XM Radio 2013 Annual Report Download - page 56

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Our results of operations discussed below include Sirius XM Connected Vehicle Services Inc. activity from the
acquisition date, November 4, 2013, as well as the impact of purchase price accounting adjustments associated with
the acquisition and the Merger. The purchase price accounting adjustments include: (i) the elimination of deferred
revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not
recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory
contracts, which are primarily attributable to third party arrangements with an OEM and programming providers.
The deferred credits on executory contracts attributable to third party arrangements with an OEM included in
revenue share and royalties, subscriber acquisition costs, and sales and marketing concluded with the expiration of
the acquired contract during 2013. The impact of these purchase price accounting adjustments is detailed in our
Adjusted Revenues and Operating Expenses tables on pages 19 through 25 of our glossary.
Total Revenue
Subscriber Revenue includes subscription, activation and other fees.
•2013 vs. 2012: For the years ended December 31, 2013 and 2012, subscriber revenue was $3,284,660
and $2,962,665, respectively, an increase of 11%, or $321,995. The increase was primarily attributable to
a 9% increase in the daily weighted average number of subscribers, the impact of the increase in certain
of our subscription rates beginning in January 2012 as more subscribers migrated to the higher rates, and
an increase in subscriptions to premium services, premier channels and Internet streaming, as well as the
inclusion of connected vehicle subscription revenue in 2013. These increases were partially offset by
subscription discounts offered through customer acquisition and retention programs, and an increasing
number of lifetime subscription plans that have reached full revenue recognition.
•2012 vs. 2011: For the years ended December 31, 2012 and 2011, subscriber revenue was $2,962,665
and $2,595,414, respectively, an increase of 14%, or $367,251. The increase was primarily attributable to
a 9% increase in daily weighted average number of subscribers, the increase in certain of our subscription
rates beginning in January 2012, and an increase in subscriptions to premium services, including premier
channels, data services and Internet streaming. The increase was partially offset by subscription discounts
offered through customer acquisition and retention programs.
We expect subscriber revenues to increase based on the growth of our subscriber base, including connected
vehicle subscribers, promotions, subscription plan mix, and identification of additional revenue streams from
subscribers. We increased certain of our subscription rates beginning January 2014.
Advertising Revenue includes the sale of advertising on certain non-music channels, net of agency fees.
Agency fees are based on a contractual percentage of the gross advertising revenue.
•2013 vs. 2012: For the years ended December 31, 2013 and 2012, advertising revenue was $89,288 and
$82,320, respectively, an increase of 8%, or $6,968. The increase was primarily due to a greater number
of advertising spots sold and broadcast, as well as increases in rates charged per spot.
•2012 vs. 2011: For the years ended December 31, 2012 and 2011, advertising revenue was $82,320 and
$73,672, respectively, an increase of 12%, or $8,648. The increase was primarily due to a greater number
of advertising spots sold and broadcast, as well as increases in rates charged per spot.
We expect our advertising revenue to grow as more advertisers are attracted to our national platform and
growing subscriber base and as we launch additional non-music channels.
Equipment Revenue includes revenue and royalties from the sale of satellite radios, components and
accessories.
•2013 vs. 2012: For the years ended December 31, 2013 and 2012, equipment revenue was $80,573 and
$73,456, respectively, an increase of 10%, or $7,117. The increase was driven by royalties from higher
OEM production, the mix of royalty eligible radios and, to a lesser extent, improved aftermarket
subsidies.
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