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Table of Contents
We will discuss the profitability of each segment in terms of segment contribution. Segment contribution is the measure of profitability used by our
CODM. Segment contribution includes segment revenue and expenses incurred directly by the segment, including material costs, service costs, customer care
and coaching costs, sales and marketing expense and bad debt expense. North America Consumer segment contribution improved from 41% of segment
revenue for the year ended December 31, 2012 to 42% of segment revenue for the year ended December 31, 2013. The improvement in North America
Consumer segment contribution is due to an increase in revenue of $1.2 million; this achievement is consistent with the goal established by management at the
onset of 2012 to stabilize the U.S. consumer market. ROW Consumer segment contribution improved $1.9 million from the year ended December 31, 2012 to
the year ended December 31, 2013 driven by a reduction in sales and marketing expense of $5.9 million, primarily the result of kiosk closures. Global
Enterprise & Education segment contribution decreased to $21.0 million or 35%, for the year ended December 31, 2013 as compared to $26.6 million, or
44%, for the year ended December 31, 2012 primarily due to an increase in sales and marketing expense related to the addition of sales staff to this group. As
our enterprise and education sales team gains traction we anticipate an improvement in contribution margin.
For additional information regarding our segments, see Note 16 of Item 8, Financial Statements and Supplementary Data. For additional information
regarding fluctuations in segment revenue, see Results of Operations, below. Prior periods are presented consistent with our current operating segments and
definition of segment contribution.

Management uses the following key business metrics to measure the success of sales of our Rosetta Stone language-learning solutions in our combined
North America and ROW Consumer segments. Management does not review these metrics at a disaggregated segment level. In addition, management does not
currently use any comparable metrics to measure success of our Global Enterprise & Education segment.
• A unit is a perpetual software license sold as either tangible packaged software or as an online download.
• Consumer revenues derived from product software units divided by the number of product software
units sold in the same period. Revenue from product software includes product revenue associated with product licenses in addition to service
revenues associated with short-term online subscriptions that are bundled with our V4  offering. Approximately $25 to $49 in revenue per
unit is derived from service revenues associated with this short-term online subscription.
• The number of paid, active learners derived from the sale of a primarily online offering as of the end of a specified period.
Applicable online offerings include purchases of subscription-based licenses for Rosetta Stone ,  subscriptions, and purchasers of
our product software who subsequently purchase renewals of their short-term online services.
• Service revenues derived from paid online learners for a specified period divided by the average number
of paid online learners during the same period, adjusted to a monthly rate. The average number of paid online learners for a quarter is calculated as
the average of the beginning and ending number of paid online learners for the specified period. The average number of paid online learners for a year-
to-date period is calculated as the average of the average number of paid online learners for quarters included in the specified year-to-date period.
The following table sets forth these unit and online learner metrics for the years ended December 31, 2013, 2012 and 2011:





Product software revenue
$179,211
$198,075
$199,963
Paid online learner revenues*
24,703
14,999
8,063
Total consumer revenues
$203,914
$213,074
$ 208,026
Product software units
681,612
629,779
585,774
Total paid online learners*
94,056
68,393
26,567
Average revenue per product software unit
$ 263
$ 315
$341
Average revenue per online learner*
$25
$26
$ 35
32