�鶹app

(1)����Basis of Presentation

The accompanying consolidated financial statements of �鶹app (formerly named �鶹app Spinco,��Inc.; see discussion below pertaining to the Starz Spin-Off (defined below)) (“�鶹app,” “we,” “our,” “us” or the “Company” unless the context otherwise requires) represent a consolidation of certain media and entertainment related assets and businesses. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

�鶹app, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the media and entertainment industries primarily in North America and the United Kingdom. Our significant subsidiaries include Sirius��XM Holdings Inc. (“SIRIUS��XM”), Formula��1 and Braves Holdings, LLC (“Braves Holdings”). Our significant investment accounted for under the equity method of accounting is Live Nation Entertainment, Inc. (“Live Nation”). As discussed in notes��2 and 7, �鶹app obtained a nearly 20% interest in Delta Topco Limited (“Delta Topco”), the parent company of Formula��1, a global motorsports business, during 2016 and acquired the remaining interests, other than a nominal number of shares held by certain Formula��1 teams, during January 2017.

In September 2011, �鶹app Interactive Corporation (“�鶹app Interactive” and formerly named �鶹app) completed the split-off of its former wholly-owned subsidiary (then known as �鶹app) from its �鶹app Interactive tracking stock group (the “Split-Off”).

In January 2013, Starz (now known as Starz Acquisition, LLC and formerly known as �鶹app) spun-off (the “Starz Spin-Off”) its then-former wholly-owned subsidiary, which, at the time of the Starz Spin-Off, held all of the businesses, assets and liabilities of Starz not associated with Starz, LLC (with the exception of the Starz, LLC office building). The transaction was effected as a pro-rata dividend of shares of �鶹app to the stockholders of Starz.

Also in January 2013, �鶹app obtained a controlling interest and began consolidating SIRIUS��XM. SIRIUS��XM, since the date of our investment, has repurchased approximately 2.5 billion SIRIUS��XM shares for approximately $9.4 billion. �鶹app continues to maintain a controlling interest in SIRIUS��XM following the completion of the share repurchases. As of December��31, 2017, we owned approximately 70% of the outstanding equity interest in SIRIUS��XM.

During 2014, �鶹app’s board of directors approved the issuance of shares of its Series��C �鶹app common stock to holders of its Series��A and Series��B �鶹app common stock, effected by means of a dividend. On July��23, 2014, holders of Series��A and Series��B �鶹app common stock received a dividend of two shares of Series��C �鶹app common stock for each share of Series��A or Series��B �鶹app common stock held by them as of July��7, 2014. Additionally, in connection with the Series��C �鶹app common stock issuance and the Broadband Spin-Off (defined below), outstanding Series��A �鶹app common stock warrants have been adjusted, as well as the number of shares covered by outstanding cash convertible note hedges and purchased call options (the “Bond Hedge Transaction”). See note��10 for further discussion regarding the warrants and Bond Hedge Transaction.

On November��4, 2014, �鶹app completed the spin-off to its stockholders common stock of a newly formed company called �鶹app Broadband Corporation (“�鶹app Broadband”) (the “Broadband Spin-Off”). In the Broadband Spin-Off, record holders of Series��A, Series��B and Series��C �鶹app common stock received one share of the corresponding series of �鶹app Broadband common stock for every four shares of common stock held by them as of the record date for the Broadband Spin-Off, with cash paid in lieu of fractional shares.

During August 2014, �鶹app Interactive completed the distribution of �鶹app TripAdvisor Holdings, Inc. (“�鶹app TripAdvisor”) (the “TripAdvisor Spin-Off”). During July 2016, �鶹app Interactive completed the spin-off of CommerceHub, Inc. (“CommerceHub”) (the “CommerceHub Spin-Off”). During November 2016, �鶹app Interactive completed the split-off of �鶹app Expedia Holdings, Inc. (“Expedia Holdings”) (the “Expedia Holdings Split-Off”). Following the Split-Off, Starz Spin-Off, TripAdvisor Spin-Off, Broadband Spin-Off, CommerceHub Spin-Off and Expedia Holdings Split-Off, �鶹app, �鶹app Interactive, Starz, �鶹app TripAdvisor, �鶹app Broadband, CommerceHub and Expedia Holdings operate as separate publicly traded companies, none of which has any stock ownership, beneficial or otherwise, in the other (except that �鶹app Interactive owns shares of �鶹app Broadband’s Series��C non-voting common stock). In connection with the Split-Off, Starz Spin-Off, TripAdvisor Spin-Off, Broadband Spin-Off, CommerceHub Spin-Off and Expedia Holdings Split-Off, �鶹app entered into certain agreements with �鶹app Interactive, Starz, �鶹app TripAdvisor, �鶹app Broadband, CommerceHub and Expedia Holdings, respectively, in order to govern ongoing relationships between the companies and to provide for an orderly transition. As a result, these entities are considered related parties of the Company for accounting purposes through the dates of the respective transactions. These agreements include Reorganization Agreements (excluding CommerceHub, Expedia Holdings and �鶹app TripAdvisor), Services Agreements, Facilities Sharing Agreements (excluding CommerceHub), a Lease Agreement (in the case of the Starz Spin-Off only) and with respect to Starz and �鶹app Broadband, Tax Sharing Agreements. The Reorganization, Services and Facilities Sharing Agreements entered into with �鶹app Interactive were assigned from Starz to �鶹app in connection with the Starz Spin-Off.

