Time Magazine 2013 Annual Report Download - page 54

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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
2013 vs. 2012
The increase in Subscription revenues for the year ended December 31, 2013 was primarily due to an
increase in domestic subscription revenues of $165 million driven primarily by higher rates. In addition, the 2013
consolidation of HBO Asia and HBO Nordic contributed $48 million of Subscription revenues for the year ended
December 31, 2013.
The decrease in Content revenues for the year ended December 31, 2013 was primarily due to lower home
video revenues mainly as a result of lower library sales.
The decrease in Costs of revenues for the year ended December 31, 2013 was primarily due to lower other
direct operating costs mainly as a result of a reduction of a receivable allowance. Originals and sports
programming costs for the year ended December 31, 2013 were flat as lower programming impairments were
offset by higher costs for originals and sports programming. In addition, acquired films and syndicated series
programming costs were essentially flat as costs associated with the consolidation of HBO Asia and HBO Nordic
were largely offset by lower costs for acquired films.
For the year ended December 31, 2013, Selling, general and administrative expenses increased mainly due to
higher domestic marketing expenses of $29 million, higher domestic employee-related costs of $17 million and
$15 million of costs associated with the consolidation of HBO Asia and HBO Nordic.
As previously noted under “Transactions and Other Items Affecting Comparability,” the results for the year
ended December 31, 2013 included a $104 million gain that was recognized upon the Company’s acquisition of
the controlling interests in HBO Asia and a $9 million gain that was recognized upon the Company’s acquisition
of the controlling interest in HBO Nordic.
For the year ended December 31, 2013, Restructuring and severance costs increased due largely to higher
executive severance costs.
The increase in Operating Income for the year ended December 31, 2013 was primarily due to higher
Revenues and Gains on operating assets, partially offset by higher Selling, general and administrative expenses.
2012 vs. 2011
The increase in Subscription revenues for the year ended December 31, 2012 was primarily due to higher
domestic subscription rates.
The decrease in Content revenues for the year ended December 31, 2012 was primarily due to lower original
programming licensing revenues.
The increase in Costs of revenues for the year ended December 31, 2012 was driven by higher originals and
sports programming costs, including a $37 million impairment related to the cancellation of an original series, as
well as higher other direct operating costs due to higher employee-related costs and an increase of a receivable
allowance, partially offset by lower acquired films and syndicated series programming costs.
For the year ended December 31, 2012, Selling, general and administrative expenses decreased primarily due
to lower marketing expenses in 2012 as compared to 2011, which included an HBO GO national marketing
campaign.
The increase in Operating Income was due primarily to higher revenues and lower Selling, general and
administrative expenses, partially offset by higher Costs of revenues.
38