Comcast 2006 Annual Report Download - page 53

51 Comcast 2006 Annual Report Notes to Consolidated Financial Statements
The results of operations of the Susquehanna cable systems
have been included in our consolidated financial statements since
the acquisition date and are reported in our Cable segment. We
allocated the purchase price to property and equipment, franchise-
related customer relationship intangibles, nonamortizing cable
franchise rights and goodwill. The acquisition of the Susquehanna
cable systems was not significant to our consolidated financial
statements for 2006.
Motorola
In March 2005, we entered into two joint ventures with Motorola
under which we are developing and licensing next-generation
programming access security (known as “conditional access”)
technology for cable systems and related products. One of the
ventures will license such products to equipment manufactur-
ers and other cable companies. The other venture will provide us
greater participation in the design and development of conditional
access technology for our cable systems. In addition to funding
approximately 50% of the annual cost requirements, we have paid
$20 million to Motorola and have committed to pay up to $80 mil-
lion to Motorola over a four-year period based on the achievement
of certain milestones. Motorola contributed licenses to conditional
access and related technology to the ventures.
These two ventures are both considered VIEs and we have con-
solidated both of these ventures as we are considered the primary
beneficiary. Accordingly, we have recorded approximately $190
million in intangible assets, of which we recorded a charge of
approximately $20 million related to in-process research and devel-
opment in 2005 that has been included in amortization expense.
Liberty Media Exchange Agreement
In July 2004, we exchanged approximately 120 million shares of
Liberty Media Corporation (“Liberty Media”) Series A common
stock that we held, valued at approximately $1.022 billion based
upon the price of Liberty Media common stock on the closing date
of the transaction with Liberty Media for 100% of the stock of Lib-
erty’s subsidiary, Encore ICCP, Inc. Encore’s assets consisted of
cash of approximately $547 million, a 10.4% interest in E! Enter-
tainment Television and 100% of International Channel Networks
(which operates AZN Television). We also received all of Liberty
Media’s rights, benefits and obligations under the TCI Music con-
tribution agreement, which resulted in the resolution of all pending
litigation between Liberty Media and us regarding the contribution
agreement. The exchange was structured as a tax-free transaction.
We allocated the value of the shares exchanged in the transaction
among cash, our additional investment in E! Entertainment Tele-
vision, International Channel Networks and the resolution of the
litigation related to the contribution agreement. The effects of our
acquisition of the additional interest in E! Entertainment Television
and our acquisition of International Channel Networks have been
reflected in our consolidated statement of operations from the date
of the transaction.
TechTV
In May 2004, we completed the acquisition of TechTV Inc. by
acquiring all outstanding common and preferred stock of TechTV
from Vulcan Programming Inc. for approximately $300 million in
cash. Substantially all of the purchase price has been recorded
to intangible assets and is being amortized over a period of 2 to
22 years. On May 28, 2004, G4 and TechTV began operating as
one network. The effects of our acquisition of TechTV have been
reflected in our consolidated statement of operations from the date
of the transaction. We have classified G4 as part of our Program-
ming segment.
Gemstar
In March 2004, we entered into a long-term, non-exclusive patent
license and distribution agreement with Gemstar-TV Guide Inter-
national (“Gemstar”) in exchange for a one-time payment of $250
million to Gemstar. If our total subscribers exceed a specified
threshold, we will be required to make additional one-time pay-
ments to Gemstar for each subscriber in excess of such threshold.
This agreement allows us to utilize Gemstar’s intellectual property
and technology and the TV Guide brand and content on our inter-
active program guides. We have allocated the $250 million amount
paid based on the fair value of the components of the contract to
various intangible and other assets, which are being amortized over
a period of 3 to 12 years. In addition, we and Gemstar formed an
entity to develop and enhance interactive programming guides.
Note 6: Investments
December 31 (in millions) 2006 2005
Fair value method
Cablevision Systems Corporation $ 146 $ 120
Discovery Holding Company 161 152
Embarq Corporation 69 —
Liberty Capital 490 —
Liberty Global 439 336
Liberty Interactive 539 —
Liberty Media — 787
Sprint Nextel 493 614
Time Warner 1,052 994
Vodafone 61 54
Other 63 90
3,513 3,147
Equity method, principally cable-related 5,394 2,823
Cost method, principally AirTouch as of
December 31, 2006, and
Time Warner Cable and AirTouch as of
December 31, 2005 1,675 6,853
Total investments 10,582 12,823
Less current investments 1,735 148
Noncurrent investments $ 8,847 $ 12,675