Enom 2014 Annual Report Download - page 75

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F-11
Content Sales and Licensing Revenue. We also generate revenue from the sale or license of media content, including the
creation and distribution of content for third party brands and publishers through our Content Solutions service. Revenue from the sale
or perpetual license of media content is recognized when the content has been delivered and the contractual performance obligations
have been fulfilled. Revenue from the license of media content is recognized over the period of the license as content is delivered or
when other related performance criteria are fulfilled. In circumstances where we distribute our content on third-party properties and
the customer acts as the primary obligor, we recognize revenue on a net basis.
Marketplaces
Art Commissions Revenue. We generate service revenue from commissions we receive from facilitating the sale of original art
by artists to customers through Saatchi Art. We recognize service revenue arising from the sale of original art net of amounts paid to
the artist because we are not the primary obligor in the transaction, we do not have inventory risk, and we do not establish the prices
for the art sold. We also recognize this service revenue net of any sales allowances. Revenue is recognized after the original art has
been delivered and the return period has expired. Payments received in advance of delivery and completion of the return period are
included in deferred revenue in the accompanying consolidated balance sheets. We periodically provide incentive offers to customers
to encourage purchases, including percentage discounts off current purchases, free shipping and other offers. VAT, sales and other
taxes are not included in revenue because we are a pass-through conduit for collecting and remitting any such taxes.
Product Revenue
Marketplaces
We recognize product revenue from sales of Society6 products upon delivery, net of estimated returns based on historical
experience. We recognize product revenue from the sale of prints through Saatchi Art when the prints are delivered and the return
period has expired. Payments received in advance of delivery and, with respect to the Saatchi Art prints, prior to completion of the
return period are included in deferred revenue in the accompanying consolidated balance sheets. Revenue is recorded at the gross
amount due to the following factors: we are the primary obligor in a transaction, we have inventory and credit risk, and we have
latitude in establishing prices and selecting suppliers. Product revenue is recognized net of sales allowances and return allowances. We
periodically provide incentive offers to customers to encourage purchases, including percentage discounts off current purchases, free
shipping and other offers. Value-added taxes (“VAT’), sales and other taxes are not included in revenue, as we are a pass-through
conduit for collecting and remitting any such taxes.
Service Costs
Service costs consist of payments relating to our Internet connection and co-location charges and other platform operating
expenses, including depreciation of the systems and hardware used to build and operate our content creation and distribution platform;
expenses related to creating, rewriting, or auditing certain content units; and personnel costs relating to in-house editorial, customer
service, information technology, as well as revenue-sharing arrangements, such as content creator revenue-sharing arrangements.
Product Costs
Product costs consist of outsourced product manufacturing costs, artist royalties and personnel costs.
Shipping and Handling
Shipping and handling charged to customers are recorded in service revenue or product revenue. Associated costs are recorded
in service costs or product costs.
Accounts Receivable
Accounts receivable primarily consist of amounts due from:
y Third parties who provide advertising services to our owned and operated websites in exchange for a share of the
underlying advertising revenue. Accounts receivable from third parties are recorded as the amount of the revenue share as
reported to us by the advertising networks and are generally due within 30 to 45 days from the month-end in which the
invoice is generated. Certain accounts receivable from these parties are billed quarterly and are due within 45 days from the
quarter-end in which the invoice is generated, and are non-interest bearing;