Time Magazine 2010 Annual Report Download - page 25

segment faces increasing pressure to develop new franchises or extend current franchises. Public acceptance of new
original television programming and new theatrical films and interactive videogames is particularly difficult to
predict, which heightens the risks associated with such content. The public acceptance of the Company’s content
depends on many factors, only some of which are within the Company’s control. Examples include the quality and
acceptance of competing content, including locally produced content, available or released at or near the same time,
the availability of alternative forms of leisure and entertainment time activities, the adequacy of efforts to limit
piracy, the Company’s ability to develop strong brand awareness and target key audience demographics, the
Company’s ability to anticipate and adapt to changes in consumer tastes and behavior on a timely basis and general
economic conditions. If the Company is not able to create and distribute content, products and services that earn
consumer acceptance, the Company’s revenues and its results of operations could be adversely affected.
The popularity of the Company’s content is reflected in (1) the theatrical performance of the Filmed
Entertainment segment’s films, (2) the ratings for the television programming produced by the Filmed
Entertainment segment and the syndicated, licensed and original programming of the Networks segment,
(3) the Publishing segment’s magazine circulation and (4) the number of unique visitors to the Company’s
many websites. Historically, there has been a correlation between a theatrical film’s domestic box office success and
international box office success, as well as a correlation between box office success and success in subsequent
distribution channels. Consequently, the underperformance of a film, particularly an “event” film (which typically
has high production and marketing costs) or a film that is part of a franchise, can have an adverse impact on the
Company’s results of operations in both the year of release and in the future. A film’s underperformance may also
adversely affect revenues from other distribution channels, such as home entertainment and pay television services,
and sales of interactive videogames and licensed consumer products based on such film. In addition, due to the
decline in the sales of DVDs, the success of a theatrical film is much more dependent on public acceptance at the
box office. A decline in the ratings or audience delivery of the television programming produced by the Filmed
Entertainment segment or shown by Turner can negatively affect license fees, syndication results, advertising
demand and rates, affiliate fees and a network’s distribution potential. For Home Box Office, a decline in the
popularity of its television programming can negatively affect license fees, syndication results, affiliate fees and the
distribution potential of its premium pay television services. For the Publishing segment, a decrease in magazine
circulation or the number of unique visitors for its websites can lead to lower advertising demand and rates.
The Company’s businesses operate in highly competitive industries. The businesses in the Networks and
Filmed Entertainment segments face intense competition from many different sources, and the ability of these businesses
to compete successfully depends on many factors, including their ability to provide high-quality, popular content, adapt
to new technologies and distribution platforms, respond to changes in consumer behavior and achieve widespread
distribution. Consolidation in the U.S. and international entertainment and media industry also has resulted in increased
competition for the Company. In addition, the Networks and Filmed Entertainment segments’ competitors include
industry participants with interests in other multiple media businesses that are vertically integrated.
The Publishing segment faces significant competition from several direct competitors and other media,
including the Internet. Moreover, additional competitors may enter the digital publishing business and further
intensify competition, which could have an adverse impact on the segment’s revenues.
There can be no assurance that the Company and its businesses will be able to compete successfully in the
future against existing or potential competitors. The failure to compete successfully may have an adverse effect on
the Company’s businesses or results of operations.
The Company has been in the recent past, and may continue to be, adversely affected by weak economic and
market conditions. The Company’s businesses have been, and in the future will continue to be, affected by
economic and market conditions, including factors such as the rate of unemployment, the level of consumer
confidence, changes in consumer spending habits, and interest rates. Because many of the Company’s products and
services are largely discretionary items, the deterioration of the economy in the U.S. or key international markets
could diminish demand for the Company’s products and services and adversely affect the Company’s subscription
and content revenues. In addition, expenditures by advertisers tend to be cyclical, reflecting general economic
conditions. The deterioration of these conditions could adversely affect the Company’s revenues since the Networks
and Publishing segments derive a substantial portion of their revenues from the sale of advertising on a variety of
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