Businessweek

Time Warner Inc. operates as a media and entertainment company in the United States and internationally. Segments The company’s segments include Networks; Film and TV Entertainment; and Publishing. NETWORKS This segment consists principally of cable television networks, premium pay and basic tier television services and digital media properties, which primarily consist of brand-aligned Websites. The networks owned by Turner Broadcasting System, Inc. (Turner or TBS) are collectively referred to as the Turner Networks. Premium pay television services consist of the multi-channel HBO and Cinemax premium pay television services (collectively, the Home Box Office Services) operated by Home Box Office, Inc. (Home Box Office or HBO). Turner, a wholly-owned subsidiary of the company, provides programming to cable system operators, satellite service distributors, telephone companies and other distributors (known as affiliates) that have contracted to receive and distribute this programming to subscribers and from the sale of advertising. Turner’s agreements with its affiliates are typically long-term arrangements that provide for annual service fee increases and have fee arrangements that are generally related to the number of subscribers served by the affiliate and the package of programming provided to the affiliate by each network. Expirations of affiliate agreements are staggered. Turner’s advertising revenues consist of consumer advertising, which is sold primarily on a national basis in the U.S. and on a pan-regional or local-language feed basis outside the U.S. Advertising contracts generally have terms of one year or less. Advertising revenues are generated from various advertising categories, including automotive, food and beverage, movie studios, restaurants, insurance, financial and business services, telecommunications, pharmaceutical, apparel and computer hardware and software. In the U.S., advertising revenues from the Turner Networks are a function of the size and demographics of the audience delivered; the CPM, which is the cost per thousand viewers delivered; and the number of units of time sold. Turner sells a certain amount of its advertising inventory in the upfront market in advance each year and other inventory in the scatter market closer to the time a program airs. Turner’s Websites, including CNN.com and cartoonnetwork.com, and the Websites that Turner manages and/or operates for third parties, including NBA.com and related digital properties and NCAA.com, generate revenues principally from the sale of advertising and sponsorships. Home Box Office, a wholly-owned subsidiary of the company, generates revenues principally from providing programming to affiliates that have contracted to receive and distribute such programming to their customers who choose to subscribe to the Home Box Office Services (Subscribers). Home Box Office’s agreements with affiliates are typically long-term arrangements that provide for annual service fee increases and retail promotion activities and have fees that are generally based on the number of Subscribers served by the affiliates. Home Box Office and its affiliates engage in marketing and promotional activities to retain existing Subscribers and acquire new Subscribers. Home Box Office also derives revenues from the sale of its original programming via DVDs, Blu-ray Discs and electronic sell-through (EST), and the licensing of its original programming primarily to international television networks. Turner Domestic Networks and Related Digital Properties: Turner’s networks in the U.S. consist of entertainment and news networks. Turner’s entertainment networks include TBS, TNT, Cartoon Network, truTV, Turner Classic Movies and Boomerang. Programming for these entertainment networks is derived, in part, from the feature film, made-for-television and animation libraries to which Turner or other divisions of the company owns the copyrights, and also includes sports programming and other licensed programming, including syndicated television series and motion pictures. Turner’s news networks consist of CNN America Inc. (CNN) and HLN. In 2012, Turner c