SIRI » Topics » Operating Expenses

This excerpt taken from the SIRI 10-Q filed May 11, 2009.

Operating Expenses

Satellite and Transmission. Satellite and transmission expenses consist of costs associated with the operation and maintenance of our satellites; satellite telemetry, tracking and control system; terrestrial repeater network; satellite uplink facility; and broadcast studios.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, satellite and transmission expenses were $20,279 and $7,822, respectively, which represents an increase of $12,457 primarily due to the impact of the Merger. XM satellite and transmission expense accounted for $14,770 during the three months ended March 31, 2009.

We expect satellite and transmission expenses to decrease as we consolidate terrestrial repeater sites and realize other cost savings as a result of the Merger; however such expenses are expected to increase in the aggregate due to the inclusion of the full period results of XM.

 

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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 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. Purchased advertising is recorded as a sales and marketing expense and the cost of sharing advertising revenue is recorded as Revenue share and royalties in the period the advertising is broadcast.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, programming and content expenses were $80,408 and $61,692, respectively, which represents an increase of $18,716. The increase includes $27,538 of XM’s programming and content expense, which was partially offset by reductions in personnel and on-air talent costs as well as savings on various content agreements.

Our programming and content expenses, excluding share-based payment expense, are expected to decrease as we reduce duplicate programming and content costs, however such expenses are expected to increase in the aggregate due to the inclusion of the full period results of XM.

Revenue Share and Royalties. Revenue share and royalties include distribution and content provider revenue share, residuals and broadcast and web streaming royalties. Residuals are monthly fees paid based upon the number of subscribers using SIRIUS and XM radios purchased from retailers. Advertising revenue share is recorded to revenue share and royalties in the period the advertising is broadcast.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, revenue share and royalties were $100,466 and $42,320, respectively, which represents an increase of $58,146. The increase was primarily attributable to the $49,682 effect of including XM’s revenue share and royalty expense as a result of the Merger, an increase in our revenues and an increase in the statutory royalty rate due for the performance of sound recordings.

We expect these costs to increase as our revenues grow, as we expand our distribution of SIRIUS and XM radios through automakers, as a result of statutory increases in the royalty rate for sound recording performances and as a result of the inclusion of the full period results of XM.

Customer Service and Billing. Customer service and billing expenses include costs associated with the operation of our customer service centers and subscriber management systems as well as bad debt expense.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, customer service and billing expenses were $59,801 and $26,922, respectively, which represents an increase of $32,879 primarily due to the Merger. XM’s customer services and billing expense accounted for $33,732 during the three months ended March 31, 2009.

We expect our customer care and billing expenses to decrease on a per subscriber basis, but increase overall as our subscriber base grows due to increased call center operating costs, transaction fees and bad debt expense associated with a larger subscriber base as well as the inclusion of the full period results of XM.

Cost of Equipment. Cost of equipment includes costs from the sale of SIRIUS and XM radios, components and accessories.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, cost of equipment was $7,993 and $7,588, respectively, which represents an increase of $405. The Merger-related increase of $3,465 was offset mainly by lower sales volume and lower inventory related charges.

We expect cost of equipment to vary in the future with changes in sales through our direct to consumer distribution channel; however, such expenses are expected to increase as a result of the inclusion of the full period results of XM.

Sales and Marketing. Sales and marketing expenses include costs for advertising, media and production, including promotional events and sponsorships; cooperative marketing; customer retention and compensation. Cooperative marketing costs include fixed and variable payments to reimburse retailers and automakers for the cost of advertising and other product awareness activities.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, sales and marketing expenses were $51,830 and $38,467, respectively, which represents an increase of $13,363. The Merger-related increase of $32,119 was offset partially by reductions in consumer advertising and cooperative marketing, personnel costs and third party distribution support expenses.

We expect sales and marketing expenses, excluding share-based payment expense, to decrease as we consolidate our advertising and promotional activities, gain efficiencies in marketing management and eliminate overlapping distribution support costs, however such expenses are expected to increase in the aggregate due to the inclusion of the full period results of XM.

 

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Subscriber Acquisition Costs. Subscriber acquisition costs include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a SIRIUS or XM radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chip sets and certain other components used in manufacturing radios; commissions paid to retailers and automakers as incentives to purchase, install and activate SIRIUS and XM radios; product warranty obligations; provisions for inventory allowance; and compensation costs associated with stock-based awards granted in connection with certain distribution agreements. The majority of subscriber acquisition costs are incurred and expensed in advance of, or concurrent with, acquiring a subscriber. Subscriber acquisition costs do not include advertising, loyalty payments to distributors and dealers of SIRIUS and XM radios, and revenue share payments to automakers and retailers of SIRIUS and XM radios.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, subscriber acquisition costs were $73,068 and $89,824, respectively, which represents a decrease of $16,756. This decrease was primarily due to improved OEM subsidies and higher aftermarket inventory reserves in the three months ended March 31, 2008 compared to the three months ended March 31, 2009, partially offset by the impact of the Merger. XM’s subscriber acquisition costs accounted for $26,250 during the three months ended March 31, 2009.

