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Thread: Could "Program & Content Expense" be the answer??

  1. #1
    cos1000 is offline
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    Could "Program & Content Expense" be the answer??

    In digging through SXM's 3Q looking for some answers to the accounts payable problem brought up to pay MLB & the NFL, I came across an "Operating Expense Bucket" titled:

    Operating Expenses: Programming and Content

    Programming and content expenses include 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. These agreements 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.

    I include here the explanation for the nine months ending 9/30/08:

    Nine Months: For the nine months ended September 30, 2008 and 2007, programming and content expenses were $222,975 and $173,324, respectively, which represents an increase of $49,651. Excluding stock-based compensation of $7,477 and $6,857 for the nine months ended September 30, 2008 and 2007, respectively, programming and content expenses increased $49,031 from $166,467, to $215,498. The increase was primarily due to the impact of the Merger. XMs programming and content expense accounted for $18,046 during the nine months ended September 30, 2008. The remaining increase was primarily attributable to a $27,500 one-time payment to a programming partner due upon completion of the Merger and license fees associated with new programming.

    With the total revenue for the same period (9 months)being:
    $ 1,792,632,000


    The Escrow Payment of $120M for the 2011 & the 2012 years is kept in an account titled: Restricted Investments, along with some other escrow fees for leases and mortgages, totaling $141M.

    It would appear that they have been accruing payments to content providers right along even though actual payments to the providers are made annually, quarterly, or whatever is defined per contract. This would change Homer's formula considerably if the cash as been accrued, as this information indicates. Any thoughts??

  2. #2
    cos1000 is offline
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    For purpose of clarity, all figures are in units found in the quarterly statements..... such as $75,000 is = to $75M the revenue for the period above is as is printed.... thanks Demian....

  3. #3
    Newman is offline
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    Good point, but I don't think that is correct. Look at the years that it says the escrow account is for: Years 2011 and 2012.

    Strange though that 120 million in escrow funds for MLB and only 21 million in escrow for mortgages and other leases? MLB is damn expensive.

  4. #4
    cos1000 is offline
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    Newman, I am confused which part is incorrect..... thanks.

  5. #5
    Newman is offline
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    Quote Originally Posted by cos1000
    The Escrow Payment of $120M for the 2011 & the 2012 years is kept in an account titled: Restricted Investments, along with some other escrow fees for leases and mortgages, totaling $141M.
    The escrow fund is for the 2011 and 2012 years.

    Then you state:
    Quote Originally Posted by cos1000
    It would appear that they have been accruing payments to content providers right along even though actual payments to the providers are made annually, quarterly, or whatever is defined per contract.
    Im not sure how you are making the connection with the escrow fund for 2011 and 2012 to then figuring that Sirius has been accruing payments... Im not saying that it is not being done, but the section of the Q3 results that you posted would not lead me to believe that this was true.

  6. #6
    homer985 is offline
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    Hmm, maybe I'm not following this thread clearly -- but the MLB expenses don't accrue. XM pays these expenses upfront in March (as a prepaid expense -- an asset) and then they are straight-line amortized against XM's financial statements on a montly basis from March through February... approximately $5MM/month.

    On the cashflow statement, it is reflected as a reduction in "Prepaid expenses"; on the balance sheet, the amount reduced will be also be subtracted from "Prepaid expenses"; and then on the earnings statement, it is a part of the "Programming and Content" line item expense.



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  7. #7
    cos1000 is offline
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    Homer, as you have corrected me before, I understand that the MLB is for the 2011, and 2012 years now, and that is kept in an interest bearing account titled Restricted Investments, not included in COH.

    In addition as an Operations Expense: both Xm and Sirius accrue Programming and Content, for their agreements requiring them to pay license fees, share advertising revenue, purchase advertising on media properties owned or controlled by the licensor and pay other guaranteed amounts, which would include MLB for Xm and the NFL for Sirius.

    These accounts include cash payments made on an annual basis, which I assume they reserve cash from revenues coming in, and deposit in an accounts payable cash account. I guess my question is that, is this payable account in addition to COH or are they accounting for the payment and not reserving the cash?

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