nickelodeon Germany Inc.                  Viacom International Inc.                 Delaware          100      NICK    D

Nickelodeon Huggings U.K. Limited         Viacom International Inc.                 United Kingdom    100      NICKF   F

Nickelodeon India Corporation             Viacom International Inc.                 Delaware          100      NICK    D

Nickelodeon International Ltd.            Viacom UK Ltd.                            United Kingdom    100      NICKF   F

Nickelodeon Magazines Inc.                Viacom International Inc.                 Delaware          100      NICK    D

Nickelodeon Movies Inc.                   Games Productions Inc.                    Delaware          100      NICK    D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Nickelodeon U.K.                          Nickelodeon Huggings U.K. Limited         United Kingdom     50      NICK    F/JV

Number One FSC Ltd.                       Front Street Management Inc.              US Virgin         100      PCIHF   F
                                                                                    Islands           

One and Only Joint Venture, The           Paramount Pictures Corporation            New York           53.37   PPC     D/JV

Our Home Productions Inc.                 Viacom First Run Limited                  Delaware          100      VIH     D

Outatown Productions Inc.                 Reality Check Productions Inc.            Delaware          100      VIH     D

Overseas Services B.V.                    Viacom International (Netherlands) B.V.   Netherlands       100      PCIHF   F

Paramount (PDI) Distribution Inc.         Paramount Stations Group Inc. (as Agent)  Delaware          100      VIH     D

Paramount Advertiser Services Inc.        Paramount Pictures Corporation            Delaware          100      PPC     D

Paramount Americas Film Corporation       Paramount Pictures Corporation            Delaware          100      PPC     D

Paramount Asia Inc.                       Paramount Pictures Corporation            Delaware          100      PPC     D

Paramount British Pictures Limited        Viacom UK Limited                         United Kingdom    100      XPPCF   F

Paramount Canadian Productions, Inc.      Paramount Pictures Corporation            Delaware          100      XPPC    D
                                          (Canada), Inc.                             
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Paramount Communications Acquisition      French Street Management Inc.             Delaware          100      PCIH    D
Corporation                           

Paramount Communications Technology       French Street Management Inc.             Delaware          100      VIH     D
Group Inc.                           

Paramount Digital Entertainment Inc.      Bombay Hook Limited                       Delaware          100      XPPC    D

Paramount Film Production (Deutschland)   Viacom International (Netherlands) B.V.   Germany           100      XPPCF   F
GmbH                                    

Paramount Films B.V.                      Paramount International Holding Company   Netherlands       100      PPCF    F

Paramount Films of Australia Inc.         Paramount International Holding Company   Delaware          100      PPC     D

Paramount Films of China, Inc.            Paramount International Holding Company   Delaware          100      PPC     D

Paramount Films of Egypt, Inc.            Paramount International Holding Company   Delaware          100      PPC     D

Paramount Films of India, Ltd.            Paramount International Holding Company   Delaware          100      PPC     D

Paramount Films of Italy, Inc.            Paramount International Holding Company   New York          100      PPC     D

Paramount Films of Lebanon, Inc.          Paramount International Holding Company   New York          100      PPC     D

Paramount Films of Pakistan Ltd.          Paramount International Holding Company   New York          100      PPC     D

Paramount Films of Southeast Asia Inc.    Paramount International Holding Company   Delaware          100      PPC     D

Paramount General Entertainment           Paramount International Holding Company   Delaware          100      PPC     D
Australia Inc.                  

Paramount Home Video, Inc.                Paramount Pictures Corporation            Delaware          100      PPC     D

Paramount Images Inc.                     Paramount Pictures Corporation            Delaware          100      SIGP    D

Paramount International Holding Company   Paramount Pictures Corporation            Delaware          100      PPC     D

Paramount LAPTV Inc.                      Paramount International Holding Company   Delaware          100      PPC     D

Paramount Music Corporation               Famous Music Corporation                  Delaware          100      MUS     D

Paramount Overseas Productions, Inc.      Paramount International Holding Company   Delaware          100      PPC     D

Paramount Parks Experience Inc.           Paramount Parks Inc.                      Nevada            100      PRKS    D

Paramount Parks Inc.                      Bombay Hook Limited                       Delaware          100      PRKS    D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Paramount Parks International B.V.        Viacom International (Netherlands) B.V.   Netherlands       100      PRKSF   F

Paramount Pictures (Australia) Pty.       Paramount International Holding Company   Australia         100      PPCF    F
Limited                              

Paramount Pictures (Canada) Inc.          Gulf & Western International N.V.         Canada             66      XPPCF   F

                                          Viacom International Canada Ltd.          (Ontario)          34      

Paramount Pictures (U.K.) Limited.        Front Street Management Inc.              United             75      PPCF    F

                                          Paramount International Holding Company   Kingdom            25

Paramount Pictures Corporation            Bombay Hook Limited                       Delaware          100      PPC     D

Paramount Pictures Corporation (Canada)   Paramount Productions, Inc.               Canada            100      XPPCF   F
Inc.                                                                                (Ontario)         

Paramount Production Support Inc.         Paramount Pictures Corporation            Delaware          100      PPC     D

Paramount Productions Service             Paramount Pictures Corporation            Delaware          100      PPC     D
Corporation                     

Paramount Productions, Inc.               PCI Canada Inc.                           Canada            100      XPPCF   F
                                                                                    (Ontario)

Paramount Publishing Deutschland GmbH     Paramount Publishing Europe B.V.          Germany           100      PBPHF   F

Paramount Publishing Europe B.V.          Prentice-Hall International, Inc.         Netherlands       100      PBPHF   F

Paramount Publishing Nederland B.V.       Paramount Publishing Europe B.V.          Netherlands       100      PBPHF   F

Paramount Stations Group Inc.             Viacom International Inc.                 Virginia           99      BTV     D

                                          Theatre 59 Ltd.                                               1

Paramount Stations Group of Fort          Paramount Stations Group Inc.             Virginia          100      BTV     D
Worth/Dallas Inc.               

Paramount Stations Group of Houston Inc.  Paramount Stations Group Inc.             Virginia          100      BTV     D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Paramount Stations Group of Oklahoma      Blue Cow Inc.                             Delaware            9.09   BTV     D
City LLC                                  

                                          Bombay Hook Limited                                           9.09 

                                          EWB Corporation                                               9.09 

                                          French Street Management Inc.                                 9.09 

                                          Front Street Management Inc.                                  9.09 

                                          Mattalex Corporation                                          9.09 

                                          Merritt Inc.                                                  9.09 

                                          Paramount Communications Acquisition Corporation              9.09 

                                          Possum Point Incorporated                                     9.09 

                                          Thirteenth Century Corporation                                9.09 

                                          Universal American Corporation                                9.09
                                                                                                      
Paramount Stations Group of               Paramount Stations Group Inc.             Virginia          100      BTV     D
Philadelphia Inc.           