We expect total subscriber acquisition costs to fluctuate as increases or decreases in our gross subscriber additions are accompanied by continuing declines in the costs of subsidized components of SIRIUS and XM radios, but increase overall as a result of the inclusion of the full period results of XM. We intend to continue to offer subsidies, commissions and other incentives to acquire subscribers.

General and Administrative. General and administrative expenses include rent and occupancy, finance, legal, human resources, information technology and investor relations costs.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, general and administrative expenses were $59,314 and $48,778, respectively, which represents an increase of $10,536, primarily due to the impact of the Merger, offset by lower costs for certain merger, litigation and regulatory matters.

We expect our general and administrative expenses, excluding share-based payment expense, to decrease in future periods as we integrate XM. General and administrative expenses may fluctuate in certain periods as a result of litigation costs; however such expenses are expected to increase in the aggregate due to inclusion of the full period results of XM.

Engineering, Design and Development. Engineering, design and development expenses include costs to develop our future generation of chip sets and new products, research and development for broadcast information, and costs associated with the incorporation of our radios into vehicles manufactured by automakers.

 

   

Three Months: For the three months ended March 31, 2009 and 2008, engineering, design and development expenses were $9,778 and $8,656, respectively, which represents an increase of $1,122. This increase was primarily due to the impact of the Merger, partially offset by lower costs associated with manufacturing of radios, OEM tooling and manufacturing, and personnel.

We expect engineering, design and development expenses, excluding share-based payment expense, to decrease in future periods as we complete the integration of SIRIUS and XM and gain efficiencies in engineering, design and development activities, however such expenses are expected to increase in the aggregate due to inclusion of the full period results of XM.

This excerpt taken from the SIRI 10-Q filed May 9, 2006.

          Operating Expenses

          Satellite and Transmission. Satellite and transmission expenses increased $488 to $7,301 for the three months ended March 31, 2006 from $6,813 for the three months ended March 31, 2005. The increase was primarily attributable to increased compensation related costs for additions to headcount and webstreaming costs. As of March 31, 2006 and 2005, we had 139 terrestrial repeaters in operation.

          Future increases in satellite and transmission expenses will primarily be attributable to the addition of new terrestrial repeaters and maintenance costs of existing terrestrial repeaters. We expect to deploy a significant number of additional terrestrial repeaters in 2006. Such expenses may also increase in future periods if we decide to reinstate our in-orbit satellite insurance or launch new satellites.

          Programming and Content. Programming and content expenses increased $32,166 to $56,444 for the three months ended March 31, 2006 from $24,278 for the three months ended March 31, 2005. The increase was primarily attributable to consulting and license fees associated with new programming, broadcast royalties as a result of the increase in our subscribers, compensation related costs for additions to headcount and additional on-air talent costs due to the expansion of the programming lineup.

          Our programming and content expenses will increase as we continue to develop and enhance our channels. Beginning February 2007, our agreement with NASCAR will increase our programming and content expenses. In

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addition, we expect broadcast royalties to increase as our subscriber base grows. We regularly evaluate programming opportunities and may choose to acquire and develop new content or renew current programming agreements in the future at substantial cost.

          Customer Service and Billing. Customer service and billing expenses increased $6,349 to $15,841 for the three months ended March 31, 2006 from $9,492 for the three months ended March 31, 2005. The increase was primarily due to increased customer service representative costs and telecommunication charges as a result of the expansion and growth of our call centers to accommodate our subscriber base and increased transaction fees due to the addition of new subscribers. Customer service and billing expenses increased 67% compared with an increase in our end of period subscribers of 181% as of March 31, 2006 compared with March 31, 2005. Customer service and billing expenses per average subscriber per month declined 42% to $1.40 for the first quarter of 2006 compared with $2.40 for the first quarter of 2005.

          We expect our customer care and billing expenses to increase and our costs per subscriber to decrease on an annual basis as our subscriber base grows.

          Cost of Equipment. Cost of equipment increased $2,489 to $3,465 for the three months ended March 31, 2006 from $976 for the three months ended March 31, 2005. The increase was primarily attributable to higher sales through our direct to consumer distribution channel.

          We expect cost of equipment to increase in the future as we introduce new products and as sales through our direct to consumer distribution channel grow.

