XM Radio 2010 Annual Report Download - page 78

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Footnotes
(1) Average self-pay monthly churn represents the monthly average of self-pay deactivations for the quarter
divided by the average number of self-pay subscribers for the quarter. Average self-pay churn for the year is the
average of the quarterly average self-pay churn.
(2) We measure the percentage of owners and lessees of new vehicles that receive our service and convert to
become self-paying subscribers after the initial promotion period. We refer to this as the “conversion rate.” At
the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive trial
subscriptions ranging from three to twelve months. Promotional periods generally include the period of trial
service plus 30 days to handle the receipt and processing of payments. We measure conversion rate three
months after the period in which the trial service ends.
(3) ARPU is derived from total earned subscriber revenue, net advertising revenue and other subscription-related
revenue, net of purchase price accounting adjustments, divided by the number of months in the period, divided
by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes
the U.S. Music Royalty Fee, which was initially charged to subscribers in the third quarter of 2009. Purchase
price accounting adjustments include the recognition of deferred subscriber revenues not recognized in
purchase price accounting associated with the Merger. ARPU is calculated as follows (in thousands, except
for subscriber and per subscriber amounts):
2010 2009 2008
For the Years Ended December 31,
Unaudited
Subscriber revenue:
GAAP .................................. $ 2,414,174 $ 2,287,503 $ 1,548,919
Predecessor financial information .............. — — 670,870
Net advertising revenue:
GAAP .................................. 64,517 51,754 47,190
Predecessor financial information .............. — — 22,743
Other subscription-related revenue (GAAP) ......... 234,148 48,679 —
Purchase price accounting adjustments ............ 14,655 46,814 38,533
$ 2,727,494 $ 2,434,750 $ 2,328,255
Daily weighted average number of subscribers ...... 19,385,055 18,529,696 18,373,274
ARPU . . .................................. $ 11.73 $ 10.95 $ 10.56
(4) Subscriber acquisition cost, per gross subscriber addition (or SAC, per gross subscriber addition) is derived
from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding share-
based payment expense and purchase price accounting adjustments, divided by the number of gross subscriber
additions for the period. Purchase price accounting adjustments associated with the Merger include the
elimination of the benefit of amortization of deferred credits on executory contracts recognized at the Merger
22