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Revenue | 9 Months Ended
--- | ---
Dec. 31, 2018
Revenue from Contract with Customer [Abstract] |
Revenue | Revenue General. The Company's Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places. The Company's Media Networks segment generates revenue primarily from the distribution of the Company's STARZ branded premium subscription video services and, to a lesser extent, direct-to-consumer content streaming services. Revenue is recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services or goods. Revenues do not include taxes collected from customers on behalf of taxing authorities such as sales tax and value-added tax. Licensing Arrangements. The Company's content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales or usage based royalties. Fixed Fee or Minimum Guarantees: The Company's fixed fee or minimum guarantee arrangements may, in some cases, include multiple titles, multiple license periods (windows) with a substantive period in between the windows, rights to exploitation in different media, or rights to exploitation in multiple territories, which may be considered distinct performance obligations. When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or territory) are recognized when the content has been delivered, and the window for the exploitation right in that territory has begun, which is the point in time at which the customer is able to begin to use and benefit from the content. Sales or Usage Based Royalties: Sales or usage based royalties represent amounts due to the Company based on the “sale” or “usage” of the Company's content by the customer, and revenues are recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which some or all the sales or usage-based royalty has been allocated has been satisfied (or partially satisfied). Generally when the Company licenses completed content (with standalone functionality, such as a movie, or television show), its performance obligation will be satisfied prior to the sale or usage. When the Company licenses intellectual property that does not have stand-alone functionality (e.g., brands, themes, logos, etc.), its performance obligation is generally satisfied in the same period as the sale or usage. The actual amounts due to the Company under these arrangements are generally not reported to the Company until after the close of the reporting period. The Company records revenue under these arrangements for the amounts due and not yet reported to the Company based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. Such estimates are based on information from the Company's customers, historical experience with similar titles in that market or territory, the performance of the title in other markets, and/or data available in the industry. Revenues by Market or Product Line. The following describes the revenues generated by market or product line. Theatrical revenues are included in the Motion Picture segment; home entertainment, television, international and other revenues are applicable to both the Motion Picture and Television Production segments; Media Networks programming revenues are included in the Media Networks segment.
• | Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (distributed by the Company directly in the United States and through a sub-distributor in Canada). Revenue from the theatrical release of feature films are treated as sales or usage- based royalties and recognized starting at the exhibition date and based on the Company's participation in box office receipts of the theatrical exhibitor.
• | Home Entertainment. Home entertainment consists of Digital Media and Packaged Media.
◦ | Digital Media. Digital media includes digital transaction revenue sharing arrangements (pay-per-view and video-on-demand platforms, electronic sell through ("EST"), and digital rental) and licenses of content to digital platforms for a fixed fee.
Digital Transaction Revenue Sharing Arrangements: Primarily represents revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, the Company shares in the rental or sales revenues generated by the platform on a title-by-title basis. These digital media platforms generate revenue from rental and EST arrangements, such as download-to-own, download-to-rent, and video-on-demand. These revenue sharing arrangements are recognized as sales or usage based royalties based on the performance of these platforms and pursuant to the terms of the contract, as discussed above. Licenses of Content to Digital Platforms: Primarily represents the licensing of content to subscription-video-on-demand ("SVOD") or other digital platforms for a fixed fee. As discussed above, revenues are recognized when the content has been delivered and the window for the exploitation right in that territory has begun.
◦ | Packaged Media. Packaged media revenues represent the sale of motion pictures and television shows (produced or acquired) on physical discs (DVD’s, Blu-Ray, 4K Ultra HD) in the retail market. Revenues are recognized, net of an allowance for estimated returns and other allowances, on the later of receipt by the customer or “street date” (when it is available for sale by the customer).
• | Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television markets, syndication) of motion pictures (including theatrical productions and acquired films) and scripted and unscripted television series, television movies, mini-series, and non-fiction programming. Television revenues include fixed fee arrangements as well as arrangements in which the Company earns advertising revenue from the exploitation of certain content on television networks. Television also includes revenue from licenses to SVOD platforms in which the initial license of a television series is to an SVOD platform. Revenues associated with a title, right, or window from television licensing arrangements are recognized when the feature film or television program is delivered (on an episodic basis for television product) and the window for the exploitation right has begun.
