Time Magazine 2011 Annual Report Download - page 52

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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
Business Segment Results
Networks. Revenues and Operating Income of the Networks segment for the years ended December 31,
2010 and 2009 are as follows (millions):
Year Ended December 31,
2010 2009 % Change
Revenues:
Subscription ......................................... $ 7,671 $ 7,077 8%
Advertising ......................................... 3,736 3,272 14%
Content ............................................ 942 819 15%
Other .............................................. 131 85 54%
Total revenues ......................................... 12,480 11,253 11%
Costs of revenues(a) ...................................... (5,732) (5,349) 7%
Selling, general and administrative(a) ........................ (2,200) (2,002) 10%
Gain on operating assets ................................. 59 — NM
Asset impairments ...................................... — (52) (100%)
Restructuring and severance costs .......................... (6) (8) (25%)
Depreciation .......................................... (342) (338) 1%
Amortization .......................................... (35) (34) 3%
Operating Income ...................................... $ 4,224 $ 3,470 22%
(a) Costs of revenues and Selling, general and administrative expenses exclude depreciation.
The increase in Subscription revenues consisted of an increase in domestic subscription revenues of
$406 million, mainly due to higher domestic subscription rates, and an increase in international subscription
revenues of $188 million, primarily due to the consolidation of HBO CE. Home Box Office’s domestic
subscribers declined by 1.6 million during 2010; however, as these subscribers generated very little or no
revenue, the decline had almost no impact on Subscription revenues.
The increase in Advertising revenues reflected domestic growth of $248 million at Turner mainly as a result
of strong pricing. Advertising revenues also increased $216 million due to international expansion and growth.
The increase in Content revenues was due primarily to higher sales of Home Box Office’s original
programming of $104 million and higher licensing revenues at Turner of $22 million, partially offset by a
decrease of approximately $20 million due to a larger benefit in 2009 associated with lower than anticipated
home video returns.
The components of Costs of revenues for the Networks segment are as follows (millions):
Year Ended December 31,
2010 2009 % Change
Programming costs:
Originals and sports .................................... $ 2,661 $ 2,316 15%
Acquired films and syndicated series ....................... 1,824 1,942 (6%)
Total programming costs .................................. 4,485 4,258 5%
Other direct operating costs ................................ 1,247 1,091 14%
Costs of revenues(a) ....................................... $ 5,732 $ 5,349 7%
(a) Costs of revenues exclude depreciation.
38