Item 1. Business.

Time Warner Inc. (the “Company” or “Time Warner”), a Delaware corporation, is a leading media and entertainment company. The Company classifies its businesses into the following three reportable segments:

For more information about the Company’s reportable segments, see “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Overview.”

As used in this report, the term “affiliates” refers to distributors that deliver packages of networks to their subscribers, including cable system operators, satellite service distributors and telephone companies (“traditional affiliates”) and virtual multichannel video programming distributors (“virtual MVPDs”); and the term “OTT services” refers to services that deliver video content to consumers over the Internet and includes subscription video-on-demand (“SVOD”) services and advertising-supported VOD services such as social media platforms and user-generated content digital platforms, but does not include virtual MVPDs.

On October 22, 2016, Time Warner entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AT&T Inc. (“AT&T”), West Merger Sub, Inc. and West Merger Sub II, LLC, pursuant to which Time Warner will combine with AT&T in a stock-and-cash transaction. The Merger Agreement was approved unanimously by the boards of directors of both companies. Time Warner shareholders adopted the Merger Agreement at a special meeting of shareholders held on February 15, 2017. Subject to the satisfaction of the remaining conditions in the Merger Agreement, upon consummation of the merger, Time Warner’s shareholders will receive per share consideration consisting of $53.75 in cash and a specified number of shares of AT&T stock, as set forth in the Merger Agreement and determined by reference to the average of the volume weighted averages of the trading price of AT&T common stock on the New York Stock Exchange (“NYSE”) on each of the 15 consecutive NYSE trading days ending on and including the trading day that is three trading days prior to the closing of the merger (the “Average Stock Price”). The stock portion of the per share consideration will be subject to a collar such that if the Average Stock Price is between $37.411 and $41.349, Time Warner shareholders will receive shares of AT&T stock equal to $53.75 in value for each share of Time Warner common stock. If the Average Stock Price is below $37.411, Time Warner’s shareholders will receive 1.437 AT&T shares for each share of Time Warner common stock. If the Average Stock Price is above $41.349, Time Warner shareholders will receive 1.300 AT&T shares for each share of Time Warner common stock.

The merger is conditioned on the receipt of certain antitrust and other required regulatory consents. On November 20, 2017, the United States Department of Justice (the “DOJ”) filed a lawsuit in the United States District Court for the District of Columbia (the “Court”) under a federal antitrust statute to enjoin the merger, and the Court has set March 19, 2018 as the start date for the trial. Time Warner intends to vigorously contest the DOJ’s allegations. In accordance with the Merger Agreement, on November 27, 2017, each of Time Warner and AT&T elected to extend the “Termination Date” of the Merger Agreement to April 22, 2018. On December 21, 2017, each of the parties to the Merger Agreement waived, until June 21, 2018, its right to terminate the Merger Agreement due to a failure to complete the merger contemplated thereunder by April 22, 2018.

Time Warner’s business is focused on the production and distribution of high-quality video content to take advantage of growing global demand. Time Warner’s businesses work together to leverage their strong brands, distinctive intellectual property and global scale to produce and distribute content that resonates deeply with consumers. As the television industry continues to evolve, with developments in technology, rapid growth of new video services and shifting consumer viewing habits, Time Warner is well-positioned to address and capitalize on these changes, but also faces risks and new sources of competition associated with these developments. Accordingly, the Company is focused on both strengthening its position within the traditional TV ecosystem and pursuing growth opportunities outside the ecosystem, including increasing the content and services offered directly to consumers.

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Within the traditional TV ecosystem, the Company is a leader in improving the value of traditional multichannel video service subscriptions for consumers and affiliates. The Company is continuing to invest in high-quality distinctive programming, make more of its content available on-demand and on a growing variety of devices and invest in technology to enhance the consumer experience. To make television advertising on Turner’s networks more attractive and valuable to advertisers and more relevant to consumers, Turner is pursuing a number of initiatives, including developing new advertising offerings that use data and analytics to enable advertisers to better reach their target audiences and improve their ability to measure the effectiveness of their advertisements.

The Company is also capitalizing on growth opportunities outside the traditional TV ecosystem by increasing its investments in new digital products and technologies, including launching OTT services, as well as investing in and obtaining distribution of its content through other companies’ OTT services and virtual MVPD services. To support this effort, Time Warner is investing in content that will appeal to consumers who view it in a multi-platform, on-demand environment and building technological capabilities, such as in data analytics, video transport and digital product management. In addition, the Company is focused on increasing the digital sales and rentals of its film and television content and participates in various initiatives designed to make digital ownership of content more compelling for consumers.

The merger with AT&T is consistent with the Company’s strategy of ensuring that its content is available to consumers on a wide range of distribution platforms. The Company expects the merger will accelerate the Company’s efforts to spur innovation in the media industry and improve the consumer experience in pay television bundles by creating compelling consumer offerings and developing more targeted advertising offerings, and it will accelerate, and increase the likelihood of success of, Time Warner’s strategy to distribute content through other online and mobile services, including those offered directly to consumers.

At December 31, 2017, the Company had a total of approximately 26,000 employees.

For convenience, the terms the “Company,” “Time Warner” and the “Registrant” are used in this report to refer to both the parent company alone and collectively to the parent company and the subsidiaries through which its various businesses are conducted, unless the context requires otherwise. In addition, the term “Home Box Office” is used to refer to Home Box Office, Inc., a subsidiary of Time Warner, the term “Turner” is used to refer to Turner Broadcasting System, Inc., a subsidiary of Time Warner, and the term “Warner Bros.” is used to refer to Warner Bros. Entertainment Inc., a subsidiary of Time Warner.

Caution Concerning Forward-Looking Statements and Risk Factors

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances, and the Company is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Time Warner’s actual results may vary materially from those expressed or implied by the statements in this report due to changes in economic, business, competitive, technological, strategic and/or regulatory factors and other factors affecting the operation of Time Warner’s businesses. For more detailed information about these factors and risk factors with respect to the Company’s operations, see Item 1A, “Risk Factors,” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Caution Concerning Forward-Looking Statements.”

Available Information and Website

The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports filed with or furnished to the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on the Company’s website at www.timewarner.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The Company is providing the address to its website solely for the information of investors. The Company does not intend the address to be an active link or to incorporate any information included on or accessible through its website into this report.

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TURNER

Turner creates and programs branded news, entertainment, sports and kids multi-platform content for consumers around the world. Turner operates more than 180 channels globally. In the U.S., its networks and related businesses and brands include TNT, TBS, Adult Swim, truTV, Turner Classic Movies, Turner Sports, Bleacher Report, the NBA and NCAA digital properties, Cartoon Network, Boomerang, CNN, the CNN digital network, HLN and iStreamPlanet. Outside the U.S., Turner’s portfolio of brands and digital businesses reaches consumers in more than 200 countries and territories.

Turner’s programming is primarily distributed by affiliates and is available to subscribers of the affiliates for viewing live and on demand on television and on various Internet-connected devices through the affiliates’ services and Turner’s network apps. Turner is also pursuing non-traditional distribution options for its programming, including launching SVOD services and making some of its programming available on other companies’ OTT services.

Turner’s digital properties consist of its own digital properties and those it manages and/or operates for sports leagues where Turner holds the related programming rights. Turner’s CNN digital network is the leading digital news destination, based on the number of average monthly domestic multi-platform unique visitors and videostarts for the year ended December 31, 2017, and Turner’s Bleacher Report is the leading digital sports destination across Facebook, Instagram and Twitter (based on data for the year ended December 31, 2017 sourced from Shareablee). Turner’s other digital properties include its apps for CNN, TBS, TNT, Adult Swim and Cartoon Network, which enable viewers who subscribe to those networks through an affiliate to view the network programming live and on demand through the apps, as well as tntdrama.com, TBS.com, adultswim.com and cartoonnetwork.com. Digital properties Turner manages and/or operates for sports leagues include NBA.com, the NBA League Pass property, NCAA.com, the NCAA March Madness Live app and PGA.com.

Turner continues to focus on improving the value of traditional multichannel video service subscriptions for consumers and affiliates and enhancing the value of television advertising for advertisers. It is strengthening the programming on its cable networks and repositioning some of its brands, airing higher quality marquee original series in addition to premium sports programming and film franchises. Beginning in 2016, Turner launched rebrands of TNT and TBS, introducing new high-quality distinctive original series aimed at engaging younger audiences across multiple viewing platforms. In addition, over the past several years, Turner has broadened the scope of CNN’s programming to include compelling storytelling about important events, people and places through original programming, long-form documentaries and films and has strengthened the programming at truTV, where it has rebranded the network to focus on comedy-driven reality and scripted series aimed at young adults. Turner also is continuing to expand the amount of its programming available on demand to its affiliates’ subscribers, including complete current seasons of programming from Turner’s networks. As part of its efforts to deliver more value to advertisers and improve the consumer experience, Turner is engaged in a number of efforts, including (i) continuing to support industry efforts to improve the measurement of viewing and audience engagement across all platforms, (ii) working with affiliates to increase the use of technology that inserts advertising in on-demand streams of programming that is viewed on a time-delayed basis on DVRs and affiliates’ and networks’ VOD offerings, (iii) continuing to develop data-driven advertising products and increasing the amount of advertising inventory sold through these products, (iv) introducing native advertisements, which present content featuring characters from the associated programming who promote an advertiser’s product or service, and (v) reducing the amount of advertising on select programming on truTV and TNT. In addition, in 2017, Turner, together with Twenty-First Century Fox and Viacom, launched OpenAP, a venture designed to create consistency in defining audience targets across television networks and independent reporting using verification of advanced audience metrics by an unaffiliated third party.