Paramount Stations Group of Washington    Paramount Stations Group Inc.             Virginia          100      BTV     D
Inc.                                   

Paramount Television International        Front Street Management Inc.              Bermuda           100      PCIHF   F
Services, Ltd.                     

Paramount Television Limited              Front Street Management Inc.              United Kingdom     75      XPPCF   F

                                          Paramount Pictures (U.K.) Limited.                           25

Paramount Television Service, Inc.        Paramount Pictures Corporation            Delaware          100      PPC     D

Paramount-Roy Rogers Music Co., Inc.      Famous Music Corporation                  New York           50      MUS     D

Para-Sac Music Corporation                Famous Music Corporation                  Delaware          100      MUS     D

Park Court Productions, Inc.              Wilshire Court Productions, Inc.          Delaware          100      SIGP    D

Parker Publishing Company, Inc.           Prentice-Hall, Inc.                       New York          100      PBPH    D

Part-Time Productions Inc.                Showtime Networks Inc.                    Delaware          100      SIGV    D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

PCI Canada Inc.                           Front Street Management Inc.              Delaware          100      PCIH    D

PCI Network Partner II Inc.               Paramount Pictures Corporation            Delaware          100      BTV     D

PCI Network Partner Inc.                  Paramount Pictures Corporation            Delaware          100      BTV     D

Pet II Productions Inc.                   Columbus Circle Films Inc.                Delaware          100      XPPC    D

Pier 66 Productions Inc.                  Torand Productions Inc.                   Florida           100      SPE     D

Plaza Theatre Company, The                CIC Theatre Group                         United Kingdom     95      CICUIP  F

Plea Bargain Productions Inc.             Viacom International Canada Limited       Canada (B.C.)     100      XPPCF   F

PLM Film Produzione SpA (Liq.)            Film Properties International B.V.        Italy              99.97   CICUIP  F
                                                                                                            
                                          Gemini International B.V.                                      .03    
                                                                                                     
PMV Productions Inc.                      Viacom Productions Inc.                   Delaware          100      SIGV    D

Pocket Books of Canada, Ltd.              Simon & Schuster, Inc.                    Canada            100      PBSSF   F
                                                                                    (Federal)

Possum Point Incorporated                 French Street Management Inc.             Delaware          100      DCM     D

PPC Space Production                      Forty-Fourth Century Corporation          California         50      PPC     D/JV

Premiere House, Inc.                      Bombay Hook Limited                       Delaware          100      XPPC    D

Pren-Hall Corporation, The                Prentice-Hall, Inc.                       New York          100      PBPH    D

Prentice-Hall (China) Pte. Limited        Prentice-Hall International, Inc.         Hong Kong         100      PBPHF   F
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Prentice-Hall (M) Sdn Bhd                 Prentice-Hall International, Inc.         Malaysia          100      PBPHF   F

Prentice-Hall (South Africa)              Prentice-Hall International, Inc.         South Africa      100      PBPHF   F
(Proprietary) Limited         

Prentice-Hall Canada Inc.                 Prentice-Hall International Inc.          Canada            100      PBPHF   F
                                                                                    (Ontario)

Prentice-Hall de Colombia Limitada        Prentice-Hall International Inc.          Colombia           95      PBPHF   F

                                          Prentice-Hall, Inc.                                           5      

Prentice-Hall Developmental Learning      Prentice-Hall, Inc.                       New Jersey        100      PBPH    D
Centers, Inc.                         

Prentice-Hall Hispanoamericana, S.A.      Prentice-Hall, Inc.                       Mexico            100      PBPHF   F

Prentice-Hall Iberia SRL                  Paramount Publishing Europe B.V.          Spain              95      PBPHF   F

                                          Paramount Publishing Nederland B.V.                           5      

Prentice-Hall International (U.K.) Ltd.   International Book Distributors Limited   United Kingdom    100      PBPHF   F

Prentice-Hall International, Inc.         Prentice-Hall, Inc.                       New York          100      PBPH    D

Prentice-Hall Japan K.K.                  Regents Publishing Co., Inc.              Japan             100      PBSSF   F

Prentice-Hall Learning Systems, Inc.      Prentice-Hall, Inc.                       Delaware          100      PBPH    D

Prentice-Hall of Australia Pty. Limited   Prentice-Hall, Inc.                       Australia         100      PBPHF   F

Prentice-Hall Professional Software,      Prentice-Hall, Inc.                       Delaware          100      PBPH    D
Inc.

Prentice-Hall Verlag GmbH                 Paramount Publishing Europe B.V.          Germany           100      PBPHF   F

Prentice-Hall, Inc.                       Paramount Communications Acquisition      Delaware          100      PBPH    D
                                          Corporation                               

Prospect Company Ltd.                     Charter Caribbean Company                 Cayman Islands    100      SPDISF  F

Publishing FSC Ltd.                       Front Street Management Inc.              US Virgin         100      PCIHF   F
                                                                                    Islands            
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Real TV Music Inc.                        RTV News Inc.                             Delaware          100      XPPC    D

Reality Check Productions Inc.            Viacom International Inc.                 Delaware          100      VIH     D

Regents Publishing Co., Inc.              A-R Acquisition Corp.                     New York           65      PBSS    D

                                          IMR Acquisition Corp.                                        35      

Remote Productions Inc.                   Viacom International inc.                 Delaware          100      VIH     D

Republic Pictures Corporation of          Republic Entertainment Inc.               Canada            100      REPF    F
Canada, Ltd.                     

Republic Pictures Netherlands Antilles    Republic Entertainment Inc.               Netherlands       100      REPF    F
N.V.                                                                                Antilles          

Reston Information Systems, Inc.          Reston Publishing Co., Inc.               Pennsylvania      100      PBPH    D

Reston Publishing Co., Inc.               Prentice-Hall, Inc.                       Delaware          100      PBPH    D

Rey Soria y Compania, S.L. [in            Cinesa                                    Spain             100      CICUIP  F
liquidation]                   
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Robert J. Brady Co.                       Prentice-Hall, Inc.                       Maryland          100      PBPH    D

RTV News Inc.                             Columbus Circle Films Inc.                Delaware          100      XPPC    D

RTV News Music Inc.                       RTV News Inc.                             Delaware          100      XPPC    D

Satellite Holdings Inc.                   Showtime Networks Inc.                    Delaware          100      SHO     D

Scarab Publishing Corporation             Famous Music Corporation                  Delaware          100      MUS     D

Securitas Services Limited                Film Investments International (FII)      Bermuda           100      CICUIP  F
                                          N.V.                                 

