Time Magazine 2013 Annual Report Download - page 56

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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
The components of Costs of revenues for the Warner Bros. segment are as follows (millions):
Year Ended December 31, % Change
2013 2012 2011 2013 vs. 2012 2012 vs. 2011
Film and television production costs . . $ 5,620 $ 5,598 $ 5,488 — 2%
Print and advertising costs .......... 1,935 1,854 2,317 4% (20%)
Other costs, including merchandise and
related costs ................... 1,119 1,051 1,276 6% (18%)
Costs of revenues(a) ................ $ 8,674 $ 8,503 $ 9,081 2% (6%)
(a) Costs of revenues exclude depreciation.
2013 vs. 2012
The increase in Content revenues for the year ended December 31, 2013 included the net unfavorable impact
of foreign exchange rates of approximately $110 million.
Theatrical product revenues from film rentals increased for the year ended December 31, 2013, reflecting
higher revenues of $315 million from theatrical films released during 2013, partially offset by lower carryover
revenues of $51 million from prior period releases. The Company released 18 and 17 theatrical films during 2013
and 2012, respectively.
For the year ended December 31, 2013, theatrical product revenues from home video and electronic delivery
decreased due to lower revenues of $140 million from prior period releases, which include catalog titles, partially
offset by higher revenues of $64 million from releases in 2013. There were 18 and 21 home video and electronic
delivery releases in 2013 and 2012, respectively.
Theatrical product revenues from television licensing decreased for the year ended December 31, 2013
primarily due to fewer availabilities in 2013 as compared to 2012.
Television product revenues from licensing for the year ended December 31, 2013 decreased due to the
timing of worldwide television availabilities.
The decrease in television product revenues from home video and electronic delivery for the year ended
December 31, 2013 was primarily due to lower revenues from consumer packaged goods, partially offset by
higher revenues from availabilities of television product to SVOD services.
Other content revenues increased for the year ended December 31, 2013 primarily due to higher revenues of
$297 million from videogames released in 2013, partially offset by lower carryover revenues of $76 million from
videogames released in prior periods. The Company released 10 videogames in both 2013 and 2012. In addition,
other content revenues increased for the year ended December 31, 2013 due to higher publishing and consumer
products revenues.
Included in film and television production costs are production costs related to videogames, as well as
theatrical film valuation adjustments resulting from revisions to estimates of ultimate revenue for certain
theatrical films. Theatrical film valuation adjustments for the years ended December 31, 2013 and 2012 were $51
million and $92 million, respectively. Film and television production costs were essentially flat as higher costs
for videogames, including impairments for certain videogame production costs, which were $53 million in 2013
and $7 million in 2012, were offset by lower theatrical film valuation adjustments and lower amortization costs
for theatrical films. The increase in print and advertising costs was primarily due to the mix and quantity of
theatrical films and videogames released. Other costs, including merchandise and related costs, increased
primarily due to higher distribution costs associated with videogames and home video sales.
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