Time Magazine 2012 Annual Report Download - page 33

The Company is exposed to risks associated with weak domestic and global economic conditions and
increased volatility and disruption in the financial markets. The Company has been adversely affected by
weak domestic and global economic conditions in the recent past, and it will be adversely affected in the future if
such conditions continue. Factors that affect economic conditions include the level of household formation, the
rate of unemployment, the level of consumer confidence and changes in consumer spending habits. The
Company also faces risks associated with the impact of weak domestic and global economic conditions on third
parties such as advertisers, affiliates, suppliers, retailers, insurers, theater operators and other parties with which
it does business. For example, if retailers file for reorganization under bankruptcy laws or otherwise experience
negative effects on their businesses due to volatile or weak economic conditions, it could reduce the number of
outlets for the Company’s DVDs, Blu-ray Discs and magazines and otherwise negatively affect the Company’s
businesses or operating results.
Certain of the Company’s operations are conducted in foreign currencies, and the value of these currencies
fluctuates relative to the U.S. dollar. As a result, the Company is exposed to exchange rate fluctuations, which in
the past have had, and in the future could have, an adverse effect on its results of operations in a given period.
The foregoing risks could increase significantly if one or more countries in the European Monetary Union stop
recognizing the Euro and instead issue national currencies or if there is a break-up of the European Monetary
Union or a departure of one or more countries from the Union. Any such developments in Europe could also
adversely affect consumer confidence and potentially increase the costs of goods and services in some countries,
which would adversely affect the Company’s businesses.
Increased volatility and disruptions in the financial markets also could make it more difficult and more
expensive for the Company to refinance outstanding indebtedness and obtain new financing. In addition, the
adoption of new statutes and regulations, the implementation of recently enacted laws or new interpretations or
the enforcement of older laws and regulations applicable to the financial markets or the financial services
industry could result in a reduction in the amount of available credit or an increase in the cost of credit.
Disruptions in the financial markets can also adversely affect the Company’s lenders, insurers, customers and
counterparties, including vendors, retailers and film co-financing partners. For instance, the inability of the
Company’s counterparties to obtain capital on acceptable terms could impair their ability to perform under their
agreements with the Company and lead to various negative effects on the Company, including business
disruptions, decreased revenues, increases in bad debt expenses and, in the case of film co-financing partners,
greater risk to the Company with respect to the performance of its feature films.
A decline in advertising expenditures or further deterioration in advertising market conditions or other
factors that adversely impact advertising could cause the Company’s revenues and operating results to
decline. The Company derives substantial revenues from the sale of advertising on its networks, syndicated
programming, magazines and online properties, and a decrease in advertising expenditures overall or reduced
demand for the Company’s offerings could lead to a reduction in the amount of advertising companies are
willing to purchase from the Company and the price at which they purchase it. Expenditures by advertisers tend
to be cyclical, reflecting domestic and global economic conditions, as well as budgeting and buying patterns. If
the economic prospects of advertisers worsen or the current economic conditions persist or worsen, such
conditions could alter current or prospective advertisers’ spending priorities. For example, corporate marketing
cutbacks due to weak economic conditions could result in upfront advertising purchases being cancelled.
Declines in consumer spending due to weak economic conditions could also indirectly negatively impact the
Company’s advertising revenues by causing downward pricing pressure on advertising because advertisers may
not perceive as much value from advertising if consumers are purchasing fewer of their products or services.
Other factors in addition to weak economic conditions could adversely affect advertising expenditures,
including decreases in the size of audiences and a shift away from print advertising. Advertising sales and rates
are dependent on audience size, and advertisers’ willingness to purchase advertising from the Company may be
adversely affected by a decline in audience ratings or the number of unique visitors at the Networks segment’s
websites or a decline in circulation, magazine readership or the number of unique visitors at the Publishing
segment’s websites. If audience levels decline significantly, the Networks segment’s cable networks generally
will be required to provide additional advertising units to advertisers to reach agreed upon audience thresholds.
This may result in the cable networks having less inventory available to sell to other advertisers or to use to
17