XM Radio 2010 Annual Report Download - page 61

associated with the Merger are expected to provide increasing benefits to revenue share and royalties through the
expiration of the acquired executory contracts, principally in 2012 and 2013.
Programming and Content includes costs to acquire, create and produce content and on-air talent costs. We
have entered into various agreements with third parties for music and non-music programming that require us to pay
license fees, share advertising revenue, purchase advertising on media properties owned or controlled by the
licensor and pay other guaranteed amounts.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, programming and content expenses were
$305,914 and $308,121, respectively, a decrease of 1%, or $2,207 and decreased as a percentage of total
revenue. The decrease was primarily due to savings in content agreements and production costs, partially
offset by increases in personnel costs, general operating expenses and a $14,503 reduction in the benefit to
earnings from purchase price accounting adjustments associated with the Merger attributable to the
amortization of the deferred credit on acquired programming executory contracts.
•2009 vs. 2008: For the years ended December 31, 2009 and 2008, programming and content expenses were
$308,121 and $312,189, respectively, a decrease of $4,068, or 1% and decreased as a percentage of total
revenue. The increase from the inclusion of a full year of XM expense was offset by savings in content
agreements, personnel and on-air talent costs.
Our programming and content expenses are expected to decrease as various agreements expire and are
renewed or replaced on more cost effective terms. The impact of purchase price accounting adjustments associated
with the Merger attributable to the amortization of the deferred credit on acquired programming executory contracts
will continue to decline, in absolute amount and as a percentage of reported programming and content costs,
through 2013.
Customer Service and Billing includes costs associated with the operation of third party customer service
centers and our subscriber management systems as well as bad debt expense.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, customer service and billing expenses
were $241,680 and $234,456, respectively, an increase of 3%, or $7,224 but decreased as a percentage of
total revenue. The increase was primarily due to higher call volume, partially offset by lower call center
expenses as a result of moving calls to lower cost locations.
•2009 vs. 2008: For the years ended December 31, 2009 and 2008, customer service and billing expenses
were $234,456 and $165,036, respectively, an increase of 42%, or $69,420 but decreased as a percentage of
total revenue. The increase was primarily due to the inclusion of XM’s customer and billing expense as a
result of the Merger and increased bad debt expense due to the economic environment during 2009.
We expect our customer care and billing expenses to increase as our subscriber base grows due to increased call
center operating costs, transaction fees and bad debt expense.
Satellite and Transmission consists of costs associated with the operation and maintenance of our satellites;
satellite telemetry, tracking and control systems; terrestrial repeater networks; satellite uplink facilities; and
broadcast studios.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, satellite and transmission expenses were
$80,947 and $84,033, respectively, a decrease of 4%, or $3,086 but decreased as a percentage of total
revenue. The decrease was primarily due to savings in repeater expenses, partially offset by increased
satellite insurance costs related to our FM-5 satellite.
•2009 vs. 2008: For the years ended December 31, 2009 and 2008, satellite and transmission expenses were
$84,033 and $59,279, respectively, an increase of 42%, or $24,754 but decreased as a percentage of total
revenue. The increase was primarily due to the inclusion of XM’s satellite and transmission expense,
partially offset by decreases due to the elimination of contracts, decommissioned repeater sites and a
decrease in streaming costs.
We expect satellite and transmission expenses to decline as a result of decreasing operating costs associated
with our in-orbit satellite fleet and repeater network optimization.
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