Time Magazine 2012 Annual Report Download - page 41

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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
Company changed the name of its Filmed Entertainment reportable segment to Film and TV Entertainment. This
change did not affect the composition of the segment; accordingly, all prior period financial information related
to this reportable segment was unaffected.
Networks. Time Warner’s Networks segment consists of Turner Broadcasting System, Inc. (“Turner”) and
Home Box Office, Inc. (“Home Box Office”). During the year ended December 31, 2012, the Networks segment
recorded Revenues of $14.204 billion (49% of the Company’s total Revenues) and $4.719 billion in Operating
Income.
Turner operates domestic and international networks, including such recognized brands as TNT, TBS, truTV,
CNN and Cartoon Network, which are among the leaders in advertising-supported television networks. The
Turner networks generate revenues principally from providing programming to affiliates that have contracted to
receive and distribute this programming to subscribers and from the sale of advertising. Turner also provides
online and mobile offerings for on-demand viewing of programs on its networks and live streaming of CNN,
HLN and Cartoon Network to authenticated subscribers. Turner also manages and operates various digital media
properties that primarily consist of brand-aligned websites, including CNN.com,NBA.com and related properties,
NCAA.com and cartoonnetwork.com that generate revenues principally from the sale of advertising and
sponsorships.
Home Box Office operates the HBO and Cinemax domestic multi-channel premium pay television services,
with the HBO service ranking as the most widely distributed domestic multi-channel premium pay television
service. HBO- and Cinemax-branded premium pay and basic tier television services are distributed in more than
60 countries in Latin America, Asia and Europe. HBO and Cinemax domestic pay television subscribers have
access to the authenticated HBO GO and MAX GO streaming services, respectively, on various online and
mobile platforms, and an authenticated HBO GO streaming service is available to international premium pay
television subscribers of HBO in a number of countries. Home Box Office generates revenues principally from
providing programming to affiliates that have contracted to receive and distribute such programming to their
customers who subscribe to the HBO or Cinemax services. Additional sources of revenues for Home Box Office
are the sale of its original programming via DVDs, Blu-ray Discs and electronic sell-through (“EST”) and the
licensing of original programming primarily to international television networks. HBO’s original programming
includes Game of Thrones,True Blood and Boardwalk Empire.
During the year ended December 31, 2012, Turner shut down its general entertainment network, Imagine, in
India and its TNT television operations in Turkey (collectively, the “Imagine and TNT Turkey Shutdowns”) as a
result of the failure to meet performance and growth objectives. For the year ended December 31, 2012, the
Company recognized $208 million of charges related to the Imagine and TNT Turkey Shutdowns. These
shutdowns allow the Company to redirect its resources toward opportunities with stronger growth prospects. See
“Transactions and Other Items Affecting Comparability” as well as Note 3, “Business Acquisitions and
Dispositions,” to the accompanying consolidated financial statements for further information.
The Company anticipates that international expansion will continue to be an area of focus at the Networks
segment for the foreseeable future.
Over the next several years, the Company expects subscription revenues generated by basic cable networks
and premium pay television services in the industry to grow as a result of affiliate rate increases driven by
investments in high quality programming.
Film and TV Entertainment. Time Warner’s Film and TV Entertainment segment consists of businesses
managed by Warner Bros. Entertainment Inc. (“Warner Bros.”) that principally produce and distribute feature
films, television shows and videogames. During the year ended December 31, 2012, the Film and TV
Entertainment segment recorded Revenues of $12.018 billion (39% of the Company’s total Revenues) and
$1.228 billion in Operating Income.
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