Turner is also increasing its investments in new digital technology and products and different types of content to capitalize on growth opportunities outside the traditional TV ecosystem. To improve its digital streaming capabilities, in 2015, Turner acquired a majority ownership interest in iStreamPlanet Co., LLC (“iStreamPlanet”), a provider of streaming and cloud-based video and technology services specializing in streaming large scale, live sporting events. iStreamPlanet provides services for several of Turner’s digital properties and those Turner manages and/or operates for sports leagues, including the March Madness Live app and the NBA League Pass property. In April 2017, Turner and Warner Bros. launched a domestic SVOD service under the Boomerang brand that offers new original animated series and kids programming from Warner Bros.’ and Turner’s animation libraries, and, in August 2017, Turner announced plans for a 2018 launch of a premium sports SVOD service that will feature Union of European Football Association (“UEFA”) soccer matches. Turner is also developing

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content for distribution outside the traditional television ecosystem. These initiatives include Great Big Story, an independent storytelling brand that creates original short form digital content aimed at millennial audiences and is distributed via social media platforms. Turner is also increasingly investing in programming for its networks that will engage audiences across multiple platforms.

Turner is continuing to increase its scale and strengthen its competitive position internationally through strategic regional channel launches, partnerships and acquisitions in key territories, and it is placing greater emphasis on creating and acquiring local programming to strengthen its brands internationally.

Entertainment

Domestic Entertainment

Turner’s domestic entertainment networks collectively provide a blend of original series, acquired series and movies, sports and reality programming. For the year ended December 31, 2017, Turner’s TBS, TNT and Adult Swim were three of the top five primetime advertising-supported cable networks among adults 18-49 in the U.S., and Adult Swim was the top advertising-supported cable network in total day among adults 18-34 in the U.S. Turner has been increasing the amount of original programming on TNT and TBS, and, as part of these efforts, Turner is collaborating with Warner Bros. on the production of original programming, such as Animal Kingdom , Claws , Major Crimes and People of Earth , and on licensing arrangements that provide Turner with greater on-demand rights to the programming. Turner’s ownership of a larger portion of its content provides Turner more flexibility to offer consumers access to more of its content through on demand platforms and take advantage of increasing licensing opportunities both domestically and internationally. In addition, Turner has made significant investments in premium sports programming and film franchises that air on its entertainment networks, including licensing the cable network television rights to popular films from franchises such as Warner Bros.’ franchise films based on DC Entertainment characters and the Star Wars , Marvel Comics and The Hunger Games film franchises, all of which will air exclusively on TBS and TNT during specified windows. As described above, Turner has reduced the advertising loads for certain programs on truTV and TNT.

TNT

TNT is focused on distinctive dramas and is home to syndicated series and original series, as well as sports and network premiere motion pictures. As of December 2017, TNT reached 90.4 million domestic television households as reported by Nielsen Media Research (“Nielsen”). For the 2017-2018 season, TNT’s returning original series include Animal Kingdom , Good Behavior , The Last Ship , The Librarians and the last season of Major Crimes , and its new original series include the limited series The Alienist , which is based on the best-selling novel by Caleb Carr, Claws , and the non-fiction series Michael Moore Live from the Apocalypse . For the 2017-2018 season, TNT’s syndicated series include Bones , Law  & Order and Supernatural . TNT and TBS are home to the Screen Actors Guild Awards , and TNT, TBS and truTV are home to the iHeartRadio Music Awards .

TBS

TBS is focused on fresh comedies aimed at a younger audience, with original series, as well as sports and acquired television series and movies. As of December 2017, TBS reached 91.5 million domestic television households as reported by Nielsen. For the 2017-2018 season, TBS’ returning original series include American Dad , Angie Tribeca , The Detour , People of Earth , Search Party and Wrecked , and its new original series include Drop the Mic , Final Space , The Guest Book , The Last O.G. and Snoop Dogg Presents The Joker’s Wild . Syndicated series for the 2017-2018 season include 2 Broke Girls , The Big Bang Theory , Brooklyn Nine-Nine , Family Guy , Friends , New Girl and Seinfeld . TBS is also the home of the late night talk shows Conan and Full Frontal with Samantha Bee .

Adult Swim

Adult Swim is an evening and overnight block of programming airing on Turner’s Cartoon Network. As of December 2017, Adult Swim reached 90.6 million domestic television households as reported by Nielsen. Adult Swim is aimed at millennial audiences and offers original and syndicated animated and live-action comedy programming. For the 2017-2018

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season, Adult Swim’s original series include Aqua Teen Hunger Force , Apollo Gauntlet , Infomercials , The Jellies! , Mike  Tyson Mysteries , Rick  & Morty , Robot Chicken and Squidbillies.

truTV

truTV focuses on comedy-driven reality and scripted series aimed at young adult audiences with the tag line “Funny because it’s tru.” As of December 2017, truTV reached 86.6 million domestic television households as reported by Nielsen. For the 2017-2018 season, truTV’s returning original series include Adam Ruins Everything , Billy on the Street , The Carbonaro Effect , Hack My Life , Impractical Jokers , Rachel Dratch’s Late Night Snack , Talk Show the Game Show , Those Who Can’t and Upscale with Prentice Penny , and its new original series include At Home with Amy Sedaris , The Chris Gethard Show , I’m Sorry , Laff Mobb’s Laff Tracks and You Can Do Better .

Turner Classic Movies

Turner Classic Movies is a commercial-free network that presents classic films from some of the largest film libraries in the world. Turner Classic Movies also offers interviews, original documentaries, specials and regular programming events that include “The Essentials,” “31 Days of Oscar” and “Summer Under the Stars.”

International Entertainment

Outside the U.S., Turner owns and/or operates regional entertainment networks providing a variety of programming, such as motion pictures and series, documentaries, fashion and lifestyle content, music videos, sports and travel. In Latin America, Turner is the number one provider of multichannel television in the region and owns and operates regional entertainment networks, including Glitz*, HTV, I-Sat, MuchMusic, Space, TBS, TCM, TNT, TNT Serie, truTV and Warner TV. Turner also owns and operates Chilevisión, a free-to-air television broadcaster in Chile, and Esporte Interativo, a Brazilian linear television channel and OTT service that airs sports programming, including programming from South American soccer leagues. Turner also operates several regional entertainment networks in Europe and the Middle East, including TCM, TNT, TNT Comedy, TNT Serie, TNT Film, truTV and Warner TV. In Asia, Turner operates several regional entertainment networks, including Oh!K, TCM and Warner TV in Hong Kong, HBO South Asia and Warner TV in India, Oh!K, TCM, truTV and Warner TV in Indonesia and Singapore, and MondoTV and Tabi Channel in Japan.

Sports

Turner Sports produces award-winning sports programming and content for Turner’s TNT, TBS and truTV networks and related digital properties. Turner’s sports programming helps drive value across its networks in the form of higher affiliate fees, ratings and advertising rates as well as more promotional opportunities.

Turner’s sports programming features licensed programming from the National Basketball Association (“NBA”) through the 2024-2025 season, Major League Baseball (“MLB”) through 2021, The National Collegiate Athletic Association (the “NCAA”) for the Men’s Division I Basketball Tournament through 2032, and the Professional Golfers’ Association (“PGA”) through 2019. NBA games and PGA tournaments air on the TNT network, and MLB games air on the TBS network. TNT airs the studio program Inside the NBA and the reality competition series, The Dunk King . Turner also operates NBA TV, an advertising-supported cable network owned by the NBA, featuring NBA exhibition, regular season and playoff games and related programming. The NCAA Men’s Division I Basketball Tournament games air on the TNT, TBS and truTV networks and on the CBS network under an agreement among Turner, CBS Broadcasting, Inc. and the NCAA. Turner’s networks and CBS carry the NCAA Final Four semifinal games and championship game in alternate years, with Turner’s networks carrying them in 2016 and 2018. Turner also has partnered with WME|IMG to form ELEAGUE, a multiplayer competitive videogaming league. Live coverage of ELEAGUE gaming events and a weekly showcase program air on TBS, and live coverage of the events and related on-demand programming are also available through the Twitch OTT platform.

