Affiliate Transactions

6 Months Ended

Jun. 30, 2011

Affiliate Transactions

Affiliate Transactions

Note 13. Affiliate Transactions

Allocations

The Company provides services to and receives services from Cablevision and its affiliates. The consolidated financial statements of the Company reflect the application of certain cost allocation policies of Cablevision. Management believes that these allocations have been made on a reasonable basis. However, it is not practicable to determine whether the charged amounts represent amounts that might have been incurred on a stand-alone basis, including as a separate independent publicly owned company, as there are no company-specific or comparable industry benchmarks with which to make such estimates. Further, as many of these transactions are conducted between subsidiaries under common control of the Dolan Family, amounts charged for these services may not represent amounts that might have been received or incurred if the transactions were based upon arm's length negotiations.

The following is a summary of the revenues and expenses included in the Company's consolidated statements of income for the three and six months ended June 30, 2011 and 2010 related to transactions with or charges from Cablevision and its affiliates:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues, net	$	8,028		$	7,305		$	15,968		$	14,526
Operating expenses:
Technical and operating expenses:
Production services	$	—		$	(190	)	$	—		$	(392	)
Other support functions		152			140			270			276
Health and welfare plans		1,244			1,091			2,331			2,173
Total technical and operating expenses	$	1,396		$	1,041		$	2,601		$	2,057
Selling, general and administrative expenses:
Corporate general and administrative costs, net	$	7,728		$	8,142		$	15,467		$	16,274
Management fees		7,218			6,438			13,958			12,656
Health and welfare plans		1,256			988			2,296			2,037
Advertising expense		1,006			395			1,331			580
Production services		(364	)		—			(557	)		—
Other support functions		288			5			360			12
Sales support and other functions, net		847			769			2,120			1,470
Share-based compensation		4,513			4,314			8,490			8,158
Long-term incentive plans		3,967			4,008			7,285			7,765
Total selling, general and administrative expenses	$	26,459		$	25,059		$	50,750		$	48,952

Revenues, net

The Company recorded affiliation fee revenues earned, net of amortization of deferred carriage fees, under affiliation agreements with companies owned by Cablevision. In addition, AMC Networks Broadcasting & Technology has entered into agreements with affiliates of Cablevision to provide various transponder, technical and support services through 2020.

Operating Expenses

Production Services

The Company provides various studio production services to affiliates of Cablevision, for which the charges are reflected as a reduction of the related expenses.

Other Support Functions

Affiliates of Cablevision provide various digital media and administrative support functions which primarily include salaries and facilities costs charged to the Company.

Health and Welfare Plans

Employees of the Company participate in health and welfare plans sponsored by Cablevision. Health and welfare benefit costs have generally been charged by Cablevision based upon the proportionate number of participants in the plans.

Corporate General and Administrative Costs, net

General and administrative costs, including costs of maintaining corporate headquarters, facilities and common support functions (such as executive management, human resources, legal, finance, tax, accounting, audit, treasury, risk management, strategic planning, information technology, etc.), have been charged to the Company by Cablevision. Additionally, the Company charges affiliates of Cablevision for a portion of the Company's leased facilities utilized by such affiliates. Such costs allocated to the Company have been included in selling, general and administrative expenses and such cost reimbursements are recorded as a reduction to selling, general and administrative expenses. See also Transition Services Agreement below.

Management Fees

Through the Distribution date, the Company paid Cablevision a management fee pursuant to a consulting agreement between Cablevision and certain of the Company's subsidiaries. The consulting agreement was terminated on the Distribution date and the Company did not replace it.

Advertising

The Company incurs advertising expenses charged by subsidiaries and affiliates of Cablevision.

Sales Support and Other Functions, net

Affiliates of Cablevision provide advertising sales support functions to the Company, which primarily include salaries and general and administrative costs, which are recorded as a charge to selling, general and administrative expenses. Additionally, the Company provides affiliation support functions to an affiliate of Cablevision, which primarily includes salaries, facilities, and general and administrative costs. These charges are recorded as a reduction to selling, general and administrative expenses.

Share-based Compensation and Long-Term Incentive Plans Expense

Cablevision charges the Company its proportionate share of expenses or benefits related to Cablevision's employee stock plans and Cablevision's long-term incentive plans. Such amounts are included in selling, general and administrative expenses in the accompanying consolidated statements of income, and if not funded or satisfied by the Company, reflected as capital contributions from Cablevision in the Company's consolidated financial statements. The long-term incentive plans are funded by the Company and aggregate liabilities of $18,563 and $28,934 related to these plans are included in accrued employee related costs and other long-term liabilities in the Company's consolidated balance sheets at June 30, 2011 and December 31, 2010, respectively. These liabilities include certain performance-based awards for which the performance criteria had not been met as of June 30, 2011 as such awards are based on achievement of certain performance criteria through December 31, 2013. The Company has accrued the amount that it currently believes will ultimately be paid based upon the performance criteria established for these performance-based awards. If it is subsequently determined that the performance criteria for such awards is not probable of being achieved, the Company would reverse the accrual in respect of such award at that time.

Treatment of Long-Term Incentive Plans After the Distribution

In 2011, 2010 and 2009, Cablevision granted three-year performance awards to certain executive officers and other members of the Company's management under Cablevision's 2006 Cash Incentive Plan. It is expected that the awards granted in 2010 and 2009 will be adjusted in light of the Distribution and the separation of the Company from the business of Cablevision. For awards granted in 2011, the performance metrics related to Cablevision were replaced with Company performance metrics. Amounts applicable to employees of the Company are and will continue to be reflected as liabilities in the Company's consolidated balance sheets until settled.

Deferred compensation awards granted by Cablevision pursuant to Cablevision's Long-Term Incentive Plan (which was superseded by the Cash Incentive Plan in 2006) will be similarly unaffected by the Distribution. Amounts applicable to employees of the Company are and will continue to be reflected as liabilities in the Company's consolidated balance sheets until settled.

Transition Services Agreement

In connection with the Distribution, Cablevision and AMC Networks entered into a Transition Services Agreement under which, in exchange for the fees specified in such agreement, Cablevision agrees to provide transition services with regard to such areas as accounting, information systems, risk management and employee services, compensation and benefits. Under the Transition Services Agreement, AMC Networks also provides certain services to The Madison Square Garden Company ("MSG") on behalf of Cablevision.

Under the Transition Services Agreement, AMC Networks provides transition services to Cablevision and MSG with regard to its information technology systems that AMC Networks, Cablevision and MSG may share. AMC Networks and Cablevision, as parties receiving services under the agreement, have agreed to indemnify the party providing services for losses incurred by such party that arise out of or are otherwise in connection with the provision by such party of services under the agreement, except to the extent that such losses result from the providing party's gross negligence, willful misconduct or breach of its obligations under the agreement. Similarly, each party providing services under the agreement agrees to indemnify the party receiving services for losses incurred by such party that arise out of or are otherwise in connection with the indemnifying party's provision of services under the agreement if such losses result from the providing party's gross negligence, willful misconduct or breach of its obligations under the agreement.