Time Magazine 2014 Annual Report Download - page 53

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
2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Film and television production
costs ........................... $ 5,924 $ 5,620 $ 5,598 5% -
Print and advertising costs ............ 1,907 1,935 1,854 (1%) 4%
Other costs, including
merchandise and related costs ....... 1,075 1,119 1,051 (4%) 6%
Costs of revenues(a) ................. $ 8,906 $ 8,674 $ 8,503 3% 2%
(a) Costs of revenues exclude depreciation.
2014 vs. 2013
The increase in Revenues for the year ended December 31, 2014 included the net unfavorable impact of foreign exchange
rates of approximately $100 million.
Theatrical product revenues from film rentals decreased for the year ended December 31, 2014, reflecting lower revenues
of $215 million from theatrical films released during 2014 compared to 2013, partially offset by higher carryover revenues of
$26 million from prior period releases. The Company released 22 and 18 theatrical films in 2014 and 2013, respectively.
For the year ended December 31, 2014, theatrical product revenues from home video and electronic delivery decreased
due to lower revenues of $127 million from releases during 2014 compared to 2013 and lower revenues of $78 million from
prior period releases, including catalog titles. There were 18 and 17 home video and electronic delivery releases in 2014 and
2013, respectively.
The increase in theatrical product revenues from consumer products and other reflected higher intellectual property
licensing, including theme park licensing of the Harry Potter brands and characters.
Television product revenues from television licensing for the year ended December 31, 2014 increased primarily due to
growth in television production reflecting additional series produced, including series produced by Eyeworks, as well as
higher license fees from SVOD services, primarily internationally.
The decrease in television product revenues from home video and electronic delivery for the year ended December 31,
2014 was primarily due to continued declines in sales of DVDs and Blu-ray discs.
Television product revenues from consumer products and other increased for the year ended December 31, 2014 primarily
due to an increase in Warner Bros.’ share of revenues from television series produced by third parties as well as an increase
in the production of television series by Warner Bros. on behalf of third parties.
Videogames and other revenues increased for the year ended December 31, 2014 primarily due to $75 million of revenues
from a patent license and settlement agreement.
Included in film and television production costs are production costs related to videogames, as well as theatrical film and
videogame valuation adjustments resulting primarily from revisions to estimates of ultimate revenue and/or costs for certain
theatrical films and videogames. Theatrical film valuation adjustments for the year ended December 31, 2014 and 2013 were
$86 million and $51 million, respectively. Videogame valuation adjustments for the year ended December 31, 2014 and 2013
were $51 million and $53 million, respectively. The increase in film and television production costs for the year ended
December 31, 2014 was primarily due to the performance and mix of product released.
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