Turner expanded its portfolio of sports programming rights during 2017. In August 2017, Turner and UEFA announced a three-year, multi-platform rights agreement for the exclusive English-language presentation of the UEFA Champions League and UEFA Europa League soccer matches in the U.S., beginning with the 2018-2019 season. Live matches will be available on TBS, TNT and/or TruTV and through a new premium sports SVOD service Turner plans to launch in 2018. In April 2017,

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Turner and Fox Sports Latin America acquired the rights to air matches of Argentina’s top soccer league, the Primera División, on their respective networks in Argentina. In December 2017, Turner entered into an agreement to purchase Canal del Fútbol, which owns a group of basic cable and premium pay television networks and an OTT service in Chile, and a fifteen-year multi-platform rights agreement for Chilean soccer matches, including Chilean Primera División matches. The transaction is subject to regulatory approval and is expected to be completed in 2018.

Bleacher Report is a leading digital sports property that provides team-specific sports content and real-time event coverage and provides Turner with cross-platform programming and marketing opportunities. Turner also manages and operates NCAA.com, the NCAA March Madness Live app, which provides live and on-demand streaming video of games, NBA.com and the NBA League Pass property, which provide live streaming of games, and PGA.com.

Kids

Cartoon Network and Boomerang offer original, acquired and classic animated and live-action entertainment aimed at kids in the U.S. and international territories. Turner has been focused on significantly expanding its global kids business, increasing its collaboration with Warner Bros. on television programming based on Warner Bros.’ and DC Entertainment’s brands and characters and growing its consumer products business. The collaboration with Warner Bros. is intended to drive the success of Cartoon Network and Boomerang and foster broader global exposure for existing Warner Bros. and DC Entertainment brands and franchises while also helping launch new long-term franchises, increase consumer product sales and generate direct-to-consumer revenues. Warner Bros. is producing original animated programming based on Warner Bros. and DC Entertainment characters and brands for Cartoon Network, Boomerang and the Boomerang-branded SVOD service that Turner and Warner Bros. launched in April 2017 and jointly manage. Turner and Warner Bros. are also jointly producing original animated programming for the networks and the Boomerang-branded SVOD service, including Bunnicula , Dorothy and the Wizard of Oz , New Looney Tunes , The Tom and Jerry Show and Wacky Races . In addition, in 2017, Turner and Warner Bros. began jointly managing the operations of the Boomerang network.

Cartoon Network

Cartoon Network offers original and syndicated animated and live-action series and motion pictures for youth and families. As of December 2017, Cartoon Network reached 90.6 million domestic television households as reported by Nielsen. For the 2017-2018 season, Cartoon Network’s original animated series include Warner Bros.’ Justice League Action , Teen Titans Go! and Unikitty! , as well as Adventure Time , The Amazing World of Gumball , Ben 10 , Mighty Magiswords , The Powerpuff Girls , Steven Universe and We Bare Bears .

Boomerang

Boomerang offers new original content from Warner Bros. as well as classic animated entertainment from the Warner Bros., Hanna-Barbera, MGM and Cartoon Network libraries, such as Bunnicula , New Looney Tunes and The Tom and Jerry Show .

Turner’s kids business is a key part of its international operations, and Cartoon Network is the number one kids network in several territories outside the U.S., including Brazil, Chile, Colombia, Mexico, South Africa and the Philippines. In addition to Cartoon Network and Boomerang, Turner’s kids networks outside the U.S. include Tooncast in Latin America, BOING and Cartoonito in Europe and the Middle East, and POGO in Asia.

News

CNN

CNN is the original cable television news service. As of December 2017, CNN reached 91.4 million domestic television households as reported by Nielsen. As of December 31, 2017, CNN managed 40 news bureaus and editorial operations, 31 of which are located outside the U.S. Turner is focused on maintaining CNN’s leadership in worldwide breaking-news, investigative and political coverage while continuing to broaden the scope of its programming, including by increasing the number of original series and films, mini-series and documentaries. In 2017, CNN received three Emmy Awards. For the

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2017-2018 season, CNN’s news programs include Anderson Cooper 360 ^o , CNN Tonight with Don Lemon , Cuomo Prime Time , Erin Burnett OutFront , New Day and The Situation Room with Wolf Blitzer . CNN’s original series for the 2017-2018 season include Anthony Bourdain: Parts Unknown , Death Row Stories , Declassified: Untold Stories of American Spies , The History of Comedy , This is Life with Lisa Ling and United Shades of America with W. Kamau Bell . For the 2017-2018 season, CNN is airing films and mini-series including Kennedys: an American Dynasty , The Radical Story of Patty Hearst , ELIÁN , JEREMIAH TOWER: The Last Magnificent , Legion of Brothers and The Nineties . CNN is also focused on expanding its leading digital presence by developing mobile products, increasing the amount of original short form video content it offers through digital platforms, including through its independent storytelling brand Great Big Story, and growing its digital presence in several premium content brand extensions, including personal finance (CNN Money), political news (CNN Politics) travel (CNN Travel) and technology (CNN Tech). In 2017, CNN was the leading digital news destination for multiplatform unique visitors and videostarts, as reported by comScore, Inc.

Internationally, CNN reaches more than 350 million households outside the U.S. as of December 31, 2017. CNN Worldwide is a portfolio of more than 20 news and information services across cable, satellite, radio, wireless devices and the Internet in more than 200 countries and territories as of December 31, 2017. CNN Worldwide’s networks and businesses include CNN U.S., CNN International, CNN en Español, CNNj, CNN.com, CNN Airport Network, CNN Radio, CNN Newsource and HLN.

HLN

HLN is a CNN Worldwide network that focuses on news, information, videos and talk shows. For the 2017-2018 season, HLN’s programs include Across America with Carol Costello , Death Row Stories , Inside with Chris Cuomo , MichaeLA , Morning Express with Robin Meade , On the Story with Erica Hill and Crime  & Justice with Ashleigh Banfield, as well as an original five-part series, Unmasking a Killer .

How Turner Generates Revenues

Turner generates revenues principally from licensing programming to affiliates that have contracted to receive and distribute the programming to subscribers, the sale of advertising on its networks and the digital properties it owns or manages for other companies, and the license of its original programming and its brands and characters for consumer products and other business ventures. Turner also generates revenues from licensing select programming to other companies’ SVOD services. Turner’s license agreements with its affiliates are typically multi-year 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, the package of programming provided to the affiliate by each network and the competitive environment. Turner’s advertising revenues are generated from a wide variety of advertiser categories, and the advertising arrangements for its networks generally have terms of one year or less. In the U.S., the advertising revenues generated by Turner are a function of the size and demographics of a network’s audience delivered to an advertiser, the number of units of time sold and the price per unit. Turner sells some 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. Outside the U.S., advertising is generally sold at a fixed rate for the unit of time sold, determined by the time of day and network.

HOME BOX OFFICE

Home Box Office owns and operates leading multichannel premium pay television services, HBO and Cinemax. Its businesses consist principally of premium pay television and OTT services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home entertainment. Home Box Office is a leader in offering high-quality programming, and it continues to invest in a diverse roster of programming and make its programming available to consumers on a variety of devices and platforms to enhance the appeal of its products and services.

In the U.S., Home Box Office’s programming and services are distributed in several different ways. HBO and Cinemax programming is available to subscribers of traditional affiliates for viewing live and on demand on television and various Internet-connected devices. In addition, Home Box Office operates HBO NOW, a domestic stand-alone OTT service that is distributed by digital distributors, such as Apple, Google, Amazon and Roku, as well as by some affiliates. Home Box Office

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has also entered into arrangements with a number of digital distributors to provide their subscribers access to the HBO and Cinemax services and programming on digital platforms and devices, and continues to explore additional distribution platforms while investing in technology to add features and enhance the overall consumer experience on its OTT services. Home Box Office also sells its original programming in both physical and digital formats.

Internationally, Home Box Office tailors the distribution of its programming for each territory using one or more of the following distribution models: premium pay and basic tier television services distributed by traditional affiliates, licensing of programming to third-party providers, OTT services distributed by third parties and direct-to-consumer OTT services. HBO- and Cinemax-branded premium pay, basic tier television and/or OTT services are distributed in over 65 countries in Latin America, Europe and Asia. Home Box Office’s original programming is also available to consumers in over 150 countries, both via licenses to international television networks and OTT services and through sales of programming in physical and digital formats.

Home Box Office Programming

Domestic Original Programming

Home Box Office continues to invest in high-quality original programming for HBO and Cinemax.

HBO’s original programming features award-winning and critically acclaimed dramatic and comedy series, such as Curb Your Enthusiasm , Divorce , Game of Thrones ,  Girls , High Maintenance , Insecure , Silicon Valley ,  Veep and Westworld , as well as talk shows and political satire, such as Last Week Tonight with John Oliver and Real Time with Bill Maher , HBO films, such as The Immortal Life of Henrietta Lacks and The Wizard of Lies , limited/mini-series, such as Big Little Lies and The Night Of , kids programming, such as Sesame Street , boxing matches and other sports programming, documentaries, such as Becoming Warren Buffett and Bright Lights: Starring Carrie Fisher and Debbie Reynolds , and comedy and music specials. The quality and diversity of HBO’s original programming differentiates HBO from other premium pay television services, basic television networks and OTT services, while enhancing the value of the HBO brand both domestically and internationally. This programming also continues to build Home Box Office’s content library while increasing the value of HBO across its businesses.

