Rosetta Stone 2011 Annual Report Download - page 61

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December 31, 2010. The decrease in bookings was due to an $8.6 million decrease in government bookings primarily as a result of the non-renewal of the
U.S. Army and the U.S. Marines Corps contracts, partially offset by a $4.5 million increase in education bookings and a $2.9 million increase in corporate and
non-profit bookings in 2011 compared to the prior year period. We have recently added sales representatives to this group to allow greater focus by senior
sales executives on regaining some of our key government and armed forces relationships.
Product revenue represented 25% of total institutional revenue for the year ended December 31, 2011, and subscription and service revenue represented
75% for the same period.
Revenue by Product Revenue and Subscription and Service Revenue
We categorize and report our revenue in two categories—product revenue and subscription and service revenue. The following table sets forth revenue
for products and subscription and services for the year ended December 31, 2011 and 2010:
Year Ended December 31,
2011 versus 2010
2011 2010 Change % Change
(in thousands, except percentages)
Product revenue $ 195,382 72.8% $ 215,590 83.3% $ (20,208) (9.4)%
Subscription and service revenue 73,067 27.2% 43,278 16.7% 29,789 68.8%
Total revenue 268,449 100.0% 258,868 100.0% 9,581 3.7%
Product Revenue
Product revenue decreased $20.2 million, to $195.4 million during the year ended December 31, 2011 from $215.6 million during the year ended
December 31, 2010. Consumer product revenue decreased $16.8 million, primarily as a result of the allocation of revenue to the online services component of
our software. At the launch of Rosetta Stone Version 4 TOTALe in the U.S. consumer market during the third quarter of 2010, we began bundling time-based
subscription licenses of our web-based TOTALe Studio and Rosetta World services with perpetual licenses of Rosetta Course, the product feature which
previously comprised our Rosetta Stone Version 3 language-learning solutions. Approximately 10% - 25% of each of these bundled sales is allocated to
online services. Institutional product revenues decreased $3.4 million as a result of a shift from sales of perpetual licenses to sales of renewing online
subscriptions.
Service and Support Revenue
Subscription and service revenue increased approximately 69%, or $29.8 million, to $73.1 million for the year ended December 31, 2011, from $43.3
million during the year ended December 31, 2010. The increase in subscription and service revenues was due to a $20.6 million increase in consumer online
service revenue related to Version 4 TOTALe and a $9.2 million increase in institutional subscription and service revenue related to growth in the institutional
customer base with renewing online subscriptions.
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