Time Warner Cable 2014 Annual Report Download - page 46

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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
Financial Statement Presentation
Consolidated
Revenue. The Company generates revenue from each of its reportable segments: Residential Services, Business
Services and Other Operations, which includes revenue generated by TWC Media, the Lakers’ RSNs, SportsNet LA and
other operating revenue, including amounts derived from the Advance/Newhouse Partnership and home shopping
network-related services. Each of the reportable segments is discussed below under “Reportable Segments.”
Operating costs and expenses
Programming and content. Programming and content costs include (i) programming costs for the Residential
Services and Business Services segments and (ii) content costs, which include (a) the content acquisition costs associated
with the Lakers’ RSNs and (b) other content production costs for the Lakers’ RSNs and the Company’s local sports, news
and lifestyle channels. Beginning in 2014, programming and content costs also include the content acquisition and
production costs associated with SportsNet LA. Content acquisition costs for the Los Angeles Lakers’ basketball games
and Los Angeles Dodgers’ baseball games are recorded as games are exhibited over the applicable season.
Sales and marketing. Sales and marketing costs consist of the costs incurred at the Residential Services, Business
Services and Other Operations segments to sell and market the Company’s services. Costs primarily include employee-
related and third-party marketing costs (e.g., television, online, print and radio advertising). Employee-related costs
primarily include costs associated with retail centers and activities related to direct sales and retention sales.
Technical operations. Technical operations costs consist of the costs incurred at the Residential Services, Business
Services and Other Operations segments associated with the installation, repair and maintenance of the Company’s
distribution plant. Costs primarily include employee-related costs and materials costs associated with non-capitalizable
activities.
Customer care. Customer care costs consist of the costs incurred at the Residential Services and Business Services
segments associated with the Company’s customer service activities. Costs primarily include employee-related costs and
outsourced customer care costs.
Other operating. Other operating costs consist of all other operating costs incurred at the Residential Services,
Business Services and Other Operations segments that are not specifically identified above, including Residential Services
and Business Services video franchise and other fees. Other operating costs also include operating costs associated with
broad “corporate” functions (e.g., accounting and finance, information technology, executive management, legal and
human resources). In addition, other operating costs include functions supporting more than one reportable segment that
are centrally managed, including costs associated with facilities (e.g., rent, property taxes and utilities), network
operations (e.g., employee costs associated with central engineering activities), vehicles and procurement.
Reportable Segments
The Company’s segment results include intercompany transactions related to programming provided to the
Residential Services and Business Services segments by the Lakers’ RSNs, the Company’s local sports, news and lifestyle
channels and, beginning in 2014, SportsNet LA. These services are reflected as programming expense for the Residential
Services and Business Services segments and as revenue for the Other Operations segment and are eliminated in
consolidation. Additionally, the operating costs described above that are associated with broad “corporate” functions or
functions supporting more than one reportable segment are recorded as shared functions and are not allocated to the
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