• | International. International revenues are derived from (1) licensing of the Company's productions, acquired films, catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom; and (3) licensing to international markets of scripted and unscripted series, television movies, mini-series and non-fiction programming. License fees and minimum guarantee amounts associated with title, window, media or territory, are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the contract, and the right to exploit the feature film or television program in that window, media or territory has commenced. Revenues are also generated from sales or usage based royalties received from international distributors based on their distribution performance pursuant to the terms of the contracts after the recoupment of certain costs in some cases, and the initial minimum guarantee, if any, and are recognized when the sale by our customer generating a royalty due to us has occurred.
• | Other. Other revenues are derived from, among others, the following:
◦ | the licensing of our film and television content to other ancillary markets;
◦ | the Company's interactive ventures and games division, its global franchise management division (including location-based entertainment) and merchandising rights, all of which may include licenses of motion picture or television characters, brands, storylines, themes or logos (i.e., symbolic intellectual property);
◦ | the sales and licensing of music from the theatrical exhibition of our films and the television broadcast of our productions; and
◦ | commissions due to 3 Arts Entertainment related to talent management.
Revenues from the licensing of film and television content and the sales and licensing of music are recognized when the content has been delivered and the license period has begun, as discussed above. Revenues from the licensing of symbolic intellectual property is recognized over the corresponding license term. Commissions are recognized as such services are provided.
• | Media Networks - Programming Revenues. Media Networks’ revenues are primarily derived from the distribution of the Company's STARZ branded premium subscription video services pursuant to affiliation agreements with U.S. multichannel video programming distributors (“MVPDs”), including cable operators, satellite television providers and telecommunications companies, and over-the-top (“OTT”) (collectively, “Distributors”) and on a direct-to-consumer basis. Media Networks revenues also include international revenues from the OTT distribution of the Company's STARZ branded premium subscription video services.
Pursuant to the Company’s distribution agreements, revenues may be based on a fixed fee, subject to nominal annual escalations, or a variable fee (i.e., a fee based on number of subscribers who receive the Company's networks or other factors). Programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor. The variable distribution fee arrangements represent sales or usage based royalties and are recognized over the period of such sales or usage by the Company's distributor, which is the same period that the content is provided to the distributor. The table below presents revenues by segment, market or product line for the three and nine months ended December 31, 2018 and 2017. As a result of the segment reorganization described in Note 15, the Company has presented prior period segment data in a manner that conforms to the current period presentation. The prior year information in the below table has not been adjusted under the modified retrospective method of adoption of the new revenue recognition guidance.
| Three Months Ended |  | Nine Months Ended
| December 31, |  | December 31,
| 2018 |  | 2017 |  | 2018 |  | 2017
| (Amounts in millions)
Revenue by Type: |  |  |  |  |  |  |
Motion Picture |  |  |  |  |  |  |
Theatrical(1) | $ | 28.5 |  |  | $ | 117.4 |  |  | $ | 147.9 |  |  | $ | 226.1 |
Home Entertainment |  |  |  |  |  |  |
Digital Media | 81.7 |  |  | 85.0 |  |  | 253.0 |  |  | 277.1 |
Packaged Media(1) | 68.0 |  |  | 104.0 |  |  | 209.0 |  |  | 311.5 |
Total Home Entertainment | 149.7 |  |  | 189.0 |  |  | 462.0 |  |  | 588.6 |
Television(1) | 74.8 |  |  | 90.5 |  |  | 207.6 |  |  | 222.3 |
International | 104.7 |  |  | 134.4 |  |  | 254.3 |  |  | 336.9 |
Other(1) | 4.9 |  |  | 7.8 |  |  | 35.1 |  |  | 23.1 |
Total Motion Picture revenues | $ | 362.6 |  |  | $ | 539.1 |  |  | 1,106.9 |  |  | 1,397.0 |
Television Production |  |  |  |  |  |  |
Television | $ | 151.5 |  |  | $ | 184.6 |  |  | 454.4 |  |  | 515.5 |
International | 35.9 |  |  | 51.1 |  |  | 94.7 |  |  | 118.8 |
Home Entertainment |  |  |  |  |  |  |
Digital Media | 10.9 |  |  | 25.7 |  |  | 54.1 |  |  | 92.4 |
Packaged Media | 2.5 |  |  | 4.1 |  |  | 5.9 |  |  | 10.0 |
Total Home Entertainment | 13.4 |  |  | 29.8 |  |  | 60.0 |  |  | 102.4 |
Other | 15.7 |  |  | 0.7 |  |  | 39.0 |  |  | 2.0 |
Total Television Production revenues | $ | 216.5 |  |  | $ | 266.2 |  |  | 648.1 |  |  | 738.7 |
Media Networks - Programming Revenues | $ | 366.8 |  |  | $ | 353.5 |  |  | 1,099.0 |  |  | 1,057.8 |
Intersegment eliminations | (12.7 | ) |  | (16.1 | ) |  | (87.1 | ) |  | (104.7 | )
Total revenues | $ | 933.2 |  |  | $ | 1,142.7 |  |  | $ | 2,766.9 |  |  | $ | 3,088.8 |
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(1) | Certain amounts in the prior period have been reclassified in order to conform to the current period presentation. In particular, in the three and nine months ended December 31, 2017, within the Motion Picture segment $16.9 million was reclassified from Other revenue to Theatrical revenue ($8.1 million), Home Entertainment Packaged Media revenue ($3.7 million), and Television revenue ($5.1 million).
