Equity method investments

9 Months Ended

Sep. 30, 2017

Equity method investments

Equity method investments

Note 5. Equity method investments

The Company makes investments that support its underlying business strategy and enable it to enter new markets.  The carrying values of the Company’s equity method investments are consistent with its ownership in the underlying net assets of the investees. Certain of the Company’s equity investments are variable interest entities, for which the Company is not the primary beneficiary.

On November 3, 2016, we acquired a 25% interest in PANTAYA, a newly formed joint venture with Lionsgate, to launch a Spanish-language OTT movie service. The service launched on August 1, 2017. The investment is deemed a VIE that is accounted for under the equity method. As of September 30, 2017, we have not funded any capital contributions to PANTAYA.  We record income/loss on investment on a one quarter lag. For the three and nine month periods ended September 30, 2017, we have recorded $0.4 million in Loss on equity method investments related to this investment.

On November 30, 2016, we, in partnership with Colombian content producers, Radio Television Interamericana S.A., Compania de Medios de Informacion S.A.S. and NTC Nacional de Television y Comunicaciones S.A., were awarded a ten (10) year renewable television broadcast concession license for Canal 1 in Colombia the (“Canal 1 Partnership”). Canal 1 is one of only three national broadcast television networks in Colombia. The Canal 1 Partnership began operations of the network through a newly formed joint venture vehicle on May 1, 2017.  The Company has a 20% interest in the JV, which is deemed a VIE that is accounted for under the equity method. Additionally, we earn a preferred return on the capital funded, which is recorded quarterly as an offset to the loss on the investment. For the period ended September 30, 2017, we have recorded $21.7 million in Equity method investments, related to Canal 1.  We record the income/loss on investment on a one quarter lag. For the three and nine month periods ended September 30, 2017, we recorded $2.3 million and $2.2 million, net of preferred return, in Loss on equity method investments, respectively. The Canal 1 Partnership losses to date have exceeded the capital contributions of the common equity partners.  In accordance with equity method accounting, equity losses in excess of the common equity have been recorded against the next layer of the capital structure, in this case, preferred equity.  Accordingly, in the quarter, the Company recorded 100% of the losses in excess of the common equity, which is greater than the Company’s 20% ownership interest in the Partnership.  For the three and nine month periods ended September 30, 2017, we recorded $0.6 million and $0.8 million of income, respectively as an offset to losses incurred in Loss on equity method investments.

On April 28, 2017, we acquired a 25.5% interest in REMEZCLA, an influential digital media company targeting English speaking and bilingual U.S. Hispanics aged 18-35 through innovative content. For the nine months ended September 30, 2017, we have recorded $5.0 million in Equity method investments related to REMEZCLA. The Company records the income/loss on investment on a one quarter lag.  For the three and nine month periods ended September 30, 2017, we have recorded $0.1 million in loss in Loss on equity method investments related to this investment.  Additionally, we earned a preferred return on capital funded.  For the three and nine month periods ended September 30, 2017, we recorded $0.3 million of income as an offset to the loss incurred in Loss on equity method investments.