Sentinel Productions Inc.                 Paramount Pictures Corporation (Canada)   Canada (B.C.)     100      PPCF    F
                                          Inc.                                      

Shirley Valentine Company Joint           Paramount Pictures Corporation            New York           50      PPC     D/JV
Venture, The

Show Industries, Inc.                     Blockbuster Music Holding Corporation     California        100      BB      D

Showtime Networks Inc.                    Viacom International Inc.                 Delaware          100      SHO     D

Showtime Networks Inc. (U.K.)             Showtime Networks Inc.                    Delaware          100      SHO     D

Showtime Networks Middle East Inc.        Showtime Networks Inc.                    Delaware          100      SHO     D

Showtime Networks Satellite Programming   Showtime Networks Inc.                    California        100      SHO     D
Company                                 

Showtime Online Inc.                      Showtime Networks Inc.                    Delaware          100      SHO     D

Showtime Satellite Networks Inc.          Showtime Networks Inc.                    Delaware          100      SHO     D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Showtime/Sundance Holding Company Inc.    Viacom International Inc.                 Delaware          100      SHO     D

SIFO One Inc.                             Showtime/Sundance Holding Company Inc.    Delaware          100      SHO     D

SIFO Two Inc.                             Showtime/Sundance Holding Company Inc.    Delaware          100      SHO     D

Silent Echoes Productions Inc.            Viacom International Canada Limited       Canada            100      XPPCF   F
                                                                                    (Ontario)

Silver Burdett Ginn Inc.                  Simon & Schuster, Inc.                    Delaware          100      PBSS    D

Simon & Schuster (Asia) Pte. Ltd.         Prentice-Hall, Inc.                       Singapore         100      PBPHF   F

Simon & Schuster (Australia) Pty.         Prentice-Hall of Australia Pty. Limited   Australia         100      PBPHF   F
Limited                           

Simon & Schuster Global Services Inc.     Viacom International Inc.                 Delaware          100      VIH     D

Simon & Schuster Indochina Ltd.           Prentice-Hall International, Inc.         Taiwan            100      PBPHF   F

Simon & Schuster Japan, Inc.              Prentice-Hall, Inc.                       Japan             100      PBPHF   F

Simon & Schuster Limited                  International Book Distributors Limited   United Kingdom    100      PBPHF   F

Simon & Schuster Macmillan France SARL    Films Paramount S.A.                      France             99      PBSSF   F

                                          MTV Networks SARL                                             1      

Simon & Schuster of Canada (1976) Ltd.    Simon & Schuster, Inc.                    Canada            100      PBSSF   F
                                                                                    (Federal) 

Simon & Schuster, Inc.                    French Street Management Inc.             New York          100      PBSS    D

Skylight Training and Publishing Inc.     Prentice-Hall, Inc.                       Illinois          100      PBPH    D

SNI Development Corp.                     Showtime Networks Inc.                    Delaware          100      SHO     D

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Southeastern Home Video, Inc.             Blockbuster Video Acquisition Corp.       Delaware          100      BB      D

Special Effects Merchandise, Inc.         Bombay Hook Limited                       Delaware          100      XPPC    D

Spy Productions Inc.                      Viacom Canadian Productions Inc.          Canada            100      XPPCF   F
                                                                                    (Ontario)

State of Mind Inc.                        Remote Productions Inc.                   Delaware          100      SIGV    D

Strand Theatre Limited                    Famous Players Inc.                       Canada             50      FMPL    F
                                                                                    (Saskatchewan)

Sudbury (Joint Venture)                   Famous Players Inc.                       Canada             66.7    FMPL    F
                                                                                    (Federal)

Summit Books, Inc. (Liq.)                 Simon & Schuster, Inc.                    Delaware          100      PBDIS   D

Sundance Channel L.L.C.                   SIFO One Inc.                             Delaware           30      SHO     D/LLC

                                          SIFO Two Ind.                                                15      
</TABLE>




<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
T.V. Factory, Inc., The                   Blockbuster Entertainment Inc.            New York          100      BB      D

Taking Advantage                          Paramount Pictures Corporation            California         50      PPC     D/P

Talent Court Productions, Inc.            Wilshire Court Productions, Inc.          Delaware          100      SIGP    D

Tele-Vu Ltee.                             Viacom International Inc.                 Canada            100      VIHF    F
                                                                                    (Federal)

Theatre 59 Ltd.                           Aetrax International Corporation          Delaware          100      THTR    D

They Productions Inc.                     Viacom Productions Inc.                   Delaware          100      SIGV    D

Thirteenth Century Corporation            French Street Management Inc.             Delaware          100      DCM     D

Thirtieth Century Corporation             French Street Management Inc.             Delaware          100      PCIH    D

Three Productions Inc.                    Paramount Pictures Corporation (Canada)   Canada (B.C.)     100      PPCF    F
                                          Inc.                                      

Toe-To-Toe Productions Inc.               Showtime Networks Inc.                    Delaware          100      SHO     D

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Total Warehouse Services Corporation      Simon & Schuster, Inc.                    Delaware          100      PBSS    D

Toxic Productions Inc.                    Viacom International Canada Limited       Canada (B.C.)     100      XPPCF   F

Tredegars Home Entertainment Limited      Cityvision plc                            United Kingdom    100      BBF     F

TRF III Entertainment, Inc.               Bombay Hook Limited                       Delaware          100      XPPC    D

Triohurst Limited.                        Paramount International Holding Company   United Kingdom    100      PPCF    F

True Productions Inc.                     Paramount Pictures Corporation (Canada)   Canada (B.C.)     100      PPCF    F
                                          Inc.                                      

TS Video, Inc.                            Blockbuster SC Video Holding Corporation  Louisiana         100      BB      D

TSM Services Inc.                         Viacom International Inc.                 Delaware          100      VIH     D

Tunes By Nickelodeon Inc.                 Viacom International Inc.                 Delaware          100      SIGV    D

TV Scoop Inc.                             Viacom First Run Limited                  Delaware          100      SIGV    D

UCI Developments (U.K.) Limited           United Cinemas International (U.K.)       United Kingdom     50      CICUIP  F
                                          Limited                                                                     

                                          United Cinemas International Multiplex                       50
                                          B.V.                                      

UCI Exhibition (U.K.) Limited             United Cinemas International (U.K.)       United Kingdom     99.98   CICUIP  F
                                          Limited                                                        

                                          United Cinemas International Multiplex                         .02
                                          B.V.                                      

UI Video Stores, Inc.                     UIV Acquisition Corporation               Colorado          100      BB      D

UIP (U.K.) Limited                        United International Pictures B.V.        United Kingdom     50      CICUIP  F

