Time Warner Cable 2014 Annual Report Download - page 86

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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Residential Services segment revenue consists of (i) video revenue, including subscriber fees received from
residential customers for various tiers or packages of video programming services, related equipment rental charges,
installation charges, broadcast fees and fees collected on behalf of local franchising authorities and the Federal
Communications Commission, as well as revenue from the sale of premium networks, transactional video-on-demand
(e.g., events and movies) and digital video recorder service; (ii) high-speed data revenue, including subscriber fees
received from residential customers for high-speed data services and related equipment rental and installation charges;
(iii) voice revenue, including subscriber fees received from residential customers for voice services, along with related
installation charges, as well as fees collected on behalf of governmental authorities; and (iv) other revenue, including
revenue from security and home management services and other residential subscriber-related fees.
Business Services segment revenue consists of (i) video revenue, including the same fee categories received from
business video subscribers as described above under residential video revenue; (ii) high-speed data revenue, including
subscriber fees received from business customers for high-speed data services and related installation charges, as well as
amounts generated by the sale of commercial networking and point-to-point transport services, such as Metro Ethernet
services; (iii) voice revenue, including subscriber fees received from business customers for voice services, along with
related installation charges, as well as fees collected on behalf of governmental authorities; (iv) wholesale transport
revenue, including amounts generated by the sale of point-to-point transport services offered to wireless telephone
providers (i.e., cell tower backhaul) and other telecommunications carriers; and (v) other revenue, including revenue from
enterprise-class, cloud-enabled hosting, managed applications and services and other business subscriber-related fees.
Other Operations segment revenue consists of advertising revenue and other revenue. Advertising revenue is
generated through the sale of video and online advertising inventory to local, regional and national advertising customers.
Other revenue primarily includes (i) beginning in the fourth quarter of 2012, fees received from distributors of the
Company’s regional sports networks that carry Los Angeles Lakers’ basketball games and other sports programming
(Time Warner Cable SportsNet and Time Warner Cable Deportes); (ii) fees paid to TWC primarily by the Advance/
Newhouse Partnership for (a) the ability to distribute the Company’s high-speed data service and (b) TWC’s management
of certain functions, including, among others, the acquisition of programming rights, as well as the provision of certain
functions, including engineering; (iii) home shopping network-related revenue (including commissions earned on the sale
of merchandise and carriage fees); and (iv) beginning in 2014, fees received from distributors of SportsNet LA, discussed
below.
On February 25, 2014, American Media Productions, LLC (“American Media Productions”), an unaffiliated third
party, launched SportsNet LA, a regional sports network carrying the Los Angeles Dodgers’ baseball games and other
sports programming. In accordance with long-term agreements with American Media Productions, TWC acts as the
network’s exclusive advertising and affiliate sales agent and has certain branding and programming rights with respect to
the network. In addition, TWC provides certain production and technical services to American Media Productions. As a
result of the launch of SportsNet LA, related revenue, including intersegment revenue, and expenses are included in the
Company’s Other Operations segment.
Revenue Recognition
Residential and business services subscriber fees are recorded as revenue in the period during which the service is
provided. Residential and business services revenue received from subscribers who purchase bundled services at a
discounted rate is allocated to each product in a pro-rata manner based on the individual product’s selling price (generally,
the price at which the product is regularly sold on a standalone basis). Revenue recognition for bundled services is
discussed further in “—Multiple-element Transactions—Sales of Multiple Products or Services” below. Installation
revenue obtained from traditional cable service connections is recognized as a component of residential and business
services revenue when the connections are completed, as installation revenue recognized is less than the related direct
selling costs. Advertising revenue is recognized in the period during which the advertisements are exhibited. Fees paid to
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