Time Magazine 2010 Annual Report Download - page 61

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after the contract term expires. If Time Warner can unilaterally terminate an agreement simply by providing
a certain number of days notice or by paying a termination fee, the Company has included the amount of the
termination fee or the amount that would be paid over the “notice period.” Contracts that can be unilaterally
terminated without incurring a penalty have not been included.
The following table summarizes the Company’s purchase obligations at December 31, 2010 (millions):
Purchase Obligations Total 2011 2012-2013 2014-2015 Thereafter
Network programming obligations
(a)
....... $17,294 $2,543 $3,806 $2,960 $7,985
Creative talent and employment
agreements
(b)
...................... 1,866 1,004 709 144 9
Obligations to use certain printing facilities
for the production of magazines ........ 705 229 437 39 —
Advertising, marketing and sponsorship
obligations
(c)
...................... 785 394 207 179 5
Other, primarily general and administrative
obligations
(d)
...................... 765 274 169 128 194
Total purchase obligations .............. $21,415 $4,444 $5,328 $3,450 $8,193
(a)
The Networks segment enters into contracts to license sports programming to carry on its television networks. The amounts in the table
represent minimum payment obligations to sports leagues (e.g., NCAA, NBA, NASCAR, MLB) to air the programming over the contract
period. Included in the table above is $10.7 billion payable to the NCAA over the 14-year term of the agreement, which does not include
amounts recoupable from the other party to the agreement with the NCAA. The Networks segment also enters into licensing agreements
with certain movie studios to acquire the rights to air movies that the movie studios release theatrically. The pricing structures in these
contracts differ in that certain agreements can require a fixed amount per movie while others are based on a percentage of the movie’s box
office receipts (with license fees generally capped at specified amounts), or a combination of both. The amounts included in the table
represent obligations for movies that have been released theatrically as of December 31, 2010 and are calculated using the actual or
estimated box office performance or fixed amounts, based on the applicable contract.
(b)
The Company’s commitments under creative talent and employment agreements include obligations to executives, actors, producers,
authors, and other talent under contractual arrangements, including union contracts and other organizations that represent such creative
talent.
(c)
Advertising, marketing and sponsorship obligations include minimum guaranteed royalty and marketing payments to vendors and content
providers, primarily at the Networks and Filmed Entertainment segments.
(d)
Other includes obligations related to the Company’s postretirement and unfunded defined benefit pension plans, obligations to purchase
general and administrative items and services, construction commitments primarily at the Networks segment, outsourcing commitments
primarily at the Filmed Entertainment segment, a deferred purchase price obligation at the Networks segment, obligations to purchase
information technology licenses and services and payments due pursuant to certain technology arrangements.
Most of the Company’s other long-term liabilities reflected in the accompanying consolidated balance sheet
have been incorporated in the estimated timing of cash payments provided in the summary of contractual
obligations, the most significant of which is an approximate $1.227 billion liability for film licensing
obligations. However, certain long-term liabilities and deferred credits have been excluded from the summary
because there are no cash outflows associated with them (e.g., deferred revenue) or because the cash outflows
associated with them are uncertain or do not represent a purchase obligation as it is used herein (e.g., deferred taxes,
participations and royalties, deferred compensation and other miscellaneous items).
49
TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)