Home Box Office continues to expand HBO’s roster of original series. In 2017, Home Box Office premiered four new series, Crashing , The Deuce , Room 104 and The Young Pope , and the limited series Big Little Lies . In early 2018, Home Box Office premiered Mosaic , a limited series by Steven Soderbergh, and Here and Now (starring Holly Hunter and created by Alan Ball) and plans to premiere additional new series, including Barry (starring Bill Hader) and Succession (executive produced by Will Ferrell and Adam McKay) later in 2018. Home Box Office has also worked closely with Warner Bros. on original programming such as The Leftovers and Westworld .

In 2017, Home Box Office received 29 Primetime Emmy Awards, the most of any network for the 16th year in a row, with Big Little Lies winning eight awards and The Night Of , Veep and Westworld each winning five awards. In 2017, Home Box Office also won three George Foster Peabody Awards, five Sports Emmy Awards and five News & Documentary Emmy Awards. In addition, in January 2018, Home Box Office won four Golden Globe Awards for Big Little Lies .

Cinemax’s original primetime series in 2017 included Mike Judge Presents: Tales From the Tour Bus . In 2018, Cinemax relaunched the series Strike Back with a new cast and plans to premiere additional limited series, including Rellik and C.B. Strike , a detective series based on the novels written by J.K. Rowling under the Robert Galbraith pen name.

Domestic Licensed Programming

Domestically, a significant portion of the programming on HBO and Cinemax consists of uncut and uncensored feature films, including recently released feature films. Home Box Office has long-term licensing agreements with major film studios and independent producers and distributors, including Warner Bros., Twentieth Century Fox (“Fox”), Universal Pictures (“Universal”) and Summit Entertainment. The agreements provide Home Box Office the exclusive right during the applicable license period to exhibit and distribute on its premium pay television and OTT services the entire feature film slate theatrically released in the U.S. by these studios during specified release years (other than certain animated films and certain

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other specified films), and these agreements cover theatrical film slates through release year 2021 or beyond. Approximately 60 percent of the top fifty feature films theatrically released in 2017 (as determined based on domestic box office receipts) will be exhibited exclusively on the HBO and Cinemax premium pay television and OTT services during the applicable license periods. Home Box Office also has agreements to license older films with Fox, Universal, Warner Bros. and a number of other major studios and independent distributors.

International Programming

A substantial portion of the programming on Home Box Office’s international premium pay, basic tier television and OTT services consists of feature films licensed from major studios in the U.S. and domestic HBO- and Cinemax-branded original programming. Home Box Office also has agreements to license older films from a number of major U.S. studios and other domestic and international independent distributors. In addition to films, Home Box Office’s international content offerings may feature local-language original programming and/or U.S. television programming produced by other production studios.

Home Box Office’s Businesses and Revenues

Domestic Premium Pay Television and OTT Services

Home Box Office generates revenues principally from licensing its programming to affiliates and digital distributors that have contracted to receive and distribute the programming to their customers who subscribe to the HBO and Cinemax services. At December 31, 2017, Home Box Office had approximately 54 million domestic subscribers, including subscribers to HBO NOW and through Home Box Office’s digital distribution partners, and HBO was the most widely distributed domestic multi-channel premium pay television service.

Home Box Office’s license agreements with affiliates are typically multi-year arrangements that provide for annual service fee increases and marketing support. The relationship between subscriber totals and the amount of revenues earned under Home Box Office’s license agreements 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 activities intended to retain existing subscribers and acquire new subscribers may also impact revenue earned. Home Box Office has entered into arrangements with a number of digital distributors to distribute HBO NOW and/or provide their subscribers access to the HBO and Cinemax services and programming on digital platforms and devices, and Home Box Office is continuing to expand the number of digital distribution partners.

Subscribers of traditional affiliates can view HBO and Cinemax programming on an HBO or Cinemax multiplex television channel as well as through on-demand products, HBO On Demand, Cinemax On Demand, HBO GO and MAX GO. Nearly all seasons of HBO’s and Cinemax’s original series, feature films, HBO mini-series and films, sports programming, documentaries, comedy and music specials, bonus features and behind-the-scenes extras are available on HBO NOW, HBO GO or MAX GO, as applicable, and through Home Box Office’s digital distribution partners.

International Premium Pay, Basic Tier Television and OTT Services

Unique, country-specific HBO- and Cinemax-branded premium pay, basic tier television and/or OTT services are distributed in more than 65 countries in Latin America, Europe and Asia. In Europe and Asia, Home Box Office operates through consolidated, wholly-owned subsidiaries. In Latin America, Home Box Office operates through an unconsolidated joint venture. Home Box Office had approximately 88 million international premium pay, basic tier television service and OTT service subscribers at December 31, 2017, including subscribers through Home Box Office’s unconsolidated joint ventures. HBO GO was available to HBO premium pay television subscribers and/or OTT service subscribers in over 50 countries and territories at December 31, 2017, and Home Box Office plans to make HBO GO available in additional countries and territories in 2018.

Internationally, Home Box Office generates a significant portion of its revenues from licensing its programming to affiliates. The terms of Home Box Office’s agreements with its international affiliates vary from country to country, and the amount of revenues attributable to such agreements can be based on a number of factors such as basic and/or pay television subscriber thresholds, performance-based or volume discounts, negotiated minimum guarantees or flat-fee arrangements.

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Home Box Office operates OTT services in 18 countries throughout Europe, including 13 countries in Central Europe, four countries in the Nordic region, and Spain. In addition, Home Box Office’s joint venture, HBO Latin America, provides its stand-alone OTT service, HBO GO, through traditional affiliates and digital distributors in 32 countries throughout Latin America and the Caribbean. Home Box Office expects to continue to expand the distribution of OTT services to additional countries around the world.

Content Licensing and Home Entertainment

Home Box Office also generates revenues from the exploitation of its original programming through multiple other distribution outlets. Home Box Office licenses both individual programs and packages of programs to television networks and OTT services in over 150 countries, including arrangements under which it licenses programming to television networks that are branded as the “Home of HBO” in countries such as the U.K., Australia, France, Germany and Israel and as “HBO Canada” in Canada.

Home Box Office sells its original programming in both physical and digital formats in the U.S. and various international regions through a wide variety of digital storefronts and traditional retailers. Significant home entertainment releases in 2017 included Big Little Lies , Divorce: The Complete First Season , Game of Thrones: The Complete Seventh Season , Silicon Valley: The Complete Fourth Season , Veep: The Complete Sixth Season and The Young Pope: The Complete First Season . In addition, Home Box Office has also licensed some of its original programming, such as Sex and the City , as well as Everybody Loves Raymond , which was produced by Home Box Office but originally aired on broadcast television, to domestic basic cable networks and local television stations.

WARNER BROS.

Warner Bros. is the largest television and film studio in the world based on total television and film revenues as of December 31, 2017. Its businesses consist principally of the production, distribution and licensing of television programming and feature films and the distribution of home entertainment product in both physical and digital formats, as well as the production and distribution of games and consumer product and brand licensing. In recent years, Warner Bros. has increased its production of new forms of content, including short-form online and mobile content, and has launched new direct-to-consumer offerings, such as OTT services. Warner Bros.’ businesses benefit from a shared infrastructure, including shared production, distribution, marketing and administrative functions and resources.

Warner Bros. is the #1 producer of primetime television series for the U.S. broadcast networks for the 2017-2018 television season, producing over 35 series, a position it has held for each of the past nine television seasons. Warner Bros. has at least four series on each of the five broadcast networks. Overall, Warner Bros. is producing 70 television series in the U.S. for the 2017-2018 television season. In addition, Warner Bros. licenses its U.S. programming in over 190 countries at December 31, 2017. Over the past several years, Warner Bros. has expanded and diversified the genres and types of television programming it produces as well as the buyers of its programming domestically. Warner Bros. has also been expanding its international television production business through its global network of local-language production companies.

Warner Bros.’ films generated over $5 billion at the global box office, and Warner Bros. was the #2 film studio in global box office receipts in 2017. Warner Bros. has been the #1 or #2 film studio in domestic box office receipts for eight of the past 10 years and the #1 or #2 film studio in global box office receipts for nine of the past 10 years. Warner Bros. has exceeded $4 billion in global box office receipts for eight of the past nine years.

Warner Bros. is the largest game publisher among television and film studios, built on key brands and franchises. Warner Bros. plans to expand its production of games for consoles and mobile devices using its portfolio of game production studios and strong global brands and franchises.