UIP Danube International Services Ltd.    United International Pictures B.V.        Hungary            95      CICUIP  F

UIP Distributions (Proprietary) Ltd.      United International Pictures (South      South Africa       50      CICUIP  F
                                          Africa)                                   

UIP Filmverleih Gesellschaft mbH          United International Pictures GmbH        Austria            95      CICUIP  F

UIP International Services B.V.           United International Pictures B.V.        Netherlands       100      CICUIP  F

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
UIP Limited                               United International Pictures B.V.        United Kingdom     50      CICUIP  F

UIP Pay Television B.V.                   United International Pictures B.V.        Netherlands       100      CICUIP  F

UIP-CIC Film & Video Distribution         Cinema International B.V.                 South Korea        50      CICUIP  F
Company
                                          United International Pictures B.V.                           50      

UIP-Coblan SA                             Cinema International Corporation          Dominican          50      CICUIP  F
                                          (Dominicana) S.A.                         Republic           

UIV Acquisition Corporation               Viacom International Inc.                 Delaware          100      BB      D

Unicorn Services                          United International Pictures B.V.        Bermuda            47.5    CICUIP  F

                                          United International Pictures                                47.5

United Cinemas International (Ireland)    United Cinemas International Multiplex    Ireland           100      CICUIP  F
Limited                                   B.V.                                   

United Cinemas International (Japan)      United Cinemas International Multiplex    Japan              99.5    CICUIP  F
K.K.                                      B.V.                                   

United Cinemas International (U.K.)       United Cinemas International Multiplex    United Kingdom     99.995  CICUIP  F
Limited                                   B.V.                                   

United Cinemas International Multiplex    Viacom International (Netherlands) B.V.   Netherlands        49.02   CICUIP  F/P
B.V.                                   

United Cinemas International Multiplex    United Cinemas International Multiplex    Germany           100      CICUIP  F
GmbH                                      B.V.                                   

United Cinemas International Multiplex    United Cinemas International Multiplex    Austria            98      CICUIP  F
GmbH                                      B.V.                                   

United International Pictures             United International Pictures B.V.        Trinidad &         95      CICUIP  F
                                                                                    Tobago             

United International Pictures             United International Pictures B.V.        United Kingdom     95      CICUIP  F

United International Pictures (Far East)  United International Pictures B.V.        Hong Kong          95      CICUIP  F

United International Pictures             United International Pictures B.V.        Netherlands       100      CICUIP  F
(Netherlands) B.V.            

United International Pictures (NZ)        United International Pictures B.V.        New Zealand        95      CICUIP  F

United International Pictures (Pay TV)    United International Pictures B.V.        Netherlands        99      CICUIP  F
B.V.                                   

United International Pictures (Schweiz)   United International Pictures B.V.        Switzerland        94      CICUIP  F
GmbH                                    
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
United International Pictures (SDN)       Cinema International Corporation (U.K.)   Malaysia           95      CICUIP  F

United International Pictures (South      United International Pictures B.V.        South Africa       95      CICUIP  F
Africa)                              

United International Pictures (U.K.)      United International Pictures B.V.        United Kingdom     95      CICUIP  F

United International Pictures A.B.        United International Pictures B.V.        Sweden             95      CICUIP  F

United International Pictures A/S         United International Pictures B.V.        Norway             95      CICUIP  F

United International Pictures and         United International Pictures B.V.        Belgium            95      CICUIP  F
Company SNC                       

United International Pictures ApS         United International Pictures B.V.        Denmark            95      CICUIP  F

United International Pictures             United International Pictures B.V.        Brazil             95      CICUIP  F
Distribuidora de Filmes Limitada     

United International Pictures EPE         United International Pictures B.V.        Greece             95      CICUIP  F

United International Pictures Filmcilik   United International Pictures B.V.        Turkey             95      CICUIP  F
ve Ticaret Limited Sirketi              

United International Pictures GmbH        United International Pictures B.V.        Germany            95      CICUIP  F

United International Pictures Limitada    United International Pictures B.V.        Colombia           95      CICUIP  F

United International Pictures Ltda.       United International Pictures B.V.        Chile              95      CICUIP  F

United International Pictures of          United International Pictures B.V.        Colombia           95      CICUIP  F
Colombia Inc.                                                                       (Delaware)

United International Pictures of Panama   United International Pictures B.V.        Panama             95      CICUIP  F
Inc.                                                                                (Delaware) 

United International Pictures OY          United International Pictures B.V.        Finland            95      CICUIP  F

United International Pictures Pay TV      United International Pictures B.V.        Netherlands       100      CICUIP  F
(Netherlands) B.V. (Liq.)             

United International Pictures PTE         United International Pictures B.V.        Singapore          95      CICUIP  F

United International Pictures Pty.        United International Pictures B.V.        Australia          95      CICUIP  F

United International Pictures S. de R.L.  United International Pictures B.V.        Argentina          95      CICUIP  F

United International Pictures S. de R.L.  Cinema International Corporation N.V.     Mexico             95      CICUIP  F
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
United International Pictures SARL        United International Pictures B.V.        France             95      CICUIP  F

United International Pictures SRL         United International Pictures B.V.        Italy              95      CICUIP  F

United International Pictures SRL         United International Pictures B.V.        Peru               95      CICUIP  F

United International Pictures SRL         United International Pictures B.V.        Venezuela          95      CICUIP  F

United International Pictures y Cia SRC   United International Pictures B.V.        Spain              95      CICUIP  F

Universal American Corporation            French Street Management Inc.             Delaware          100      DCM     D

Uptown Productions Inc.                   Games Productions Inc.                    Delaware          100      SIGV    D

Uranus Productions France S.A.R.L.        Cinema International Corporation N.V.     France            100      CICUIP  F

Urban Legends Productions Inc.            Viacom International Canada Limited       Canada            100      XPPCF   F
                                                                                    (Ontario)

Uro, S.A.                                 Cinesa                                    Spain             100      CICUIP  F

VE Development Company                    Viacom First Run Limited                  Delaware          100      VIH     D

VE Drive Inc.                             Viacom First Run Limited                  Delaware          100      SIGV    D

VE Television Inc.                        Viacom First Run Limited                  Delaware          100      VIH     D

VH-1 Management GmbH                      Viacom Holdings (Germany) B.V.            Germany            99      MTVF    F 

                                          Viacom Holdings (Germany) II B.V.                             1

VH-1 OHG                                  VH-1 Management GmbH                      Germany            80      MTVF    F/P

                                          Viacom VHENO GmbH                                            20

VH-1 Save The Music Foundation                  No Shares                           New York          100      VIH     D/NFP

VHONE Inc.                                Viacom International Inc.                 Delaware          100      VIH     D

Viacom A.G.                               Viacom International Inc.                 Switzerland       100      VIHF    F

Viacom Animation of Korea Inc.            Paramount Pictures Corporation            Delaware          100      PPC     D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Viacom Asia Inc.                          Viacom International Inc.                 Delaware          100      MTV     D

Viacom Brasil Holdings Limitada           Viacom International (Netherlands) B.V.   Brazil             95      MTVF    F

                                          Viacom International Holdings B.V.                            5      

Viacom Broadcasting of Miami, Inc.        Viacom WBFS Inc.                          Delaware          100      BTV     D

Viacom Broadcasting of Philadelphia,      Viacom WPSG Inc.                          Delaware          100      BTV     D
Inc.                                 

