1105705--2/22/2008--TIME_WARNER

related topics

{capital, credit, financial}

{product, market, service}

{regulation, change, law}

{system, service, information}

{property, intellectual, protect}

{operation, international, foreign}

{regulation, government, change}

Time Warner s businesses may suffer if it cannot continue to license or enforce the intellectual property rights on which its businesses depend. The Company has been, and may be in the future, subject to claims of intellectual property infringement, which could have an adverse impact on the Company s businesses or operating results due to a disruption in its business operations, the incurrence of significant costs and other factors. Time Warner faces risks relating to doing business internationally that could adversely affect its business and operating results. Weakening economic conditions or other factors could reduce the Company s advertising or other revenues or hinder its ability to increase such revenues. The introduction and increased popularity of alternative technologies for the distribution of news, entertainment and other information and the resulting shift in consumer habits and/or advertising expenditures from traditional to online media could adversely affect the revenues of the Company s Publishing, Networks and The Company faces risks relating to competition for the leisure and entertainment time of audiences, which has intensified in part due to advances in technology. Several of the Company s businesses rely heavily on network and information systems or other technology, and a disruption or failure of such networks, systems or technology as a result of computer viruses, misappropriation of data or other malfeasance, as well as outages, natural disasters, accidental releases of information or similar events, may disrupt the Company s businesses. The Company s Internet and advertising businesses are subject to regulation in the U.S. and internationally, which could cause these businesses to incur additional costs or liabilities or disrupt their business practices. RISKS RELATING TO TIME WARNER S AOL BUSINESS The continuing shift in AOL s business model from a primarily subscription-based business model to a primarily advertising-supported model involves significant risks. Pricing for advertising may continue to face downward pressure. Costs to acquire advertising inventory could continue to increase. AOL faces risks associated with the fragmentation of the Internet audience. Unless AOL increases the number of visitors to the AOL Network and maintains or increases their activity in areas where advertising revenues are generated, AOL may not be able to increase advertising revenues associated with the AOL Network. If AOL does not continue to develop and offer compelling and differentiated content, products and services, AOL s advertising revenues could be adversely affected. If AOL cannot secure favorable arrangements to effectively distribute its products and services, it could hinder AOL s ability to attract new Internet consumers or maintain or increase the engagement of Internet More individuals are using devices other than personal and laptop computers to access and use the Internet, and if AOL cannot make its products and services available and attractive to consumers via these alternative devices, AOL s advertising revenues could be adversely affected. If AOL cannot effectively build a portfolio of alternate brands that are appealing to Internet consumers, AOL may have difficulty in increasing the engagement of Internet consumers on its web products and services. Changes in AOL s relationship with a major customer of Advertising.com will put downward pressure on AOL s advertising revenues in 2008. AOL faces intense competition in all aspects of its business. Acquisitions of other companies could have an adverse impact on AOL s operations and result in unanticipated liabilities. New or changing federal, state or international privacy legislation or regulation could hinder the growth of AOL s business. RISKS RELATING TO TIME WARNER S CABLE BUSINESS TWC may continue to face challenges in its systems in Dallas, Texas and Los Angeles, California. Increases in programming costs or an inability to obtain popular programming could adversely affect TWC s operations, business or financial results. TWC faces a wide range of competition, which could negatively affect its business and financial results. Significant unanticipated increases in the use of bandwidth-intensive Internet-based services could increase TWC s costs. Availability of SDV technology may not enable TWC to effectively manage its existing bandwidth. The Internal Revenue Service and state and local tax authorities may challenge the tax characterizations of the Adelphia Acquisition, the Redemptions or the Exchange, or related valuations, and any successful challenge by the Internal Revenue Service or state or local tax authorities could materially adversely affect Time Warner s tax profile, significantly increase its future cash tax payments and significantly reduce its future earnings and cash flow. TWC may encounter unforeseen difficulties as it increases the scale of its video, high-speed data and voice offerings to commercial customers. TWC s business is subject to extensive governmental regulation, which could adversely affect its business. Net neutrality legislation or regulation could limit TWC s ability to operate its high-speed data business profitably, to manage its broadband facilities efficiently and to make upgrades to those facilities sufficient to respond to growing bandwidth usage by its high-speed data customers. RISKS RELATING TO BOTH THE TIME WARNER NETWORKS AND FILMED ENTERTAINMENT BUSINESSES The Networks and Filmed Entertainment segments must respond to recent and future changes in technology, services and standards to remain competitive and continue to increase their revenue. The Networks and Filmed Entertainment segments operate in highly competitive industries. Although piracy poses risks to several of Time Warner s businesses, such risks are especially significant for the Networks and Filmed Entertainment segments due to the prevalence of piracy of feature films and television programming. The popularity of the Company s television programs and films and other factors is difficult to predict and could lead to fluctuations in the revenue of the Networks and Filmed Entertainment segments. The Networks and Filmed Entertainment segments are subject to labor interruption. RISKS RELATING TO TIME WARNER S FILMED ENTERTAINMENT BUSINESS DVD sales have been declining, which may adversely affect the Filmed Entertainment segment s growth prospects and results of operations. The Filmed Entertainment segment s strategy includes the release of a limited number of event films each year, and the underperformance of one or more of these films could have an adverse effect on the Filmed Entertainment segment s results of operations and financial condition. The costs of producing and marketing feature films have increased and may increase in the future, which may make it more difficult for a film to generate a profit. Changes in estimates of future revenues from feature films could result in the write-off or the acceleration of the amortization of film production costs. A decrease in demand for television product could adversely affect Warner Bros. revenues. RISKS RELATING TO TIME WARNER S NETWORKS BUSINESS The loss of affiliation agreements could cause the revenue of the Networks segment to decline in any given period, and further consolidation of multichannel video programming distributors could adversely affect the segment. The inability of the Networks segment to license rights to popular programming or create popular original programming could adversely affect the segment s revenue. Increases in the costs of programming licenses and other significant costs may adversely affect the gross margins of the Networks segment. The maturity of the U.S. video services business, together with rising retail rates, distributors focus on selling alternative products and other factors, could adversely affect the future revenue growth of the Networks segment. Changes in U.S. or foreign communications laws or other regulations may have an adverse effect on the business of the Networks segment. RISKS RELATING TO TIME WARNER S PUBLISHING BUSINESS The Publishing segment faces significant competition for advertising and audience.

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1105705--2/22/2008--TIME_WARNER_INC.