Warner Bros. is focused on increasing the digital sales and rentals of its film and television content and participates in a variety of initiatives (including the Movies Anywhere service) that are designed to make digital ownership more compelling for consumers. Warner Bros. has led the U.S. home entertainment industry in sales of home entertainment products for more

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than 15 years. At December 31, 2017, Warner Bros.’ vast content library consists of more than 80,000 hours of programming, including over 7,000 feature films and 5,000 television programs comprised of tens of thousands of individual episodes.

Warner Bros.’ portfolio of leading brands includes brands licensed from DC Entertainment (DC Comics, Vertigo and MAD Magazine), as well as the Harry Potter, Looney Tunes and Hanna-Barbera brands. DC Comics’ characters include such iconic characters as Batman, the Flash, Green Arrow, Superman and Wonder Woman, and Warner Bros.’ other characters include Bugs Bunny, Scooby-Doo and Tom and Jerry, among many others. Warner Bros. is focused on expanding its brands and characters across all its businesses, including film, television programming, games and consumer products.

Warner Bros. has developed strong global franchise properties from its brands and featuring its characters, including film franchises such as the Batman and Harry Potter series and The Hobbit and The Lord of the Rings trilogies, and it is focused on extending its existing global film franchises. Warner Bros. released three films based on DC Entertainment characters in 2017 ( Justice League, The LEGO Batman Movie and Wonder Woman ) and plans to release several additional films based on DC Entertainment characters, including Aquaman and Teen Titans GO! to the Movies in 2018 and Shazam! and a sequel to Wonder Woman in 2019. Warner Bros. also released Fantastic Beasts and Where to Find Them in 2016, the first of five planned films in partnership with J.K. Rowling based on J.K. Rowling’s Wizarding World, and plans to release Fantastic Beasts: The Crimes of Grindelwald in 2018. Warner Bros. has also developed a successful slate of horror films and plans to release the next installment in The Conjuring franchise ( The Nun ) in 2018 and the sequel to It in 2019. Warner Bros. is also focused on creating new global film franchises and plans to release Ready Player One in 2018 and The Six Billion Dollar Man in 2019.

In television, nine live-action series based on DC Entertainment characters ( Arrow , Black Lightning , DC’s Legends of Tomorrow , The Flash , iZombie , Krypton , Lucifer , Gotham and Supergirl ) are airing on broadcast and cable television during the 2017-2018 television season. Warner Bros. is also producing the second season of Lethal Weapon for the 2017-2018 television season, which is based on the successful Warner Bros. film franchise.

In 2016, Warner Bros. formed Warner Bros. Digital Networks, a division focused on engaging more directly with consumers, meeting their evolving tastes and video viewing habits and acquiring more consumer data. The division oversees a portfolio of OTT services, including the Boomerang-branded SVOD service that Warner Bros. and Turner launched in April 2017 and jointly manage; DramaFever, a U.S. OTT service that specializes in Asian dramas; Warner Archive, an SVOD service focused on classic films and TV series; and a DC-branded service expected to launch in 2018 and include DC Entertainment video content and digital comics. The acquisition of DramaFever in 2016 provided Warner Bros. the direct-to-consumer product expertise and technology platform to build, launch and operate its portfolio of OTT services. In addition, Warner Bros. Digital Networks is building a premium digital production company (including its Stage 13 digital content brand) aimed at reaching millennial audiences on new platforms through distinctive series. The division also manages Warner Bros.’ investments in Uninterrupted, a partnership with LeBron James and Turner Sports focused on developing and distributing an original production slate of sports- and athlete-focused programming across multiple platforms, and Ellen Digital Ventures, a partnership with Ellen DeGeneres focused on digital content and social games. Machinima (acquired by Warner Bros. in 2016), a global aggregator of gaming and related content aimed at audiences that play Warner Bros.’ games and watch its films and television programming, is also part of the division.

Television

Warner Bros. is a leader in the global television production and distribution business. Warner Bros. is focused on maintaining its leadership position in producing primetime series for the U.S. broadcast networks (including The CW broadcast network (“The CW”)) while increasing production of high-quality original series for basic cable networks (including TNT and TBS, which are airing four Warner Bros. series for the 2017-2018 television season), premium pay television services (including HBO) and OTT services (including Warner Bros.’ and Turner’s Boomerang-branded SVOD service). Warner Bros. has continued to strategically license in-season stacking rights to U.S. networks and OTT services that license Warner Bros.’ programming. Warner Bros. is also expanding its international local television production business by using its global network of local-language production companies to develop programing specifically tailored for local audiences.

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Warner Bros. is actively collaborating with Turner to significantly expand their global kids businesses and maximize the related consumer product opportunities. This collaboration is intended to drive the success of Cartoon Network and Boomerang and foster broader global exposure for existing Warner Bros. and DC Entertainment brands and franchises while also helping launch new global franchises, increase consumer product sales and generate direct-to-consumer revenues. Warner Bros. is producing original animated programming based on its characters and brands for Turner’s Cartoon Network, Boomerang network and the Boomerang-branded SVOD service that Warner Bros. and Turner launched in April 2017 and jointly manage. Warner Bros. and Turner are also jointly producing original animated programming for those networks and the Boomerang-branded SVOD service. In addition, in 2017, Warner Bros. and Turner began jointly managing the operations of Turner’s Boomerang network.

Domestic Business

Warner Bros. produces and distributes its television programming for initial airing on broadcast and basic cable television networks, premium pay television and OTT services and local television stations in the U.S. Warner Bros. also produces and distributes short-form live-action series and animated programming for initial viewing on digital platforms. Warner Bros.’ programming includes the following:

After the initial domestic television airing, Warner Bros. licenses its television programming for subsequent airing on basic cable networks, local television stations and OTT services. These licenses enable Warner Bros. to generate significant revenues from hit television series for years beyond their initial airing on television.

Warner Bros. also licenses its feature films to premium pay television services (including HBO), broadcast and cable networks and OTT services starting approximately eight to nine months following their theatrical release. During 2017, Warner Bros. licensed thousands of feature films to television networks, premium pay television services and OTT services.

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International Business

Warner Bros. licenses rights to exhibit its feature films and original television series in international territories through agreements with television networks, premium pay television services, basic tier television services and OTT services. Warner Bros. licenses rights to exhibit feature films to SVOD services in China, and feature films and original television series to HOOQ, an SVOD service operating in India, Indonesia, the Philippines, Singapore and Thailand, which is owned by Warner Bros., Singtel Telecommunications Limited and Sony Pictures Television. During 2017, Warner Bros. licensed thousands of hours of programming, dubbed or subtitled in more than 90 languages, to international distributors in more than 190 countries.

As the worldwide demand for locally produced, local-language programming increases, Warner Bros. is focused on expanding its international local-language production business. Warner Bros. is developing programming specifically tailored for local audiences through its global network of production companies. Warner Bros. is also adapting international local programming into formats that can be produced by its local-language production companies in additional territories, including the U.S. For example, one or more of The Bachelor franchises (including The Bachelor , Bachelor in Paradis e and The Bachelorette (formats owned by Warner Bros. that originated in the U.S.)) is being adapted and produced in multiple international territories, including Australia, Canada, Finland, Germany, Japan, the Netherlands, Russia, Sweden, Switzerland and Vietnam.

Television Business Revenues

The revenues generated by Warner Bros.’ television business consist of (1) fees for the initial broadcast of Warner Bros.’ television programming on U.S. broadcast and cable television networks and premium pay television and OTT services, (2) fees for the airing or other distribution of its television programming after its initial broadcast in secondary U.S. distribution channels (such as basic cable networks, local television stations and OTT services), (3) fees for the international distribution of Warner Bros.’ television programming for free-to-air television, basic tier television services, premium pay television services and OTT services, and (4) revenues from the sale of the television programming of Warner Bros. and other companies in physical and digital formats. Warner Bros.’ television programming also supports Warner Bros.’ key brands and franchises, which helps generate consumer product and brand licensing revenues based on the programming for years beyond the initial airing of the programming on television.

Feature Films

Warner Bros. is a leader in the feature film business and produces feature films under its Warner Bros. and New Line Cinema banners. Warner Bros. also enters into arrangements with others to co-produce and co-finance feature films. Warner Bros. produces and distributes a wide-ranging slate of films, and it is focused on building its film slate around its strongest franchises with global appeal. Warner Bros. plans to release four to six event films each year that target a wide audience domestically and internationally.

During 2017, Warner Bros. released 18 original feature films for distribution in the U.S., including Annabelle: Creation , Blade Runner 2049 , Dunkirk , It , Justice League , Kong: Skull Island , The LEGO Batman Movie and Wonder Woman . Of the films released during 2017, eight were released in 3D format and seven were formatted for viewing on IMAX screens. In January 2018, Warner Bros. released Paddington 2 and 12 Strong and, in February 2018, released The 15:17 to Paris for distribution in the U.S. Warner Bros. plans to release an additional 17 films during 2018 for distribution in the U.S., including Aquaman , Fantastic Beasts: The Crimes of Grindelwald , The Nun , Ocean’s 8, Rampage , Ready Player One , Teen Titans GO! to the Movies and Tomb Raider .