Viacom Broadcasting of Seattle Inc.       Viacom International Inc.                 Delaware          100      BTV     D

Viacom Broadcasting West Inc.             Viacom International Inc.                 Delaware          100      VDIS    D

Viacom Camden Lock Inc.                   Viacom International Inc.                 Delaware          100      MTV     D

Viacom Canada Limited                     Viacom International Inc.                 Canada            100      VIHF    F
                                                                                    (Federal)

Viacom Consumer Products Inc.             French Street Management Inc.             Delaware          100      VCP     D

Viacom Consumer Products Ltd.             Viacom UK Ltd.                            United Kingdom    100      VIHF    F

Viacom DBS Inc.                           Viacom International Inc.                 Delaware          100      VIH     D

Viacom Enterprises Canada Ltd.            Viacom International Inc.                 Canada            100      VIHF    F
                                                                                    (Federal)

Viacom Entertainment Canada Inc.          1020917 Ontario Inc.                      Canada            100      VIHF    F
                                                                                    (Ontario)         

Viacom Film Funding Company Inc.          Viacom International Inc.                 Delaware          100      VIH     D

Viacom First Run Development Company      Viacom First Run Limited                  Delaware          100      SIGV    D
Inc.                                  

Viacom First Run Limited                  Viacom International Inc.                 Delaware          100      VIH     D

Viacom Global Services Inc.               Viacom International Inc.                 Delaware          100      VIH     D

Viacom Group Finance Limited              Paramount Television Limited              United Kingdom     80      PCIHF   F

                                          Front Street Management Inc.                                 20      

Viacom HA! Holding Company                Viacom International Inc.                 Delaware          100      VIH     D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Viacom Holdings (Germany) B.V.            Viacom International N.V.                 Germany            49      NICKF   F

                                          Chenille International B.V.                                   1      

Viacom Holdings (Germany) II B.V.         Viacom Holdings (Germany) B.V.            Germany           100      NICKF   F

Viacom IDA Inc.                           Viacom International Inc.                 Delaware          100      VIH     D

Viacom International (Netherlands) B.V.   Front Street Management Inc.              Netherlands       100      PCIHF   F

Viacom International Canada Ltd.          PCI Canada Inc.                           Canada            100      PCIHF   F
                                                                                    (Ontario)

Viacom International Holdings B.V.        Front Street Management Inc.              Netherlands       100      PCIHF   F

Viacom International Inc.                 Viacom Inc.                               Delaware          100      VIH     D

Viacom International Inc. Political       Viacom International Inc.                 New York          100      VIH     D/PAC
Action Committee Corporation         

Viacom International Limited              Viacom UK Limited                         United Kingdom    100      VIHF    F

                                                                                    
Viacom International N.V.                 Viacom International (Netherlands) B.V.   Netherlands       100      PCIHF   F
                                                                                    Antilles   
                                                                                    
Viacom International Pty. Limited         Viacom International Inc.                 Australia         100      VIHF    F

Viacom IRB Acquisition Inc.               Viacom International Inc.                 Delaware          100      VIH     D

Viacom Japan Inc.                         Viacom International Inc.                 New York          100      VIH     D

Viacom K-Band Inc.                        Viacom International Inc.                 Delaware          100      VIH     D

Viacom Limited                            Viacom International Pty. Limited         New Zealand       100      VIHF    F

Viacom Medical Management Inc.            Viacom International Inc.                 Delaware          100      VIH     D

Viacom Middle East Holdings VOF           Viacom International (Netherlands) B.V.   Netherlands        95      VIH     F
                                                                                    Antilles

                                          Viacom International Holdings B.V.                            5

Viacom Networks Europe Inc.               Viacom International Inc.                 Delaware          100      MTV     D

Viacom Networks Europe UK                 Viacom International (Netherlands) B.V.   Netherlands       100      VIHF    F

Viacom Networks Inc.                      Viacom International Inc.                 New York          100      VIH     D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Viacom Networks UK Limited                Paramount Television Ltd.                 United Kingdom     50      VIHF    F

                                          Viacom Networks Europe UK                                    50      

Viacom Pacific Limited                    Viacom International Inc.                 Vila, Vanuatu     100      VIHF    F

Viacom Phoenix Inc.                       Viacom International Inc.                 Delaware          100      VIH     D

Viacom Pictures Development Company       Viacom Pictures Inc.                      Delaware          100      SIGV    D

Viacom Pictures Inc.                      Viacom International Inc.                 Delaware          100      SIGV    D

Viacom Pictures Movie Music Inc.          Viacom Pictures Inc.                      Delaware          100      SIGV    D

Viacom Pictures Overseas Inc.             Viacom Pictures Inc.                      Delaware          100      SIGV    D

Viacom Pictures Songs Inc.                Viacom Pictures Inc.                      Delaware          100      SIGV    D

Viacom PNW Sports Inc.                    Viacom International Inc.                 Delaware          100      VDIS    D

Viacom Productions Inc.                   Viacom International Inc.                 Delaware          100      SIGV    D

Viacom Properties Inc.                    Viacom International Inc.                 Delaware          100      VIH     D

Viacom Realty Corporation                 French Street Management Inc.             Delaware          100      VIH     D

Viacom Receivables Funding I Corporation  Viacom Inc.                               Delaware          100      VIH     D

Viacom Retail Stores, Inc.                Blockbuster Amusement Holding             Delaware          100      BB      D
                                          Corporation                  

Viacom Satellite News Inc.                Viacom International Inc.                 Delaware          100      VIH     D

Viacom Shopping Inc.                      Viacom International Inc.                 Delaware          100      VIH     D

Viacom Telecommunications (D.C.) Inc.     Viacom International Inc.                 Delaware          100      VIH     D

Viacom UK Limited                         Viacom International Inc.                 United Kingdom     76.4    VIHF    F

                                          Blockbuster Entertainment Inc.                               23.6

Viacom VHENO GmbH                         VH-1 Management GmbH                      Germany            99      NICKF   F

