(5) Equity Method Investment
The Company owns a 50% interest in a joint venture, Hub Television Networks, LLC ("Hub Network"), with Discovery Communications, Inc. ("Discovery"). Hub Network was established to create a cable television network in the United States dedicated to high-quality children's and family entertainment. The Company purchased its 50% share in Hub Network for a payment of $300,000 and certain future payments based on the value of certain tax benefits expected to be received by the Company. The present value of the expected future payments at the acquisition date totaled approximately $67,900 and was recorded as a component of the Company's investment in the joint venture. The balance of the associated liability, including imputed interest, was $69,749 and $71,072 at December 29, 2013 and December 30, 2012, respectively, and is included as a component of other liabilities in the accompanying consolidated balance sheets. During 2013, 2012 and 2011, the Company made payments under the tax sharing agreement to Discovery of $6,541, $5,954 and $5,443, respectively.
Voting control of Hub Network is shared 50/50 between the Company and Discovery. The Company has determined that it does not meet the control requirements to consolidate Hub Network, and accounts for the investment using the equity method of accounting. The Company's share in the loss of Hub Network for the years ended December 29, 2013, December 30, 2012 and December 25, 2011 totaled $2,386, $6,015 and $7,290, respectively, and is included as a component of other (income) expense, net in the accompanying consolidated statements of operations.
The Company has a license agreement with Hub Network that requires the payment of royalties by the Company to Hub Network based on a percentage of revenue derived from products related to television shows broadcast by the joint venture. The license agreement includes a minimum royalty guarantee of $125,000, payable in 5 annual installments of $25,000 per year, commencing in 2009, which can be earned out over approximately a 10-year period. During 2013, 2012 and 2011, the Company paid annual installments of $25,000 each which are included in other, including long-term advances in the consolidated statements of cash flows. The payment made in 2013 was the final installment under this agreement. As of December 29, 2013 and December 30, 2012, the Company had $101,823 and $89,914 of prepaid royalties, respectively, related to this agreement, $15,955 and $12,400, respectively, of which are included in prepaid expenses and other current assets and $85,868 and $77,514, respectively, of which are included in other assets. The Company and Hub Network are also parties to an agreement under which the Company will provide Hub Network with an exclusive first look in the U.S. to license certain types of programming developed by the Company based on its intellectual property. In the event Hub Network licenses the programming from the Company to air on the network, it is required to pay the Company a license fee.
As of December 29, 2013 and December 30, 2012, the Company's interest in Hub Network totaled $321,876 and $330,746, respectively, and is a component of other assets. The Company also enters into certain other transactions with Hub Network including the licensing of television programming and the purchase of advertising. During 2013, 2012 and 2011, these transactions were not material.