Internationally, Warner Bros. produces and distributes both English-language and local-language films for theatrical exhibition in more than 125 territories outside the U.S. Warner Bros. uses both day and date and a staggered release schedule for its international releases. In 2017, Warner Bros. released internationally 19 English-language films and 34 local-language films that it either produced itself or acquired from other companies.

After the theatrical exhibition of its feature films, Warner Bros. releases them both domestically and internationally for distribution in various time periods through a variety of distribution channels, including retail stores, online and digital

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retailers; premium pay television services; broadcast and basic cable networks; OTT services and other exhibitors such as airlines and hotels. Feature films are released for sale through physical and digital formats and for rental via transactional VOD beginning approximately three to six months after their release in theaters. The date for that release is influenced by seasonality, competitive conditions, film attributes and expected performance. Feature films are typically released for rental in physical formats seven days later. After that, Warner Bros. licenses the feature films for domestic and international distribution to premium pay television services (including HBO and Cinemax), broadcast and basic cable networks (including Turner’s networks), OTT services and, in most cases, other exhibitors such as airlines and hotels.

Warner Bros. produces most of the films it releases in the U.S. under co-financing arrangements, which give Warner Bros. a greater ability to manage the financial risks of its film slate and offset some of the significant costs involved in the production, marketing and distribution of feature films, particularly event films. In most cases, Warner Bros. maintains worldwide distribution rights for the films it co-finances with others. Warner Bros. has co-financing arrangements with MGM Holdings Inc. and Village Roadshow Pictures. Warner Bros. also enters into co-financing arrangements with other studios. Warner Bros. monetizes its distribution and marketing operations by distributing films that other companies wholly finance and produce, and it has an exclusive distribution arrangement with Alcon Entertainment.

Feature Film Business Revenues

The revenues generated by Warner Bros.’ feature film business primarily consist of (1) rental fees paid by theaters for the theatrical exhibition of feature films produced (or co-produced) and/or distributed by Warner Bros., (2) licensing fees paid by television networks, premium pay television services and OTT services for the exhibition of feature films produced or co-produced by Warner Bros. and (3) revenues from the distribution of Warner Bros.’ and other companies’ feature films in physical and digital formats. Warner Bros.’ feature films also support Warner Bros.’ key brands and franchises, which helps generate consumer product and brand licensing revenues based on its films and characters.

Home Entertainment

Warner Bros. also generates revenues through the home entertainment distribution of its film and television content in physical and digital formats. Warner Bros. continues to be a leader in the home entertainment industry, and its significant home entertainment releases during 2017 included The Accountant , Annabelle: Creation, Dunkirk, Fantastic Beasts and Where to Find Them , It , Kong: Skull Island , The LEGO Batman Movie and Wonder Woman .

The home entertainment industry has been undergoing significant changes as it transitions from the distribution of film and television content via physical formats to digital formats. In recent years, consumer spending on home entertainment product in physical formats has declined as a result of several factors, including consumers shifting to OTT service subscriptions and, to a lesser degree, digital purchases and transactional VOD rentals of content; changing retailer initiatives and strategies ( e.g. , reduction in floor space devoted to home entertainment product in physical formats); retail store closures; increasing competition for consumer discretionary time and spending; and piracy. Consumer spending on film and television content in higher margin digital formats represents an increasing share of total home entertainment consumer spending in recent years, but has not meaningfully offset declines in consumer spending on home entertainment product in physical formats.

In response to these dynamics, Warner Bros. has been focusing on increasing the more profitable electronic sell-through (“EST”) sales and transactional VOD rentals of its film and television content and is an innovator in a variety of initiatives designed to make digital ownership more compelling for consumers, including providing enhanced content offerings, improving digital storefronts and promoting industry standards for content portability across retail platforms. For example, in 2017, Warner Bros. joined four other major film studios to launch the Movies Anywhere service in the U.S., which enables consumers to access digital copies of their films through a variety of digital platforms. Warner Bros. licenses its newly released feature films as well as films from its library and its television content to EST and transactional VOD services for viewing online and on mobile platforms in the U.S. and internationally. In the U.S. and most major international territories, Warner Bros.’ recent theatrical releases are generally released for sale via EST at least two weeks before their release in physical formats and transactional VOD.

Although consumer spending on home entertainment product in physical formats has declined in recent years, the distribution of home entertainment product in physical formats still generates significant revenues for Warner Bros. The

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home entertainment product it distributes in physical formats includes its own feature films and television content, including library content, as well as content acquired from others. Warner Bros. also distributes content in physical formats for others, such as Home Box Office, Turner, the BBC and Sesame Street in the U.S., as well as several content producers outside the U.S.

Games

Warner Bros. develops, publishes and distributes games, including mobile and console games. Its games are based on intellectual property owned or licensed by Warner Bros. (including DC Entertainment properties, Harry Potter and Mortal Kombat). Warner Bros. is focused on increasing its monetization of its franchises in its games business in the future. In 2017, Warner Bros. released 11 games, including Game of Thrones , Golf Clash , Injustice 2 , LEGO Marvel Super Heroes 2 and Middle-earth: Shadow of War . Warner Bros. plans to release seven games in 2018. Warner Bros. also licenses Warner Bros. and DC Entertainment properties for games to other companies. Warner Bros.’ games revenues consist of revenues from the development and distribution of the games of Warner Bros. and other companies.

OTHER TELEVISION NETWORK ASSETS

The Company also holds interests in companies that operate broadcast networks.

Central European Media Enterprises Ltd.

As of December 31, 2017, Time Warner held an approximate 46% voting interest and an approximate 75% ownership interest (on a fully diluted basis) in the equity interests of Central European Media Enterprises Ltd. (“CME”), a publicly-traded broadcasting company that operates leading television networks in Bulgaria, the Czech Republic, Romania and the Slovak Republic. CME also develops and produces content for its television networks. Time Warner’s investment consists of (i) common stock, (ii) convertible preferred stock that has voting rights, (iii) convertible redeemable preferred shares that do not have voting rights and (iv) warrants to purchase common stock of CME. Time Warner accounts for its investment in CME’s common stock and convertible preferred stock under the equity method of accounting, and it accounts for its investment in CME’s convertible redeemable preferred shares under the cost method of accounting. Time Warner also guarantees all of CME’s outstanding senior indebtedness and provides financing to CME under a revolving credit facility.

The CW

The CW is a 50-50 joint venture between Warner Bros. and CBS Corporation. The CW’s 2017-2018 schedule includes a 5-night, 10-hour primetime lineup of advertising-supported original programming such as The 100 , Arrow , Black Lightning , Crazy Ex-Girlfriend , DC’s Legends of Tomorrow , Dynasty , The Flash , iZombie , Jane the Virgin , Life Sentence , The Originals , Riverdale , Supergirl , Supernatural and Valor , as well as a three-hour block of advertising-supported programming on Saturday mornings. The CW plans to add a sixth night to its primetime programming lineup during the 2018-2019 season. The CW has entered into an agreement with a third party pursuant to which the third party is programming the Saturday morning programming block through the 2020-2021 season and pays The CW a license fee. For the 2017-2018 season, Warner Bros. and CBS are producing 15 series for The CW, including six series based on DC Entertainment characters. Advertising-supported full episodes of The CW’s original series are also available on cwtv.com and through The CW’s apps for mobile devices and Internet-connected televisions. The CW does not require any login or authentication of a cable subscription to stream its content. The CW’s programming is also available through an OTT service eight days after the full season of programming airs on The CW. The CW also operates CW Seed, The CW’s digital-only platform for original programming, which is available online and on mobile devices. The Company accounts for its investment in The CW under the equity method of accounting.

COMPETITION

The Company’s businesses operate in highly competitive industries, and the environment in which the Company competes has become more challenging over the past few years due to the shifts in consumer viewing patterns described above, increased competition from OTT services and the expansion by other companies, in particular technology companies, into

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the production or distribution of film and television programming and other video content. Competition in these industries has intensified as leisure and entertainment options have proliferated and audience fragmentation has increased. The competition is expected to increase further over the next few years. The Company’s businesses compete for consumers’ entertainment and leisure time and spending with each other, as well as other forms of entertainment, including other television networks, premium pay television services, local over-the-air television stations, social media platforms and other OTT services, motion pictures, home entertainment products and services, games, print media, live events, radio broadcasts and other forms of news, information and entertainment, as well as pirated content.

The Company’s competitive position is greatly affected by the quality of, and public response to, its content. The Company’s businesses compete with other production companies and studios for the services of producers, directors, writers, actors and others and for the acquisition of literary properties. In recent years, technology companies also have begun to produce programming and compete with the Company for talent and property rights. The Company’s television networks and premium pay television services compete for programming with OTT services, other television networks and premium pay television services and local television stations, and competition for programming, particularly licensed and sports programming, is intense.