                                          Viacom Holdings (Germany) II B.V.                             1      
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>
Viacom Video-Audio Communicacoes          Viacom International Inc.                 Brazil            100      VIHF    F
Limitada                                  

Viacom WBFS Inc.                          Viacom International Inc.                 Delaware          100      BTV     D

Viacom World Wide Ltd.                    Viacom International Inc.                 New York          100      VIH     D

Viacom WPSG Inc.                          Viacom International Inc.                 Delaware          100      BTV     D

Viasem Brasil Holdings Limitada           Viacom Brasil Holdings Limitada           Brazil             99      MTVF    F

                                          Viacom International Holdings B.V.                            1

Video Club (G.B.) Limited                 Cityvision plc                            United Kingdom    100      BBF     F

Video Store (Jersey) Limited              Cityvision plc                            Channel Islands   100      BBF     F

Viper Productions Inc.                    Paramount Pictures Corporation (Canada)   Canada (B.C.)     100      PPCF    F
                                          Inc.                                      

Virgin Blockbuster Ltd. (UK)              Blockbuster Music Holding Corporation     United Kingdom     50      BBF     F

</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Virgin Retail Australia Pty. Ltd.         Blockbuster Music Holding Corporation     Australia         100      BBF     F

VISI Services Inc.                        Viacom International Inc.                 Delaware          100      VIH     D

VJK Inc.                                  Viacom First Run Limited                  Delaware          100      SIGV    D

VNM Inc.                                  Viacom International inc.                 Delaware          100      VIH     D

VP Direct Inc.                            Viacom Productions Inc.                   Delaware          100      SIGV    D

VP Programs Inc.                          Viacom Productions Inc.                   California        100      SIGV    D

VSC Communications Inc.                   Viacom International Inc.                 Delaware          100      BTV     D

VSC Compositions Inc.                     Viacom International Inc.                 New York          100      SIGV    D

VSC Music Inc.                            Viacom International Inc.                 New York          100      SIGV    D

Waite Group Inc., The                     Prentice-Hall, Inc.                       California        100      PBPH    D

Warren Schloat Productions, Inc.          Prentice-Hall, Inc.                       New York          100      PBPH    D

Western Row Properties, Inc.              Kings Island Company                      Ohio              100      PRKS    D

Westside Amphitheater Corporation, The    Blockbuster Amphitheater Corporation      Arizona           100      BB      D

Wheatsheaf Books Limited                  International Book Distributors Limited   United Kingdom    100      PBPHF   F

Wilshire Court Productions, Inc.          Bombay Hook Limited                       Delaware          100      SIGP    D


</TABLE>




<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

Wilson Century Theatres Limited           Famous Players Inc.                       Canada            100      FMPL    F
                                                                                    (Ontario) 

WJB Realty, L.P.                          Blockbuster Videos, Inc. (GP)             South Carolina   [?]       BB      D/LP

WJB Video Limited Partnership             Blockbuster Videos, Inc. (GP)             South Carolina   [?]       BB      D/LP

Woburn Insurance Ltd.                     Bombay Hook Limited                       Bermuda           100      PCIHF   F

Woodhead-Faulkner (Publishers) Limited    International Book Distributors Limited   United Kingdom    100      PBPHF   F

Worldwide Productions, Inc.               Paramount International Holding Company   Delaware          100      PPC     D
</TABLE>



<PAGE>

                                     VIACOM

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>

                                                                                    PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                   INCORP          % OWNED    GRP    D/F/+
- -----------                               -----------------------                   --------        -------    ---    -----
<S>                                       <C>                                       <C>               <C>      <C>     <C>

WVIT Inc.                                 Viacom International Inc.                 Delaware          100      BTV     D

Yellams LDC                               Viacom International (Netherlands) B.V.   Cayman Islands    100      PCIHF   F

Young Reader's Press, Inc.                Simon & Schuster, Inc.                    Delaware          100      PBSS    D
</TABLE>



<PAGE>

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>
                                                                                              PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                             INCORP       % OWNED    GRP    D/F/+
- -----------                               -----------------------                             ------       -------    ---    -----
<S>             <C>                                                                           <C>          <C>        <C>    <C>
                                                                           
                                                       SUBSIDIARY LIST - GROUP KEY
  BB            Blockbuster

  BBF           Blockbuster - Foreign

  BTV           Broadcasting - Television

  CICUIP        Cinamera International Corporation, United Cinemas International, United 
                  International Pictures

  DCM           Delaware Corporate Management finance companies

  FMPL          Famous Players

  INVST         Investment

  MTV           MTV

  MTVF          MTV - Foreign

  MUS           Famous Music

  MUSF          Famous Music - Foreign

  NICK          Nickelodeon

  NICKF         Nickelodeon - Foreign

  PBPH          Publishing company within Prentice-Hall chain of ownership

  PBPHF         Publishing company within Prentice-Hall chain of ownership - Foreign

  PBSS          Publishing company within Simon & Schuster chain of ownership

  PBSSF         Publishing company within Simon & Schuster chain of ownership - Foreign

  PCIH          Paramount Communications - "home office" company

  PCIHF         Paramount Communications - "home office" company - Foreign

  PPC           Paramount Pictures

  PPCF          Paramount Pictures - Foreign

  PRKS          Theme Parks

  PRKSF         Theme Parks - Foreign

  SHO           Showtime

  SIGP          Signatory company - Paramount

  SIGV          Signatory company - Viacom

  SPDISF        Spelling - discontinued operations - Foreign

</TABLE>



<PAGE>

                            SUBSIDIARY LIST - SORTED


<TABLE>
<CAPTION>
                                                                                              PLACE OF
ENTITY NAME                               STOCKHOLDER/PARENT NAME                             INCORP       % OWNED    GRP    D/F/+
- -----------                               -----------------------                             ------       -------    ---    -----
<S>             <C>                                                                           <C>          <C>        <C>    <C>
  THTR          Theatres

  VCP           Viacom Consumer Products

  VIH           Viacom - "home office" company

  VIHF          Viacom - "home office" company - Foreign

  XPPC          Paramount Pictures but outside ownership chain of PPC

  XPPCF         Paramount Pictures - foreign but outside ownership chain of PPC

  EXCH          Traded on a stock exchange
</TABLE>





<PAGE>
                                                               Exhibit 23a


                        CONSENT OF INDEPENDENT ACCOUNTANTS



We hereby consent to the incorporation by reference in the Prospectus 
constituting part of the Registration Statements on Form S-3 (No. 33-53485 
and No. 33-55785) of Viacom Inc. and Viacom International Inc. and in the 
Registration Statements on Form S-8 (No. 333-42987, No. 333-34125, No. 
33-41934, No. 33-56088, No. 33-59049, No. 33-59141, No. 33-55173, No. 
33-55709, and No. 33-60943) of Viacom Inc. of our report dated February 12, 
1998, included in Item 8 of this Form 10-K.