          Sales and Marketing. Sales and marketing expenses increased $4,174 to $39,296 for the three months ended March 31, 2006 from $35,122 for the three months ended March 31, 2005. The increase was attributable to higher distribution costs primarily as a result of increased OEM revenue share, market development funds and retail residuals. Compensation related costs also increased as a result of additions to headcount to support our growth. Such increases were offset by decreased advertising, media and production costs primarily for trade shows and events and for the expiration of certain sponsorships in 2005.

          We expect sales and marketing expenses to increase as we continue to build brand awareness through national advertising and promotional activities and expand the distribution of SIRIUS radios. Beginning in 2007, our agreement with NASCAR will increase our sponsorship costs included in sales and marketing expense.

          Subscriber Acquisition Costs. Subscriber acquisition costs increased $42,051 to $109,144 for the three months ended March 31, 2006 from $67,093 for the three months ended March 31, 2005, an increase of 63%. Over the same period, gross subscriber additions increased 171% from 354,708 for the three months ended March 31, 2005 to 960,610 for the three months ended March 31, 2006. The increase in subscriber acquisition costs was attributable to subsidies for higher shipments of SIRIUS radios and chip sets to accommodate the growth of our subscriber base and increases in commissions resulting from the increase in gross subscriber additions, offset by reductions in average subsidy rates as we continued to reduce manufacturing and chip set costs.

          Subscriber acquisition costs per gross subscriber addition were $113 and $190 for the three months ended March 31, 2006 and 2005, respectively. The decline was primarily attributable to the reduction in average subsidy rates as we continued to reduce manufacturing and chip set costs.

          We expect total subscriber acquisition costs to increase in the future as our gross subscriber additions increase and we continue to offer subsidies, commissions and other incentives to acquire subscribers. However, we anticipate that, on a per gross subscriber addition basis, the costs of certain subsidized components of SIRIUS radios will continue to decrease in the future. If competitive forces require us to increase hardware subsidies or promotions, subscriber acquisition costs per gross subscriber addition could increase. Our subscriber acquisition costs per gross subscriber addition are generally higher in the first three quarters of our fiscal year and decline in the fourth quarter as we experience higher activation rates.

          General and Administrative. General and administrative expenses increased $4,312 to $19,144 for the three months ended March 31, 2006 from $14,832 for the three months ended March 31, 2005. The increase was primarily a result of additional personnel-related costs and operating costs to support the growth of our business and bad debt expense.

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          We expect our general and administrative expenses to increase in future periods for personnel-related and facility costs to support our growth.

          Engineering, Design and Development. Engineering, design and development expenses increased $1,017 to $12,679 for the three months ended March 31, 2006 from $11,662 for the three months ended March 31, 2005. The increase was primarily attributable to additional personnel-related costs to support research and development efforts and costs associated with OEM tooling and manufacturing upgrades for factory installations of SIRIUS radios.

          We expect engineering, design and development expenses to decrease in 2007, as we anticipate incorporating SIRIUS radios and accessories in a significant number of vehicle models for the year ended 2006.

          Equity Granted to Third Parties and Employees. Equity granted to third parties and employees expense for warrants decreased $7,125 to $14,371 for the three months ended March 31, 2006 from $21,496 for the three months ended March 31, 2005. This decrease was primarily attributable to the timing of our partners achieving production and other milestones and changes in the fair value of such awards during the first quarter of 2006 as compared with the first quarter of 2005.

          Equity granted to third parties and employees expense for stock options, restricted stock, restricted stock units and other stock-based awards increased $253,005 to $270,215 for the three months ended March 31, 2006 from $17,210 for the three months ended March 31, 2005. The increase was primarily a result of $224,813 of expense for granting 34,375,000 shares of our common stock to Howard Stern and his agent in January 2006. Excluding the charge for these shares, equity granted to third parties expense increased $28,192 to $45,402 for the three months ended March 31, 2006. The increase was primarily attributable to the adoption of SFAS No. 123R and expense associated with common stock expected to be earned upon the satisfaction of performance targets.

          Future expense associated with equity granted to third parties and employees is contingent upon a number of factors, including the number of stock-based awards granted, the price of our common stock, assumptions used in estimating the fair value of stock-based awards, estimates for forfeitures, vesting provisions and the timing as to when certain performance criteria are met, and could materially change.

This excerpt taken from the SIRI 10-K filed Mar 13, 2006.
Operating Expenses

      Satellite and Transmission. Satellite and transmission expenses decreased $1,447 to $31,157 for the year ended December 31, 2004 from $32,604 for the year ended December 31, 2003. The decrease was primarily attributable to a reduction in satellite insurance costs. In addition, during 2003, we recorded a loss of $1,028 as a result of the write-off of site acquisition costs capitalized in prior periods for terrestrial repeaters that will not be placed in operation. Such decreases were offset by increased costs associated with additional technical lines used primarily to receive programming from third parties, maintenance of existing terrestrial repeaters, costs associated with the addition of new terrestrial repeaters and the purchase of our satellite uplink facility. As of December 31, 2004, we had 137 terrestrial repeaters in operation compared with 133 terrestrial repeaters as of December 31, 2003.