The Company also faces competition for the licensing and distribution of its programming. As a producer and distributor of programming, the Company competes with other studios and television production groups and independent producers to produce and sell programming. Many television networks have affiliated production companies from which they are increasingly obtaining their programming, which has reduced the demand for programming from non-affiliated production companies. The Company also faces competition from other television networks and premium pay television services for distribution and marketing of its television networks and premium pay and basic tier television services by affiliates.

Competition for advertisers’ expenditures is intense, and the advantages of digital advertising to target and measure consumer response and the increased amount of consumer time spent online and on mobile activities have resulted in advertisers shifting more of their advertising budgets away from traditional television advertising to digital advertising. The Company’s advertising-supported television networks and digital properties compete for advertisers’ spending with advertising-supported OTT services, other networks and digital properties, print, radio, outdoor display and other media.

The Company’s businesses also compete in their character and brand merchandising and other licensing activities with other licensors of characters and brands.

REGULATORY MATTERS

The Company’s businesses are subject to and affected by laws and regulations of U.S. federal, state and local governmental authorities as well as the laws and regulations of other countries and international bodies such as the European Union (the “EU”), and these laws and regulations are subject to change, including due to regulatory reform measures. The following descriptions of significant U.S. federal, state, local and international laws, regulations, regulatory agency inquiries, rulemaking proceedings and other developments should be read in conjunction with the texts of the respective laws and regulations and other related materials.

Intellectual Property Laws

Time Warner is one of the world’s leading creators, owners and distributors of intellectual property. The Company’s vast intellectual property assets include copyrights in films, television programs, software, comic books and mobile apps; trademarks in names, logos and characters; patents or patent applications for inventions related to products and services; and licenses of intellectual property rights of various kinds. The Company derives value from these assets through its business activities.

To protect the Company’s intellectual property, the Company relies on a combination of copyright, trademark, unfair competition, patent and trade secret laws and license agreements. The duration of the protection afforded to the Company’s intellectual property depends on the type of property, the laws and regulations of the relevant jurisdiction and the terms of its license agreements. With respect to the Company’s trademarks and trade names, trademark laws and rights are generally

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territorial in scope and the Company’s rights are generally limited to those countries where a mark has been registered or otherwise protected. While trademark registrations may generally be maintained in effect for as long as the mark is in use in the respective jurisdictions, there may be occasions where a mark or title is not registrable or protectable or cannot be used in a particular country. In addition, a trademark registration may be cancelled or invalidated if challenged by others based on certain use requirements or other limited grounds. In the U.S., the usual copyright term for authored works is the life of the author plus 70 years, and the copyright term for “works made for hire” is the shorter of 95 years from the first publication or 120 years from the date the work was created. The Company also relies on laws that prohibit the circumvention of technological protection measures and trafficking in circumvention devices. The extent of copyright protection and benefit from laws prohibiting the circumvention of technological protection measures vary in different countries.

Piracy, particularly of digital content, continues to present a threat to the Company’s revenues from products and services based on intellectual property. The Company seeks to limit that threat through a combination of approaches, including working with cross-industry groups, trade associations and strategic partners to develop and implement technological solutions to control piracy, promoting legitimate market alternatives, applying technological protection measures, engaging in efforts to ensure effective and appropriately tailored legal remedies for infringement, enhancing public awareness of the meaning and value of intellectual property and promoting and advocating for appropriate legislative and policy initiatives both in the U.S. and internationally. The Company vigorously pursues appropriate avenues to protect its intellectual property, including sending takedown notices in appropriate circumstances and pursuing litigation and referrals to law enforcement against websites that distribute or facilitate the unauthorized distribution of the Company’s content. The volume of actions against websites dedicated to copyright theft is increasing internationally, and certain countries have implemented or are considering implementing programs or remedies designed to address and deter widespread infringement.

Outside the U.S., laws and regulations relating to intellectual property protection and the effective enforcement of these laws and regulations vary greatly from country to country and continue to evolve. Judicial, legislative and administrative developments are taking place in certain jurisdictions that may limit the ability of rights holders to exploit and enforce certain of their exclusive intellectual property rights outside the U.S. For example, in October 2011, the European Court of Justice held, in the context of satellite broadcasts of live soccer matches, that it was an unlawful restriction on competition for England’s Football Association Premier League to prohibit broadcasting licensees from distributing satellite decoder cards outside the territory for which the broadcasts were licensed for reception. As a result of that decision, in January 2014, the European Commission (the “EC”) began an antitrust investigation of the cross-border access to satellite and online services, examining certain provisions in licensing agreements between a number of U.S. film studios, including Warner Bros., and several large European satellite pay TV broadcasters. The investigation has focused on contractual restrictions that prevent broadcasters in one EU country from selling subscriptions in response to unsolicited requests from viewers in other EU countries. In July 2015, the EC sent a Statement of Objections to a number of U.S. film studios, including Warner Bros., reflecting its preliminary view that such contractual provisions may violate EU competition rules prohibiting anti-competitive agreements. In January 2016, the EC held a hearing on the matter. The Statement of Objections and hearing are steps in the process, but do not represent a finding of infringement or indicate the outcome of the EC’s investigation, which is ongoing. Separately, in 2015, the EC published its Digital Single Market strategy, which includes a broad range of high-level proposals that are intended to promote access to online services and entertainment content across national borders within the EU to foster the creation of a single digital market in the EU. For example, in September 2016, the EC announced a proposal for a regulation that would make it easier for broadcasters to distribute certain online services (such as online services that provide access to programming for a limited period of time after its initial broadcast and services offering the online transmission of programming simultaneously with its broadcast) across borders within the EU without requiring the further authorization of the owners of the programming rights. The outcomes of the ongoing EC investigation and legislative and regulatory proceedings in the EU are difficult to predict, and thus it is not possible to determine the impact they could have on the Company’s businesses.

Regulation Relating to Data Privacy, Data Security and Cybersecurity

The Company’s businesses are subject to laws and regulations governing data privacy, data security and cybersecurity. For example, in the U.S., the Company is subject to: (1) the Children’s Online Privacy Protection Act (“COPPA”), which applies to certain of the Company’s websites, mobile apps and other online business activities and restricts the collection, maintenance and use of personal information regarding children; (2) the Privacy and Security Rules under the Health Insurance Portability and Accountability Act, which imposes privacy and security requirements on the Company’s health

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plans for its employees and on service providers under those plans; (3) the Video Privacy Protection Act, which restricts disclosure of video viewing information; (4) state statutes requiring data security controls and notice to individuals when personally identifiable information (“PII”) has been accessed or acquired in a data breach; and (5) privacy and security rules imposed by the payment card industry, as well as regulations designed to protect against identity theft and fraud in connection with the collection of credit and debit card payments from consumers.

Moreover, several laws, regulations and policies that could affect how the Company collects, uses and protects data are in effect or are being considered in the U.S. and internationally. In the U.S., for example, the Federal Trade Commission (the “FTC”) frequently issues guidance that sets forth best practices for businesses to build privacy protections into their products and provide consumers greater control over the collection and use of their personal information. Self-regulatory bodies also have established requirements to implement notice and opt-out mechanisms and place other limitations on data tracking and usage and targeted advertising.

Congress, the White House and federal agencies continue to examine and focus on data security, consumer privacy and cybersecurity, particularly in light of several recent high-profile incidents, such as various companies’ data security breaches and the confirmed and alleged cybersecurity attacks surrounding the 2016 U.S. Presidential election. The Cybersecurity Information Sharing Act of 2015, for example, is intended to promote voluntary sharing of information regarding cybersecurity threats and defensive measures undertaken in response to those threats with the government and other businesses. The adoption of new privacy, data security and cybersecurity laws or regulations may in some cases increase the Company’s compliance costs.

Several state legislatures have also enacted legislation that regulates how businesses operate online, including measures relating to privacy, data security and data breaches. For example, California law requires operators of commercial websites and online services (including mobile apps) to make disclosures about how the operator or other parties may collect PII about a consumer’s online activities, including in some cases disclosure of how the operator responds to Web browser “do not track” signals or other mechanisms that enable consumers to opt out of the collection of such information. Furthermore, California law requires operators of commercial websites and online services to post a privacy policy that meets designated requirements, including providing a list of categories of PII that the operator collects and a list of third parties with whom the PII may be shared.

Foreign governments have also focused on data privacy and security concerns for many years. The EC adopted a data directive in 1995 to protect the privacy rights of individuals within the European Union and the transfer of personal information outside the EU (the “Directive”). In October 2015, the Court of Justice of the European Union (the “CJEU”) issued an opinion ruling that the U.S. – EU Safe Harbor framework (the “Safe Harbor framework”), which had been in place since 2000 and was a central mechanism relied on by U.S. organizations, including the Company, to transfer personal data from the EU to the U.S., was invalid. The decision did not invalidate any other legal mechanisms or bases that can be utilized or relied on to transfer personal data from the EU to the U.S. in compliance with the Directive, such as standard contractual clauses, binding corporate rules or individual consent. A replacement framework called the EU – U.S. Privacy Shield (the “Privacy Shield” framework), which replaces the Safe Harbor framework, was formally approved by the EC in July 2016. The Privacy Shield framework imposes greater obligations on U.S. companies to protect personal data transferred from the EU to the U.S. and requires the U.S. Department of Commerce and the FTC to carry out stricter monitoring and enforcement. The Company continues to evaluate the mechanisms available to comply with EU/U.S. data transfer requirements to be able to continue to operate its businesses.

