Time Magazine 2011 Annual Report Download - page 27

RISK FACTORS
RISKS RELATING TO TIME WARNER GENERALLY
The Company must respond to recent and future changes in technology and consumer behavior to remain
competitive and continue to increase its revenues. Technology, particularly digital technology used in the
entertainment and media industry, continues to evolve rapidly, and advances in that technology have led to
alternative methods for the distribution, storage and consumption of digital content. These technological
developments have driven and reinforced changes in consumer behavior as consumers seek more control over
when, where and how they consume digital content. For example, consumer electronics innovations have enabled
consumers to view Internet-delivered content, including films, television programming and magazines, on
televisions, computers, tablets, smartphones and other portable electronic devices. These changes in technology
and consumer behavior have resulted in a number of challenges and risks for the Company and other content
owners and aggregators. For example, technological developments may disrupt traditional distribution platforms
by enabling content owners to provide content directly to distributors and consumers, thus bypassing traditional
network aggregators such as the Company’s networks. In addition, the availability of content on multiple
platforms may reduce the value or shorten the lifespan of that content on traditional distribution platforms,
including in subsequent distribution windows. The Company’s failure to protect the value of its content while
adapting to emerging technologies and changes in consumer behavior could have a significant adverse effect on
the Company’s businesses and results of operations.
Technological developments also pose other challenges for the Company’s business segments that could
adversely affect its revenues and competitive position. For example, new delivery platforms could lead to the loss
of distribution control and direct relationships with consumers for the Publishing segment if distribution on a
delivery platform is controlled by a limited number of companies. Furthermore, new technology or business
initiatives supported by the Company may not be embraced by consumers, advertisers or others in the media and
entertainment industry, and therefore may not develop into profitable business models, which could have a
significant adverse effect on the Company’s competitive position and its businesses and results of operations.
The Company faces risks relating to increasing competition for the leisure and entertainment time and
discretionary spending of consumers, which has intensified in part due to technological developments and
changes in consumer behavior. The Company’s businesses compete with each other and all other sources of
entertainment, news and other information, including television, premium pay television services, films, the
Internet, home video products, videogames, social networking sites, sports, print media, live events and radio
broadcasts, for consumers’ leisure and entertainment time and discretionary spending. Technological
developments, such as tablets and other portable electronic devices, video-on-demand, new video formats and
Internet-delivered content, have increased the number of media and entertainment choices available to consumers
and intensified the challenges posed by audience fragmentation. The increasing number of leisure and
entertainment choices available to consumers, including low-cost or free choices, new technologies that allow
consumers to make and store digital copies of programming and the increasing availability of programming
online, could negatively affect consumer demand for the Company’s content, products and services, the prices
content aggregators are willing to pay to license the Company’s content and advertising rates and demand, which
could reduce the Company’s revenues and could also result in the Company incurring additional marketing
expenses.
The popularity of the Company’s content is difficult to predict, can change rapidly and could lead to
fluctuations in the Company’s revenues, and low public acceptance of the Company’s content may adversely
affect its results of operations. The production and distribution of films, television programming, videogames,
magazines and other content are inherently risky businesses, largely because the revenues derived from the
production, distribution and sale or licensing of such content depend primarily on public acceptance, which is
difficult to predict. In addition, the Company must invest substantial amounts in the production of feature films,
programming for its networks and premium pay television services and the development of videogames before it
learns whether these films, programs and products will reach anticipated levels of popularity with consumers. With
the theatrical release of the final Harry Potter film in 2011, the Filmed Entertainment segment also faces increasing
pressure to develop successful new franchises or build on existing brands by leveraging existing intellectual
property, including through the development of sequels. As more television networks and premium pay television
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