PRICE WATERHOUSE LLP
New York, New York
March 31, 1998






<PAGE>


                                                           EXHIBIT 24


                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas his true lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.


                                                      /s/ George S. Abrams
                                              ----------------------------------
                                                      George S. Abrams


<PAGE>

                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas his true lawful attorney-in-fact and

agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.



                                                      /s/ Ivan Seidenberg
                                              ----------------------------------
                                                      Ivan Seidenberg


<PAGE>

                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas his true lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.


                                                      /s/  Thomas E. Dooley
                                              ----------------------------------
                                                      Thomas E. Dooley


<PAGE>

                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas his true lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.


                                                      /s/  Ken Miller
                                              ----------------------------------
                                                      Ken Miller


<PAGE>

                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas his true lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.


                                                      /s/  Brent D. Redstone
                                              ----------------------------------
                                                      Brent D. Redstone


<PAGE>

                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas her true lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for her and in her
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as she might or
could do in person hereby ratifying and confirming all that the said
attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.


                                                      /s/  Shari Redstone
                                              ----------------------------------
                                                      Shari Redstone


<PAGE>

                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas his true lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.


                                                      /s/  Frederic V. Salerno
                                              ----------------------------------
                                                      Frederic V. Salerno


<PAGE>

                                   VIACOM INC.

                                Power of Attorney


      KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM
INC., a Delaware corporation (the "Company"), hereby constitutes and appoints
Philippe P. Dauman and Michael D. Fricklas his true lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (and any
amendments thereto); granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF, I have hereunto signed my name this 30th day of March,
1998.


                                                      /s/  William Schwartz
                                              ----------------------------------
                                                      William Schwartz