Remaining Performance Obligations Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog). Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2018 are as follows:
|  | Rest of Year Ending March 31, 2019 |  | Year Ended March 31, |  |  |  |
|  |  | 2020 |  | 2021 |  | Thereafter |  | Total
|  | (Amounts in millions)
Remaining Performance Obligations |  | $ | 490.0 |  |  | $ | 783.7 |  |  | $ | 240.7 |  |  | $ | 279.0 |  |  | $ | 1,793.4 |
The above table does not include estimates of variable consideration for transactions involving sales or usage-based royalties in exchange for licenses of intellectual property. The revenues included in the above table include all fixed fee contracts regardless of duration. Revenues of $64.6 million and $186.8 million, including variable and fixed fee arrangements, were recognized during the three and nine months ended December 31, 2018, respectively, from performance obligations satisfied prior to March 31, 2018. These revenues were primarily associated with the distribution of television and theatrical product in electronic sell-through and video-on-demand formats, and to a lesser extent, the distribution of theatrical product in the domestic and international markets related to films initially released in prior periods. Payment Terms, Contract Assets and Deferred Revenue The timing of revenue recognition, billings and cash collections affects the recognition of accounts receivable, contract assets and deferred revenue. At December 31, 2018 and April 1, 2018, accounts receivable, contract assets and deferred revenue are as follows:
| December 31, 2018 |  | April 1, 2018 |  | Addition (Reduction)
| (Amounts in millions) |  |
Accounts receivable, net - current | $ | 833.1 |  |  | $ | 1,042.2 |  |  | $ | (209.1 | )
Accounts receivable, net - non-current(1) | 228.7 |  |  | 257.7 |  |  | (29.0 | )
Contract asset - current(2) | 69.0 |  |  | 78.3 |  |  | (9.3 | )
Contract asset - non-current(3) | 28.0 |  |  | 71.5 |  |  | (43.5 | )
Deferred revenue - current | 173.0 |  |  | 183.8 |  |  | (10.8 | )
Deferred revenue - non-current | 70.0 |  |  | 70.5 |  |  | (0.5 | )
__________________
(1) | Included in accounts receivable within non-current other assets in the unaudited condensed consolidated balance sheets.
(2) | Included in prepaid expenses and other within other current assets in the unaudited condensed consolidated balance sheets.
(3) | Included in prepaid expenses and other within non-current other assets in the unaudited condensed consolidated balance sheets.
Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables). Amounts relate primarily to contractual payment holdbacks in cases in which the Company is required to deliver additional episodes or seasons of television content in order to receive payment, complete certain administrative activities, such as guild filings, or allow the Company's customers' audit rights to expire. The change in balance of contract assets is primarily due to the satisfaction of the condition related to payment holdbacks. Deferred revenue relates primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation. Revenues of $23.6 million and $128.8 million were recognized during the three and nine months ended December 31, 2018, respectively, related to the balance of deferred revenue at April 1, 2018. Payment terms vary by location and type of customer and the nature of the licensing arrangement, however, other than certain multi-year license arrangements, generally payment is due within 60 days after revenue is recognized. For certain multi-year licensing arrangements, primarily in the television, digital media, and international markets, payments may be due over a longer period. When we expect the period between fulfillment of our performance obligation and the receipt of payment to be greater than a year, a significant financing component is present. In these cases, such payments are discounted to present value based on a discount rate reflective of a separate financing transaction between the customer and the Company, at contract inception. The significant financing component is recorded as a reduction to revenue and accounts receivable initially, with such accounts receivable discount amortized to interest income over the period to receipt of payment. The Company does not assess contracts with deferred payments for significant financing components if, at contract inception, we expect the period between fulfillment of the performance obligation and subsequent payment to be one year or less. In other cases, customer payments are made in advance of when the Company fulfills its performance obligation and recognizes revenue. This primarily occurs under television production contracts, in which payments may be received as the production progresses, international motion picture contracts, where a portion of the payments are received prior to the completion of the movie and prior to license rights start dates, and pay television contracts with multiple windows with a portion of the revenues deferred until the subsequent exploitation windows commence. These arrangements do not contain significant financing components because the reason for the payment structure is not for the provision of financing to the Company, but rather to mitigate the Company's risk of customer non-performance and incentivize the customer to exploit the Company's content. Summarized Balance Sheet and Income Statement Comparison of New and Prior Revenue Recognition Guidance The following table presents the line items impacted by the adoption of the new revenue recognition guidance (described in Note 1) on the unaudited condensed consolidated balance sheet and statement of operations:
|  | December 31, 2018
|  | As Reported |  | Impact of Adoption |  | Without Adoption of New Revenue Guidance
Balance Sheet Information: |  | (Amounts in millions)
Assets |  |  |  |  |  |
Accounts receivable, net - current |  | $ | 833.1 |  |  | $ | (109.2 | ) |  | $ | 723.9 |
Other assets - current |  | 227.7 |  |  | (69.1 | ) |  | 158.6 |
Other assets - non-current |  | 453.6 |  |  | (2.1 | ) |  | 451.5 |
Investment in films and television programs and program rights, net |  | 1,670.0 |  |  | 38.0 |  |  | 1,708.0 |
Liabilities |  |  |  |  |  |
Accounts payable and accrued liabilities |  | 432.5 |  |  | (95.7 | ) |  | 336.8 |
Participations and residuals - current |  | 499.6 |  |  | (26.0 | ) |  | 473.6 |
Deferred revenue - current |  | 173.0 |  |  | (0.5 | ) |  | 172.5 |
Deferred revenue - non-current |  | 70.0 |  |  | 0.7 |  |  | 70.7 |
Deferred tax liabilities |  | 46.8 |  |  | (4.2 | ) |  | 42.6 |
Equity |  |  |  |  |  |
Retained earnings |  | 346.0 |  |  | (16.7 | ) |  | 329.3 |
|  | Three Months Ended December 31, 2018
|  | As Reported |  | Impact of Adoption |  | Without Adoption of New Revenue Guidance
Statement of Operations Information: |  | (Amounts in millions)
Revenues |  | $ | 933.2 |  |  | $ | (7.4 | ) |  | $ | 925.8 |
Direct operating |  | 502.0 |  |  | (2.3 | ) |  | 499.7 |
Operating income |  | 86.8 |  |  | (5.1 | ) |  | 81.7 |
Interest and other income |  | 2.9 |  |  | 0.1 |  |  | 3.0 |
Income before income taxes |  | 25.4 |  |  | (5.0 | ) |  | 20.4 |
Income tax provision |  | (5.3 | ) |  | 1.1 |  |  | (4.2 | )
Net income |  | 20.1 |  |  | (3.9 | ) |  | 16.2 |
|  | Nine Months Ended December 31, 2018
|  | As Reported |  | Impact of Adoption |  | Without Adoption of New Revenue Guidance
Statement of Operations Information: |  | (Amounts in millions)
Revenues |  | $ | 2,766.9 |  |  | $ | 5.7 |  |  | $ | 2,772.6 |
Direct operating |  | 1,495.2 |  |  | 2.4 |  |  | 1,497.6 |
Operating income |  | 164.0 |  |  | 3.3 |  |  | 167.3 |
Interest and other income |  | 9.0 |  |  | (0.2 | ) |  | 8.8 |
Loss before income taxes |  | (167.1 | ) |  | 3.1 |  |  | (164.0 | )
Income tax benefit |  | 26.6 |  |  | (1.1 | ) |  | 25.5 |
Net loss |  | (140.5 | ) |  | 2.0 |  |  | (138.5 | )

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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