In April 2016, the European Parliament and the EC adopted the General Data Protection Regulation (“GDPR”), which will become enforceable in May 2018 and will replace the Directive. The GDPR is intended to support the Digital Single Market strategy within the EU by providing a single set of rules on data protection across the European Economic Area, while enabling individuals to better control their personal data.

Regulation of Television Networks, Internet/Broadband Services, Programming and Advertising

The Company’s businesses are also subject to a number of laws and regulations relating to the distribution and licensing of television programming, the content of that programming, and advertising and marketing. In the U.S., cable networks and premium pay television services, either directly or indirectly through their distribution partners, are subject to various

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obligations under the Communications Act of 1934, as amended (the “Communications Act”), and related regulations issued by the Federal Communications Commission (the “FCC”). These obligations and regulations, among other things, require closed captioning of programming for the hearing impaired, require certain content providers to make available audio descriptions of programming for the visually impaired and limit the amount and content of commercial matter that may be shown during programming aimed primarily at an audience of children aged 12 and under.

The FCC continues to examine policies for video programming and distribution, and in recent years it has taken actions that could directly or indirectly restrict the Company’s ability to produce, distribute or fully monetize its content. For example, in March 2015, the FCC adopted “net neutrality” regulations that constrain how broadband Internet service providers (“ISPs”) can offer broadband and related services that can be used to distribute the Company’s programming via the Internet (the “2015 Order”). The net neutrality regulations subject ISPs to the requirements of Title II of the Communications Act, including imposing limitations on unreasonable practices, obligations regarding customer privacy and protections for people with disabilities and authorize the FCC to investigate and act on consumer complaints. The regulations prohibit ISPs from: (i) blocking access to legal content, applications or services or to devices that do not harm their network, (ii) impairing or degrading lawful Internet content and (iii) implementing paid prioritization or “fast lanes” for content or applications. ISPs generally are permitted to engage in reasonable network management (other than paid prioritization) if the purpose of their actions is related to managing their network. In 2015, a trade group, several broadband providers and others filed lawsuits in the U.S. Court of Appeals for the District of Columbia challenging the net neutrality regulations, which were upheld by the court in June 2016. Petitions for review by the U.S. Supreme Court remain pending. However, in December 2017, under a new chairman, the FCC adopted a declaratory ruling, report, and order (the “2017 Order”) (the date on which it will be fully effective has not yet been determined) that reverses application of Title II to ISPs and eliminates most of the specific conduct restrictions on ISPs established through the 2015 Order. Several lawsuits, including lawsuits brought by public interest groups and several state attorneys general, have been filed to block the FCC’s action. In addition, members of Congress have introduced legislation that would set forth a new net neutrality regulatory framework and lawmakers in several states have introduced bills that would prohibit ISP actions to block or slow down sites or online services. It is not possible to predict how the 2017 Order, or the lawsuits and net neutrality laws and regulations seeking to challenge or nullify the 2017 Order will impact the Company.

In September 2016, the FCC proposed rules that would constrain how multichannel video programming distributors (which are also referred to in this report as traditional affiliates) negotiate carriage agreements with programming providers that are independent of the distributor and programming providers that are not associated with a major production studio. The proposed rules would prohibit such a distributor from including in such carriage agreements “most favored nation” clauses that enable the distributor to receive favorable contract terms that a programming provider has given to another distributor without requiring the affiliate to be subject to any corresponding obligations included in the other distribution agreement. The proposed rules would also prohibit contract provisions that restrict a programming provider’s ability to distribute its programming through alternative video distribution platforms, including online platforms. It is not possible to predict what, if any, impact any such rules could have on the Company’s negotiations with multichannel video programming distributors.

From time to time, the FCC also conducts inquiries and rulemaking proceedings, which could lead to additional regulations that could have a material effect on the Company’s businesses. The FCC has also initiated the following proceedings:

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Various other federal laws also contain provisions that place restrictions on violent and sexually explicit programming. Regulators, legislatures and other policymakers are interested in laws and regulations intended to protect the interests of children by placing limitations on food and beverage marketing in media popular with children and teens.

In international territories, there are various laws and regulations relating to the distribution or licensing of television programming and other products. These include television licensing requirements relating to closed captioning of programming for the hearing impaired, descriptive audio versions for the visually impaired and mandatory local language dubbed and/or subtitled versions of programming, laws providing for minimum percentages of local content and maximum percentages of foreign content on television, local language advertising requirements, laws and regulations imposing pricing, exclusivity and importing restrictions, editorial control, translation or local editing requirements and other nationality-based restrictions. There are also a number of laws and regulations in these international territories relating to the nature of content and advertising and marketing efforts, including content codes and laws requiring government approval of certain content prior to exhibition, consumer protection laws (particularly those relating to advertisements and programming aimed at children) and laws restricting the amount of advertising permitted on television networks. For example, the EU Audio Visual Media Services directive, which allows EU member states to adopt more restrictive regimes and applies to all programs produced after December 2009, obligates broadcasters to notify viewers if an audiovisual program contains paid product placement, bans any form of product placement in children’s and news programming and prohibits product placement of tobacco products and prescription medication. The directive also imposes an obligation on EU member states and the EC to encourage broadcasters and channel providers to develop codes of conduct regarding advertising for foods high in fat, salt and sugar in or around children’s programming. Accordingly, in the U.K., the Office of Communications has restricted such television advertising, and other EU jurisdictions have required that nutritional information be included in food advertisements. In May 2016, the EC proposed an amendment to the directive to require that the rules implemented under the directive by EU member states are applied consistently across various platforms, including traditional broadcast networks, VOD providers and video-sharing platforms. The Council of the EU and the European Parliament are reviewing the legislative proposal. Outside the EU, other governments are considering or have already implemented food advertising restrictions similar to those in the U.K., including in Argentina, Brazil, Colombia, Chile, Ecuador, Mexico, Norway, Peru, Singapore and Uruguay. Finally, several governments, including in Argentina, Brazil, India, Mexico and Uruguay, have recently proposed, enacted or more strictly enforced regulations that limit the amount of advertising content that can be aired on television networks.

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Regulation of the Distribution and Licensing of Feature Films

In countries outside the U.S., there are a variety of laws and regulations relating to the distribution or licensing of feature films for exhibition in theaters and on broadcast and cable networks. These include copyright laws and regulations, television licensing requirements similar to those applicable to made-for-television programming, trade and customs regulations, laws providing for minimum percentages of local content in theaters and on broadcast television and maximum percentages of foreign content on television and laws that limit increases in prices paid by distributors to content providers. In certain countries, laws and regulations limit the number of foreign films exhibited in such countries in a calendar year. For example, China, which was the second-largest box office territory based on box office receipts in 2016, limits the number of foreign films that can be distributed annually using revenue-sharing arrangements as well as the percentage of revenue shared with the foreign film distributor. In addition to laws and regulations, there are various trade agreements among the United States and other countries that govern or affect the global distribution of content and copyright protection for such content among the applicable countries.

Marketing Regulation

The Company’s marketing and advertising sales activities are subject to regulation by the FTC, the FCC, and each of the states under general consumer protection statutes prohibiting unfair or deceptive acts or practices. Certain marketing activities are also subject to specific federal statutes and rules, such as COPPA and the Telephone Consumer Protection Act (the “TCPA”), which restricts certain telephone calls, faxes or mobile text messages to consumers without their prior consent. Outside the U.S., laws restricting marketing and sales activities also continue to be adopted. For example, the Canadian Anti-Spam legislation (the “CASL”), which went into effect July 1, 2014, restricts commercial electronic messages to consumers without their prior permission. Both the TCPA and CASL provide for private rights of action, and violations of these laws can result in potential liability, including substantial administrative fines and class action lawsuits.

FINANCIAL INFORMATION ABOUT SEGMENTS, GEOGRAPHIC AREAS AND BACKLOG

Financial and other information by segment and revenues by geographic area for each year in the three-year period ended December 31, 2017 are set forth in Note 16 to the Company’s consolidated financial statements, “Segment Information.” Information with respect to the Company’s backlog, representing future revenue not yet recorded from cash contracts for the worldwide licensing of theatrical and television product for premium pay television services, basic cable and network and syndicated television exhibition, at December 31, 2017 and December 31, 2016, is set forth in Note 17 to the Company’s consolidated financial statements, “Commitments and Contingencies — Commitments — Programming Licensing Backlog.”