Commitments and Contingencies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||
| 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, 2015 is reflected in accrued liabilities and in other liabilities in the accompanying consolidated balance sheets. As of December 31, 2015, such liabilities aggregated approximately $88.9 million and are payable as follows: $67.8 million in 2016, $10.5 million in 2017, $4.1 million in 2018, $6.0 million in 2019, $0.4 million in 2020 and $0.1 million thereafter.
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, 2015, are as follows: $256.0 million in 2016; $109.4 million in 2017; $99.6 million in 2018; $87.9 million in 2019, $66.5 million in 2020 and $111.2 million thereafter.
Starz is also obligated to pay fees for films that have not yet been released in theaters by Sony. Starz is unable to estimate the amounts to be paid to Sony for films that have not yet been released, however, such amounts are expected to be significant.
Amortization of program rights was $607.2 million, $555.7 million and $581.1 million for the years ended December 31, 2015, 2014 and 2013, 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 $6.4 million, $7.2 million and $7.1 million for the years ended December 31, 2015, 2014 and 2013, 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 at December 31, 2015 were 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 and New Zealand. Starz has committed to pay US$11.2 million for ZAR142.4 million and US$16.6 million for NZD25.2 million during 2016.
Guarantee
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
On October 29, 2015, Keno Thomas, a former Starz Entertainment employee, filed a complaint in Los Angeles County Superior Court against Starz, Starz, LLC, Starz Entertainment (collectively, “Starz Parties”) and Liberty Media, and certain individual defendants. The plaintiff alleges that the Starz Parties and certain of the other defendants engaged in retaliation, wrongful termination of employment, failure to prevent retaliation and intentional infliction of emotional distress, all in connection with the plaintiff’s employment with Starz Entertainment. The plaintiff seeks compensatory, emotional distress and punitive damages, interest and an award of reasonable attorneys’ fees. On November 30, 2015, defendants removed this case to the United States District Court for the Central District of California. On December 7, 2015, the defendants moved to dismiss Mr. Albrecht and Liberty Media and to dismiss various causes of action against the Starz Parties and Mr. Thornton, and to strike portions of the complaint. These motions are scheduled for hearing on February 29, 2016. In February 2016, the parties stipulated to dismiss Starz and Starz, LLC without prejudice and to dismiss Liberty Media with prejudice.
On November 9, 2015, a purported class action was commenced in the U.S. District Court for the Central District of California by Pierre Bolduc, against Starz and certain individual defendants. The plaintiff purports to represent a class of persons who purchased shares of Starz common stock between August 1, 2014 and October 29, 2015. Citing allegations in the lawsuit filed by Keno Thomas, described above, the plaintiff alleges that the defendants violated applicable federal securities laws by making materially false and misleading statements and failing to disclose that: (a) Starz lacked adequate internal controls; (b) Starz’s contract with a certain Distributor was a result of illicit business practices; and (c) as a result, Starz’s public statements were materially false and misleading and lacked a reasonable basis. The complaint alleges that the price of shares of Starz’s common stock fell as a result of the Keno Thomas lawsuit. The plaintiff seeks damages, interest, reasonable attorneys’ fees and costs. On February 11, 2016, the District Court entered an Order appointing Lucille Theroux as Lead Plaintiff and Approving Glancy Prongay & Murray LLP, as Counsel, and thereafter the Court formally changed the case name to Theroux v. Starz, et al.
Starz believes it has substantial defenses to the claims asserted, is defending these actions vigorously, and does not believe that the resolution of these remaining cases will have a material adverse effect on its business, financial condition or results of operations.
In the normal course of business, Starz is subject to other lawsuits and other claims, including claims of alleged infringement of the trademarks, patents, copyrights and other intellectual property rights of third parties. While it is not possible to predict the outcome of these other 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’s business, financial condition or results of operations.
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