Time Magazine 2014 Annual Report Download - page 26

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Feature Films
Warner Bros. is a leader in the feature film business and produces feature films under its Warner Bros. and New Line
Cinema banners. Warner Bros. also enters into arrangements with others to co-produce and co-finance feature films. Warner
Bros. produces and distributes a wide-ranging slate of films, and it is focused on expanding its film slate, built around its
strongest franchises with global appeal.
During 2014, Warner Bros. released 21 original feature films for distribution in the U.S., including Annabelle,Edge of
Tomorrow,Godzilla,The Hobbit: The Battle of the Five Armies,The LEGO Movie and Tammy. Of the films released during
2014, five were released in 3D format, including Godzilla and The LEGO Movie, and five were formatted for viewing on
IMAX screens, including Edge of Tomorrow and The Hobbit: The Battle of the Five Armies. In January 2015, Warner Bros.
widely released American Sniper, and in February and March 2015, Warner Bros. released Jupiter Ascending,Focus,Get
Hard and Run All Night. Warner Bros. plans to release an additional 17 films during 2015, including Entourage,Mad Max:
Fury Road,Magic Mike XXL,Pan and San Andreas.
Internationally, Warner Bros. produces and distributes both English language as well as local language films for theatrical
exhibition in more than 170 territories outside the U.S. Warner Bros. uses both day and date and a staggered release schedule
for its international releases. In 2014, Warner Bros. released internationally 20 English-language films and 29 local-language
films that it either produced itself or acquired from other companies.
After the theatrical exhibition of its feature films, Warner Bros. releases them both domestically and internationally for
distribution in various time periods through a variety of distribution channels. Feature films are released for sale through EST
and on DVDs and Blu-ray Discs approximately three to six months following their release in theaters. After that, Warner
Bros. licenses the feature films for domestic and international distribution to premium pay television services (including
HBO and Cinemax), broadcast and basic cable networks, (including Turner’s cable networks) and SVOD and other digital
services and, in most cases, other exhibitors such as airlines and hotels.
The revenues generated by Warner Bros.’ feature film business primarily consist of (i) rental fees paid by theaters for the
theatrical exhibition of feature films produced (or co-produced) and/or distributed by Warner Bros., (ii) licensing fees paid
by television networks, premium pay television services and SVOD services for the exhibition of feature films produced or
co-produced by Warner Bros. and (iii) revenues from the distribution of Warner Bros.’ and other companies’ feature films on
physical discs and in digital formats.
Warner Bros. produces most of its films under co-financing arrangements, which give Warner Bros. a greater ability to
manage the financial risks of its film slate and offset some of the significant costs involved in the production, marketing and
distribution of feature films, particularly event films. In most cases, Warner Bros. maintains worldwide distribution rights for
the films it co-finances with others. Warner Bros. has co-financing arrangements with Village Roadshow Pictures,
Metro-Goldwyn-Mayer Pictures Inc. and RatPac-Dune Entertainment (“RatPac-Dune”). Under Warner Bros.’ multi-year
agreement with RatPac-Dune, RatPac-Dune has agreed to co-finance as many as 75 of Warner Bros.’ films by contributing
capital for and receiving equity in such films. Warner Bros. also monetizes its distribution and marketing operations by
distributing films that are totally financed and produced by others, and it has an exclusive distribution arrangement with
Alcon Entertainment.
Home Entertainment
Warner Bros. also generates revenues through the home entertainment distribution of its film and television content on
DVDs and Blu-ray Discs and various digital formats. Warner Bros. continues to be a leader in the home entertainment
industry, and its significant home entertainment releases during 2014 include Gravity,The Hobbit: The Desolation of Smaug
and The LEGO Movie. The home entertainment industry has been undergoing significant changes as it transitions from the
physical distribution of film and television content via DVDs and Blu-ray Discs to the digital delivery of such content. In
recent years, consumer spending on physical discs has declined as a result of several factors, including consumers shifting to
subscription rental services and discount rental kiosks; increasing competition for consumer discretionary time and spending;
and piracy. Consumer spending on the digital delivery of film and television content has been increasing in recent years, but
that growth has not fully offset declines in consumer spending on physical discs.
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