Share-Based Payments

9 Months Ended

Sep. 30, 2011

Share-Based Payments [Abstract]

Share-Based Payments

NOTE 8: SHARE-BASED PAYMENTS

We grant share-based awards to our employees, non-employee directors and consultants under our 1997 Amended and Restated Equity Incentive Plan (the "1997 Plan"). The 1997 Plan permits the granting of stock options, restricted stock, restricted stock units, and performance based restricted stock. At September 30, 2011, there were 3.0 million shares of unissued common stock reserved for issuance under all the stock plans, of which 2.0 million shares were available for future grants.

Certain information regarding our share-based payments is as follows (in thousands, except per share amounts):

		Three Months Ended     September  30,							Nine Months Ended     September  30,
		2011				2010			2011			2010
Share-based payments expense:
Share-based compensation - stock options	$		697		$		739	$		2,200	$		2,485
Share-based compensation - restricted stock			1,778				1,006			5,479			4,352
Share-based payments for DVD arrangements			(1,606	)			1,390			1,683			4,211
Total	$		869		$		3,135	$		9,362	$		11,048
Deferred tax benefit on share-based payments	$		866		$		570	$		2,696	$		2,308
		September 30, 2011
		Unrecognized  Share- Based Payments Expense							Weighted-Average Remaining Life
Unrecognized share-based payments expense:
Share-based compensation - stock options					$		4,617			1.6 years
Share-based compensation - restricted stock							14,290			1.9 years
Share-based payments for DVD arrangements							5,474			3.1 years
Total					$		24,381

Share-Based Compensation

Stock options

Shares of common stock are issued upon exercise of stock options.

— Stock options are granted only to our executives and non-employee directors.

— Options granted during the current year vest annually in equal installments over 4 years, and expire after 10 years.

The following table summarizes the weighted average valuation assumptions used in the Black-Scholes-Merton Valuation model for stock options granted during 2011:

	Nine Months Ended     September 30, 2011
Expected term (in years)		7.3
Expected stock price volatility		42.8	%
Risk-free interest rate		2.8	%
Expected dividend yield		0.0	%

The following table presents a summary of stock option activity for 2011:

Shares in thousands	Shares				Weighted     Average Exercise Price
OUTSTANDING, December 31, 2010		1,103		$		29.41
Granted		93				45.78
Exercised		(74	)			29.37
Cancelled, expired, or forfeited		(50	)			30.17
OUTSTANDING, September 30, 2011		1,072				30.79

Certain information regarding stock options outstanding as of September 30, 2011, is as follows (shares and intrinsic value in thousands):

		Options   Outstanding			Options   Exercisable
Number			1,072			506
Weighted average per share exercise price	$		30.79	$		27.42
Aggregate intrinsic value	$		10,594	$		6,178
Weighted average remaining contractual term (in years)			3.6			2.5

Restricted stock awards

Restricted stock awards are granted to eligible employees, including executives, and non-employee directors. Awards granted to employees and executives vest annually in equal installments over four years. Non-employee director awards vest one year after the grant date. Performance-based restricted stock awards are granted to executives only, with established performance criteria approved by the Compensation Committee of the Board of Directors, once earned, and vest in equal installments over three years from the date of grant. The restricted shares require no payment from the grantee. The fair value of the awards is based on the market price on the grant date and is recognized on a straight-line basis over the vesting period or based on achieving performance conditions.

The following table presents a summary of restricted stock award activity for 2011:

Shares in thousands	Restricted Stock Awards				Weighted Average   Grant Date   Fair Value
NON-VESTED, December 31, 2010		414		$		32.82
Granted		320				45.57
Vested		(150	)			33.37
Forfeited		(44	)			36.26
NON-VESTED, September 30, 2011		540				39.92

Share-Based Payments for DVD Arrangements

We granted restricted stock as part of content license agreements with certain movie studios. The expense related to these agreements is included within direct operating expenses in our Consolidated Statements of Net Income and is adjusted based on the number of unvested shares and market price of our common stock each reporting period. During 2010 and 2009, we entered into agreements with SPHE Scan Based Trading Corporation ("Sony") and Paramount Home Entertainment, Inc. ("Paramount"). During the third quarter of 2011, our agreement with Sony was amended whereby; (i) the scheduled vesting of certain shares of restricted stock was extended from August 1, 2011 to August 1, 2012 and (ii) the number of weeks we can offer Sony content was extended from 26 weeks to 52 weeks. Information related to the shares of restricted stock granted as part of these agreements as of September 30, 2011, is as follows:

	Granted		Vested		Unvested		Remaining     Vesting Period
Sony		193,348		19,335		174,013	2.8 years
Paramount		200,000		20,000		180,000	3.3 years
		393,348		39,335		354,013