<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE YEAR ENDED
DECEMBER 31, 1995 RESTATED FOR DISCONTINUED OPERATIONS AND EARNINGS PER SHARE
PRESENTED IN ACCORDANCE WITH SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-END>                               DEC-31-1995<F1>
<CASH>                                             464
<SECURITIES>                                         0
<RECEIVABLES>                                    1,998
<ALLOWANCES>                                       126
<INVENTORY>                                      2,163
<CURRENT-ASSETS>                                 5,184
<PP&E>                                           3,955
<DEPRECIATION>                                     757
<TOTAL-ASSETS>                                  28,991
<CURRENT-LIABILITIES>                            4,064
<BONDS>                                         10,712
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      10,890
<TOTAL-LIABILITY-AND-EQUITY>                    28,991
<SALES>                                         10,916
<TOTAL-REVENUES>                                10,916
<CGS>                                            6,690
<TOTAL-COSTS>                                    9,517
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 809
<INCOME-PRETAX>                                    580
<INCOME-TAX>                                       367
<INCOME-CONTINUING>                                151
<DISCONTINUED>                                      72
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                       163
<EPS-PRIMARY>                                      .45
<EPS-DILUTED>                                      .43
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS AND
RECLASSIFICATIONS TO PRIOR PERIODS' FINANCIAL STATEMENTS TO CONFORM TO THE
CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE QUARTER ENDED
MARCH 31, 1996 RESTATED FOR DISCONTINUED OPERATIONS AND EARNINGS PER SHARE 
PRESENTED IN ACCORDANCE WITH SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               MAR-31-1996<F1>
<CASH>                                             351
<SECURITIES>                                         0
<RECEIVABLES>                                    2,020
<ALLOWANCES>                                       130
<INVENTORY>                                      2,104
<CURRENT-ASSETS>                                 5,112
<PP&E>                                           4,167
<DEPRECIATION>                                     868
<TOTAL-ASSETS>                                  29,194
<CURRENT-LIABILITIES>                            3,487
<BONDS>                                         11,400
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      10,960
<TOTAL-LIABILITY-AND-EQUITY>                    29,194
<SALES>                                          2,623
<TOTAL-REVENUES>                                 2,623
<CGS>                                            1,642
<TOTAL-COSTS>                                    2,368
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 202
<INCOME-PRETAX>                                     53
<INCOME-TAX>                                        35
<INCOME-CONTINUING>                                 19
<DISCONTINUED>                                       8
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                        13
<EPS-PRIMARY>                                      .03
<EPS-DILUTED>                                      .03
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS TO PRIOR PERIODS'
FINANCIAL STATEMENTS TO CONFORM TO THE CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE SIX MONTHS 
ENDED JUNE 30, 1996 RESTATED FOR DISCONTINUED OPERATIONS AND EARNINGS PER 
SHARE PRESENTED IN ACCORDANCE WITH SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               JUN-30-1996<F1>
<CASH>                                             275
<SECURITIES>                                         0
<RECEIVABLES>                                    2,101
<ALLOWANCES>                                       135
<INVENTORY>                                      2,173
<CURRENT-ASSETS>                                 6,211
<PP&E>                                           3,523
<DEPRECIATION>                                     606
<TOTAL-ASSETS>                                  29,316
<CURRENT-LIABILITIES>                            5,017
<BONDS>                                         10,079
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      10,986
<TOTAL-LIABILITY-AND-EQUITY>                    29,316
<SALES>                                          5,408
<TOTAL-REVENUES>                                 5,408
<CGS>                                            3,384
<TOTAL-COSTS>                                    4,878
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 409
<INCOME-PRETAX>                                    123
<INCOME-TAX>                                        77
<INCOME-CONTINUING>                                 45
<DISCONTINUED>                                      24
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                        39
<EPS-PRIMARY>                                      .10
<EPS-DILUTED>                                      .10
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS TO PRIOR PERIODS'
FINANCIAL STATEMENTS TO CONFORM TO THE CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION 
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE NINE MONTHS 
ENDED SEPTEMBER 30, 1996 RESTATED FOR DISCONTINUED OPERATIONS AND EARNINGS 
PER SHARE PRESENTED IN ACCORDANCE WITH SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               SEP-30-1996<F1>
<CASH>                                             308
<SECURITIES>                                         0
<RECEIVABLES>                                    2,414
<ALLOWANCES>                                       124
<INVENTORY>                                      2,297
<CURRENT-ASSETS>                                 5,673
<PP&E>                                           3,688
<DEPRECIATION>                                     695
<TOTAL-ASSETS>                                  29,002
<CURRENT-LIABILITIES>                            3,788
<BONDS>                                         10,182
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      11,743
<TOTAL-LIABILITY-AND-EQUITY>                    29,002
<SALES>                                          8,675
<TOTAL-REVENUES>                                 8,675
<CGS>                                            5,353
<TOTAL-COSTS>                                    7,651
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 602
<INCOME-PRETAX>                                    424
<INCOME-TAX>                                       262
<INCOME-CONTINUING>                                154
<DISCONTINUED>                                   1,322
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     1,430
<EPS-PRIMARY>                                     3.89
<EPS-DILUTED>                                     3.85
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS TO PRIOR PERIODS'
FINANCIAL STATEMENTS TO CONFORM TO THE CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE YEAR ENDED
DECEMBER 31, 1996, WITH EARNINGS PER SHARE PRESENTED IN ACCORDANCE WITH 
SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               DEC-31-1996<F1>
<CASH>                                             209
<SECURITIES>                                         0
<RECEIVABLES>                                    2,254
<ALLOWANCES>                                       101
<INVENTORY>                                      2,342
<CURRENT-ASSETS>                                 5,718
<PP&E>                                           3,890
<DEPRECIATION>                                     734
<TOTAL-ASSETS>                                  28,834
<CURRENT-LIABILITIES>                            4,269
<BONDS>                                          9,856
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      11,383
<TOTAL-LIABILITY-AND-EQUITY>                    28,834
<SALES>                                         12,084
<TOTAL-REVENUES>                                12,084
<CGS>                                            7,605
<TOTAL-COSTS>                                   10,810
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 798
<INCOME-PRETAX>                                    481
<INCOME-TAX>                                       296
<INCOME-CONTINUING>                                171
<DISCONTINUED>                                   1,077
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     1,188
<EPS-PRIMARY>                                     3.26
<EPS-DILUTED>                                     3.23
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS AND
RECLASSIFICATIONS TO PRIOR PERIODS' FINANCIAL STATEMENTS TO CONFORM TO THE
CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE QUARTER ENDED
MARCH 31, 1997 WITH EARNINGS PER SHARE PRESENTED IN ACCORDANCE WITH SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               MAR-31-1997<F1>
<CASH>                                             261
<SECURITIES>                                         0
<RECEIVABLES>                                    2,088
<ALLOWANCES>                                       104
<INVENTORY>                                      2,455
<CURRENT-ASSETS>                                 5,881
<PP&E>                                           4,039
<DEPRECIATION>                                     873
<TOTAL-ASSETS>                                  29,079
<CURRENT-LIABILITIES>                            3,728
<BONDS>                                         10,753
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      11,347
<TOTAL-LIABILITY-AND-EQUITY>                    29,079
<SALES>                                          2,918
<TOTAL-REVENUES>                                 2,918
<CGS>                                            1,968
<TOTAL-COSTS>                                    2,744
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 197
<INCOME-PRETAX>                                   (23)
<INCOME-TAX>                                      (14)
<INCOME-CONTINUING>                               (24)
<DISCONTINUED>                                       5
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                      (34)
<EPS-PRIMARY>                                    (.10)
<EPS-DILUTED>                                    (.10)
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS TO PRIOR PERIODS'
FINANCIAL STATEMENTS TO CONFORM TO THE CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE SIX MONTHS 
ENDED JUNE 30, 1997 WITH EARNINGS PER SHARE PRESENTED IN ACCORDANCE WITH 
SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               JUN-30-1997<F1>
<CASH>                                             202
<SECURITIES>                                         0
<RECEIVABLES>                                    2,177
<ALLOWANCES>                                       114
<INVENTORY>                                      2,359
<CURRENT-ASSETS>                                 5,996
<PP&E>                                           4,151
<DEPRECIATION>                                     951
<TOTAL-ASSETS>                                  29,197
<CURRENT-LIABILITIES>                            3,889
<BONDS>                                         10,820
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      11,148
<TOTAL-LIABILITY-AND-EQUITY>                    29,197
<SALES>                                          5,949
<TOTAL-REVENUES>                                 5,949
<CGS>                                            4,217
<TOTAL-COSTS>                                    5,912
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 402
<INCOME-PRETAX>                                  (300)
<INCOME-TAX>                                     (114)
<INCOME-CONTINUING>                              (241)
<DISCONTINUED>                                      27
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     (244)
<EPS-PRIMARY>                                    (.69)
<EPS-DILUTED>                                    (.69)
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS TO PRIOR PERIODS'
FINANCIAL STATEMENTS TO CONFORM TO THE CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 WITH EARNINGS PER SHARE PRESENTED IN ACCORDANCE
WITH SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               SEP-30-1997<F1>
<CASH>                                             219
<SECURITIES>                                         0
<RECEIVABLES>                                    2,610
<ALLOWANCES>                                       112
<INVENTORY>                                      2,441
<CURRENT-ASSETS>                                 5,934
<PP&E>                                           4,229
<DEPRECIATION>                                   1,051
<TOTAL-ASSETS>                                  29,054
<CURRENT-LIABILITIES>                            4,056
<BONDS>                                          9,925
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      11,581
<TOTAL-LIABILITY-AND-EQUITY>                    29,054
<SALES>                                          9,596
<TOTAL-REVENUES>                                 9,596
<CGS>                                            6,503
<TOTAL-COSTS>                                    9,117
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 593
<INCOME-PRETAX>                                   (51)
<INCOME-TAX>                                       102
<INCOME-CONTINUING>                              (222)
<DISCONTINUED>                                     443
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                       176
<EPS-PRIMARY>                                      .50
<EPS-DILUTED>                                      .50
<FN>
<F1>RESTATEMENT REFLECTED HEREIN IS THE RESULT OF RESTATEMENTS TO PRIOR PERIODS'
FINANCIAL STATEMENTS TO CONFORM TO THE CURRENT PERIOD PRESENTATION.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF VIACOM INC. FOR THE YEAR ENDED DECEMBER 31,
1997 WITH EARNINGS PER SHARE PRESENTED IN ACCORDANCE WITH SFAS 128.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                             292
<SECURITIES>                                         0
<RECEIVABLES>                                    2,498
<ALLOWANCES>                                       100
<INVENTORY>                                      2,253
<CURRENT-ASSETS>                                 5,714
<PP&E>                                           4,320
<DEPRECIATION>                                   1,123
<TOTAL-ASSETS>                                  28,289
<CURRENT-LIABILITIES>                            5,053
<BONDS>                                          7,423
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,200
<COMMON>                                             4
<OTHER-SE>                                      12,180
<TOTAL-LIABILITY-AND-EQUITY>                    28,289
<SALES>                                         13,206
<TOTAL-REVENUES>                                13,206
<CGS>                                            8,863
<TOTAL-COSTS>                                   12,453
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 763
<INCOME-PRETAX>                                  1,223
<INCOME-TAX>                                       690
<INCOME-CONTINUING>                                375
<DISCONTINUED>                                     419
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                       734
<EPS-PRIMARY>                                     2.08
<EPS-DILUTED>                                     2.07
        

</TABLE>