XM Radio 2011 Annual Report Download - page 60

Other Revenue includes amounts earned from subscribers for the U.S. Music Royalty Fee, revenue from our
Canadian affiliate and ancillary revenues.
•2011 vs. 2010: For the years ended December 31, 2011 and 2010, other revenue was $274,387 and
$266,946, respectively. The $7,441 increase was primarily due to increased royalty revenue from Sirius
XM Canada. While the number of subscribers subject to the U.S. Music Royalty Fee increased, that
increase was offset by a reduction in December 2010 in the rate charged on primary subscriptions.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, other revenue was $266,946 and
$83,029, respectively. The $183,917 increase was primarily due to the full year impact of the U.S. Music
Royalty Fee introduced in the third quarter of 2009.
Other revenue is dependent upon the amount of the U.S. Music Royalty Fee and revenues from our
Canadian affiliate. Other revenue will fluctuate as additional subscribers become subject to the U.S. Music
Royalty Fee and based on the performance of our Canadian affiliate.
Operating Expenses
Revenue Share and Royalties include distribution and content provider revenue share, advertising revenue
share, residuals and broadcast and web streaming royalties. Residuals are monthly fees paid based upon the
number of subscribers using satellite radios purchased from retailers. Advertising revenue share is recognized in
revenue share and royalties in the period in which the advertising is broadcast.
•2011 vs. 2010: For the years ended December 31, 2011 and 2010, revenue share and royalties were
$471,149 and $435,410, respectively, an increase of 8%, or $35,739. For the year ended December 31,
2011, revenue share and royalties remained flat as a percentage of total revenue. The increase in revenue
share and royalties was primarily attributable to a 14% increase in our revenues subject to royalty and/or
revenue sharing arrangements and a 7% increase in the statutory royalty rate for the performance of sound
recordings, partially offset by a $18,974 increase in the benefit to earnings from the amortization of
deferred credits on executory contracts initially recognized in purchase price accounting associated with
the Merger.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, revenue share and royalties were
$435,410 and $397,210, respectively, an increase of 10%, or $38,200. For the year ended December 31,
2010, revenue share and royalties decreased as a percentage of total revenue. The increase in revenue
share was primarily attributable to a 12% increase in our revenues subject to royalty and/or revenue
sharing arrangements and an 8% increase in the statutory royalty rate for the performance of sound
recordings, partially offset by a decrease in the revenue sharing rate with an automaker and a $18,187
increase in the benefit to earnings from the amortization of deferred credits on executory contracts
initially recognized in purchase price accounting associated with the Merger.
We expect our revenue share and royalty costs to increase as our revenues grow and as a result of statutory
increases in the royalty rate for the performance of sound recordings. Under the terms of the Copyright Royalty
Board’s decision, we paid royalties of 7.5% and 7.0% of gross revenues, subject to certain exclusions, for the
years ended December 31, 2011 and 2010, respectively, and will pay royalties of 8.0% for 2012. The deferred
credits on executory contracts initially recognized in purchase price accounting 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.
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