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Commitments and Contingencies
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12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2014
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies |
Commitments and Contingencies
Programming Rights
Starz has an exclusive multi-year output licensing agreement for qualifying films that are released theatrically in the U.S. by Sony Pictures Entertainment Inc. (“Sony”) through 2021. The agreement provides Starz with exclusive pay TV rights to exhibit qualifying theatrically released films under the Sony, Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels. Theatrically released films produced by Sony Pictures Animation are not licensed to Starz under the Sony agreement. In addition, Starz has an exclusive licensing agreement for qualifying films that are released theatrically in the U.S. by Walt Disney Company (“Disney”) through 2015. The agreement provides Starz with exclusive pay TV rights to exhibit qualifying theatrically released films under the Disney, Touchstone, Pixar and Marvel labels. Theatrically released films produced by DreamWorks and released by Disney are not licensed to Starz under the Disney agreement. The programming fees to be paid to Sony and Disney are based on the quantity and domestic theatrical exhibition receipts of qualifying films. Starz has also entered into agreements with a number of other motion picture producers and is obligated to pay fees for the rights to exhibit certain films licensed from these producers.
The unpaid balance for film rights related to films that were available for exhibition at December 31, 2014 is reflected in accrued liabilities and in other liabilities in the accompanying consolidated balance sheets. As of December 31, 2014, such liabilities aggregated approximately $93.7 million and are payable as follows: $89.0 million in 2015 and $4.7 million in 2016.
The estimated amounts payable under programming license agreements related to films that are not available for exhibition until some future date, including the rights to exhibit films that have been released theatrically under the Sony and Disney agreements, which have not been accrued as of December 31, 2014, are as follows: $287.5 million in 2015; $113.0 million in 2016; $111.5 million in 2017; $101.4 million in 2018, $85.7 million in 2019 and $158.0 million thereafter.
Starz is also obligated to pay fees for films that have not yet been released in theaters by Sony and Disney. Starz is unable to estimate the amounts to be paid under these agreements for films that have not yet been released; however, such amounts are expected to be significant.
Total amortization of program rights was $555.7 million, $581.1 million and $617.8 million for the years ended December 31, 2014, 2013 and 2012, respectively. These amounts are included in programming costs in the accompanying consolidated statements of operations.
Operating Leases
Starz leases office facilities, back-up transponder capacity, and certain other equipment under operating lease arrangements. Rental expense under such arrangements amounted to $7.2 million, $7.1 million and $7.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. Such amounts are included in operating expenses and selling, general and administrative expenses in the accompanying consolidated statements of operations.
The future minimum payments under noncancelable operating leases, net of subleases, at December 31, 2014 are as follows (in millions):
Foreign Currency Hedge Contracts
Starz has entered into foreign currency hedge contracts to manage its foreign currency risk in connection with certain original series produced in South Africa. Starz has committed to pay US$12.0 million for ZAR131.8 million during 2015.
Guarantees
Starz Entertainment entered into a guarantee on behalf of a previously owned subsidiary of Starz Media for any amounts owed to the Ontario government under the Canadian Next Generation of Jobs Fund Grant if the subsidiary did not meet its obligations. The Ontario government released Starz Entertainment from the guarantee in December 2013 due to completion of the project in September 2013. As a result of this release, Starz recognized income of $8.8 million in other income, net during the year ended December 31, 2013, for amounts accrued in prior years under the guarantee.
Legal Proceedings
In the normal course of business, Starz is subject to lawsuits and other claims. While it is not possible to predict the outcome of these matters, it is the opinion of management, based upon consultation with legal counsel, that the ultimate disposition of known proceedings will not have a material adverse impact on Starz consolidated financial position, results of operations or liquidity.
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