The Reorganization Agreements provide for, among other things, provisions governing the relationships between �鶹app and each of �鶹app Interactive, Starz and �鶹app Broadband following the Split-Off, Starz Spin-Off and Broadband Spin-Off, respectively, including certain cross-indemnities. Pursuant to the Services Agreements, �鶹app provides �鶹app Interactive, Starz, �鶹app TripAdvisor, �鶹app Broadband, CommerceHub and Expedia Holdings with general and administrative services including legal, tax, accounting, treasury and investor relations support. �鶹app Interactive, Starz, �鶹app TripAdvisor, �鶹app Broadband, CommerceHub and Expedia Holdings reimburse �鶹app for direct, out-of-pocket expenses incurred by �鶹app in providing these services and for �鶹app Interactive’s and Starz’s allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to each respective company. �鶹app TripAdvisor, �鶹app Broadband, CommerceHub and Expedia Holdings reimburse �鶹app for shared services and personnel based on a flat fee. Under the Facilities Sharing Agreements, �鶹app shares office space and related amenities with �鶹app Interactive, Starz, �鶹app TripAdvisor, �鶹app Broadband and Expedia Holdings at �鶹app’s corporate headquarters. Under these various agreements, approximately $24��million, $21��million and $23��million of these allocated expenses were reimbursed to �鶹app during the years ended December��31, 2017, ��2016 and 2015, respectively. Under the Lease Agreement, Starz leases its corporate headquarters from �鶹app. The Lease Agreement with Starz for their corporate headquarters requires a payment of approximately $4��million annually, subject to certain increases based on the Consumer Price Index. The Lease Agreement expires on December��31, 2023 and contains an extension option.

The Tax Sharing Agreements provide for the allocation and indemnification of tax liabilities and benefits between �鶹app and each of Starz and �鶹app Broadband as well as other agreements related to tax matters. Among other things, pursuant to the Tax Sharing Agreements, �鶹app has generally agreed to indemnify Starz and �鶹app Broadband for taxes and losses resulting from the failure of the Starz Spin-Off and the Broadband Spin-Off, respectively, to qualify for tax-free treatment. However, Starz will be responsible for any such taxes and losses related to the Starz Spin-Off which (i)��result primarily from the breach of certain restrictive covenants made by Starz, or (ii)��result from Section��355(e) of the Internal Revenue Code of 1986 (the “Code”) applying to the Starz Spin-Off as a result of the Starz Spin-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire a 50-percent or greater interest (measured by vote or value) in the stock of Starz, and �鶹app Broadband will be responsible for any such taxes and losses related to the Broadband Spin-Off which (i)��result primarily from the breach of certain restrictive covenants made by �鶹app Broadband, or (ii)��result from Section��355(e) of the Code applying to the Broadband Spin-Off as a result of the Broadband Spin-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire a 50-percent or greater interest (measured by vote or value) in the stock of �鶹app Broadband. In February 2014, the IRS and Starz entered into a closing agreement which provided that the Starz Spin-Off qualified for tax-free treatment to Starz and �鶹app. In September 2015, �鶹app entered into a closing agreement with the IRS which provided that the Broadband Spin-Off qualified for tax-free treatment.

The Company’s additional paid-in capital balance was in a deficit position as of December��31, 2015. In order to maintain a zero balance in the additional paid-in capital account, we reclassified the amount of the deficit ($499��million) to retained earnings as of December��31, 2015.