Time Magazine 2014 Annual Report Download - page 37

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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
OVERVIEW
Time Warner is a leading media and entertainment company whose major businesses encompass an array of the most
respected and successful media brands. Among the Company’s brands are TNT, TBS, Adult Swim, Cartoon Network, CNN,
HBO, Cinemax, Warner Bros. and New Line Cinema. During the year ended December 31, 2014, the Company generated
Revenues of $27.359 billion (up 3% from $26.461 billion in 2013), Operating Income of $5.975 billion (down 5% from
$6.268 billion in 2013), Income from continuing operations of $3.894 billion (up 16% from $3.354 billion in 2013), Net
Income attributable to Time Warner shareholders of $3.827 billion (up 4% from $3.691 billion in 2013) and Cash provided
by operations from continuing operations of $3.681 billion (up 13% from $3.258 billion in 2013).
Time Warner Businesses
Time Warner classifies its operations into three reportable segments: Turner, Home Box Office and Warner Bros. For
additional information regarding Time Warner’s segments, refer to Note 15, “Segment Information,” to the accompanying
consolidated financial statements.
Turner. Time Warner’s Turner segment consists of businesses managed by Turner Broadcasting System, Inc.
(“Turner”). During the year ended December 31, 2014, the Turner segment recorded Revenues of $10.396 billion (38% of
the Company’s total Revenues) and Operating Income of $2.954 billion.
Turner operates domestic and international television networks and related properties that offer entertainment, sports, kids
and news programming on television and digital platforms for consumers around the world. The Turner networks and related
properties include TNT, TBS, Adult Swim, truTV, Turner Classic Movies, Turner Sports, Cartoon Network, Boomerang,
CNN and HLN. The Turner networks generate revenues principally from providing programming to affiliates that have
contracted to receive and distribute this programming to subscribers, from the sale of advertising and from licensing its
original programming, including to subscription-video-on-demand (“SVOD”) services, and its brands and characters for
consumer products. Turner’s programming is available to subscribers of affiliates for viewing on television; on demand on
television; and via streaming online and on mobile devices through Turner’s digital properties and services provided by
affiliates. Turner also manages and operates various digital media properties that primarily consist of websites, including
bleacherreport.com,cartoonnetwork.com,CNN.com,CNNMoney.com,NBA.com and NCAA.com, which generate revenues
principally from the sale of advertising and sponsorships.
Home Box Office. Time Warner’s Home Box Office segment consists of businesses managed by Home Box Office, Inc.
(“Home Box Office”). During the year ended December 31, 2014, the Home Box Office segment recorded Revenues of
$5.398 billion (19% of the Company’s total Revenues) and Operating Income of $1.786 billion.
Home Box Office operates the HBO and Cinemax multi-channel premium pay television services, with the HBO service
ranking as the most widely distributed multi-channel premium pay television service. HBO- and Cinemax-branded premium
pay and basic tier television services are distributed in over 60 countries in Latin America, Asia and Europe. In the U.S.,
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. HBO and Cinemax
programming is available in the U.S. to subscribers of affiliates for viewing on its main HBO and Cinemax channels and its
multiplex channels, through Home Box Office’s on demand services, HBO On Demand and Cinemax On Demand, and
through Home Box Office’s streaming video-on-demand services, HBO GO and MAX GO. HBO GO and MAX GO are
available on a variety of digital platforms, including mobile devices, gaming consoles and Internet connected streaming
devices and televisions. Home Box Office’s agreements with its domestic affiliates are typically long-term arrangements that
provide for annual service fee increases and marketing support. While fees to Home Box Office under affiliate agreements
are generally based on the number of subscribers served by the affiliates, the relationship between subscriber totals and the
amount of revenues earned depends on the specific terms of the applicable agreement, which may include basic and/or pay
television subscriber thresholds, volume discounts and other performance-based discounts. Marketing and promotional
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