Time Magazine 2010 Annual Report Download - page 117

to continue to provide credit support for certain AOL lease and trade obligations, of which approximately
$13 million remained as of February 16, 2011. Time Warner’s obligation to provide AOL with the credit
support ends on the earlier of December 9, 2011 and 30 days after AOL completes certain specified
financing activities.
• Generally, letters of credit and surety bonds support performance and payments for a wide range of global
contingent and firm obligations, including insurance, litigation appeals, import of finished goods, real
estate leases and other operational needs. Other contingent commitments primarily include amounts
payable representing contingent consideration on certain acquisitions, which if earned would require the
Company to pay a portion or all of the contingent amount, and contingent payments for certain put/call
arrangements, whereby payments could be made by the Company to acquire assets, such as a venture
partner’s interest or a co-financing partner’s interest in one of the Company’s films.
Time Warner does not guarantee the debt of any of its investments accounted for using the equity method of
accounting.
Programming Licensing Backlog
Programming licensing backlog represents the amount of future revenues not yet recorded from cash contracts
for the licensing of theatrical and television product for pay cable, basic cable, network and syndicated television
exhibition. Because backlog generally relates to contracts for the licensing of theatrical and television product that
have already been produced, the recognition of revenue for such completed product is principally dependent on the
commencement of the availability period for telecast under the terms of the related licensing agreement. Cash
licensing fees are collected periodically over the term of the related licensing agreements. Backlog was
approximately $5.2 billion and $4.5 billion at December 31, 2010 and 2009, respectively. Included in these
amounts is licensing of film product from the Filmed Entertainment segment to the Networks segment in the amount
of $1.3 billion and $1.1 billion at December 31, 2010 and 2009, respectively. Backlog excludes filmed
entertainment advertising barter contracts, which are also expected to result in the future realization of
revenues and cash through the sale of the advertising spots received under such contracts to third parties.
Contingencies
On October 8, 2004, certain heirs of Jerome Siegel, one of the creators of the “Superman” character, filed suit
against the Company, DC Comics and Warner Bros. Entertainment Inc. in the U.S. District Court for the Central
District of California. Plaintiffs’ complaint seeks an accounting and demands up to one-half of the profits made on
Superman since the alleged April 16, 1999 termination by plaintiffs of Siegel’s grants of one-half of the rights to the
Superman character to DC Comics’ predecessor-in-interest. Plaintiffs have also asserted various Lanham Act and
unfair competition claims and alleging “wasting” of the Superman property by DC Comics, and the Company has
filed counterclaims. On March 26, 2008, the court entered an order of summary judgment finding, among other
things, that plaintiffs’ notices of termination were valid and that plaintiffs had thereby recaptured, as of April 16,
1999, their rights to a one-half interest in the Superman story material, as first published, but that the accounting for
profits would not include profits attributable to foreign exploitation, republication of pre-termination works and
trademark exploitation. On October 6, 2008, the court dismissed plaintiffs’ Lanham Act and “wasting” claims with
prejudice, and subsequently determined that the remaining claims in the case will be subject to phased non-jury
trials. On July 8, 2009, the court issued a decision in the first phase trial in favor of the defendants on the issue of
whether the terms of various license agreements between DC Comics and Warner Bros. Entertainment Inc. were at
fair market value or constituted “sweetheart deals.” The parties are awaiting a new date for the commencement of
the second phase trial.
On October 22, 2004, the same Siegel heirs filed a related lawsuit against the same defendants, as well as
Warner Communications Inc. and Warner Bros. Television Production Inc. in the U.S. District Court for the Central
District of California. Plaintiffs claim that Siegel was the sole creator of the character Superboy and, as such, DC
105
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)