      Programming and Content. Programming and content expenses increased $33,533 to $63,353 for the year ended December 31, 2004 from $29,820 for the year ended December 31, 2003. The increase was primarily attributable to personnel-related costs, consultant costs, license fees,

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advertising revenue share and on-air talent costs due to the expansion of our programming lineup. We also incurred additional broadcast royalties as a result of the increase in our subscriber base.

      Customer Service and Billing. Customer service and billing expenses decreased $1,316 to $22,341 for the year ended December 31, 2004 from $23,657 for the year ended December 31, 2003. The decrease was primarily due to a $14,465 loss on the disposal of our prior subscriber management system in May 2003 as a result of the termination of our agreement with the provider. This decrease was offset by increased customer service representative costs and credit card fees necessary to support the growth of our subscriber base and increased operation and maintenance costs associated with our new billing system implemented in 2004. Customer service and billing expenses, excluding the loss on disposal of our prior subscriber management system, increased 143% compared with an increase in our end of period subscribers of 338% as of December 31, 2004 compared with December 31, 2003. Excluding the loss on disposal of our prior subscriber management system, customer service and billing expenses per average subscriber per month declined 48% to $3.56 for 2004 compared with $6.84 for 2003.

      Cost of Equipment. Cost of equipment increased $3,352 to $3,467 for the year ended December 31, 2004 from $115 for the year ended December 31, 2003. The increase was attributable to the increased sales from our direct to consumer distribution channel.

      Sales and Marketing. Sales and marketing expenses increased $33,330 to $154,495 for the year ended December 31, 2004 from $121,165 for the year ended December 31, 2003. The increase was a result of higher advertising, media and production costs primarily due to launch costs for our SIRIUS NFL Sunday Drive initiative, offset in part by a decline in media spending incurred in connection with the introduction of our Plug & Play radios for the year ended December 31, 2003 and a decline in sponsorship costs. Distribution costs also increased primarily as a result of the expansion of our retail distribution channel, including our national rollout in RadioShack stores. The remaining increase was primarily attributable to personnel-related costs to support our continued growth, including the costs of outsourced specialists for support at retail stores and automotive dealerships.

      Subscriber Acquisition Costs. Subscriber acquisition costs increased $98,842 to $173,702 for the year ended December 31, 2004 from $74,860 for the year ended December 31, 2003, an increase of 132%. Over the same period, gross subscriber additions increased 286% from 255,798 for the year ended December 31, 2003 to 986,556 for the year ended December 31, 2004. The increase in subscriber acquisition costs was attributable to subsidies for higher shipments of SIRIUS radios and chip sets to accommodate the growth of our subscriber base and commissions resulting from the increase in gross subscriber additions.

      Subscriber acquisition costs per gross subscriber addition were $177 and $293 for the years ended December 31, 2004 and 2003, respectively. The decline was primarily attributable to the reduction in hardware and chip set subsidy rates and higher activation to sales ratios in 2004 than in 2003.

      General and Administrative. General and administrative expenses increased $7,817 to $44,028 for the year ended December 31, 2004 from $36,211 for the year ended December 31, 2003. The increase was primarily a result of additional personnel-related costs; consulting fees, including costs incurred in order to comply with the Sarbanes-Oxley Act of 2002; and rent and occupancy costs to support the continued growth of our business. These increases were partially offset by a decrease in legal fees and settlement costs incurred in 2003 associated with the termination of our agreement with the prior provider of our subscriber management system.

      Engineering, Design and Development. Engineering, design and development expenses increased $5,986 to $30,520 for the year ended December 31, 2004 from $24,534 for the year ended December 31, 2003. The increase was primarily attributable to additional personnel-related costs to support research and development efforts and costs associated with OEM tooling and manufacturing upgrades in preparation for SIRIUS factory installations, offset in part by reduced chip set development costs.

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      Equity Granted to Third Parties and Employees. Equity granted to third parties and employees expense for warrants increased $74,255 to $74,700 for the year ended December 31, 2004 from $445 for the year ended December 31, 2003. The increase was primarily attributable to expense associated with vesting events for warrants granted pursuant to various distribution and programming agreements and media assets provided to us under the NFL agreement. The remaining increase in expense associated with warrants for the year ended December 31, 2004 was accrued based on certain third parties’ performance toward achieving milestones.

      Equity granted to third parties and employees expense for stock options, restricted stock, restricted stock units and other stock-based awards increased $36,102 to $47,740 for the year ended December 31, 2004 from $11,638 for the year ended December 31, 2003. The increase was primarily attributable to expense associated with vesting events for awards granted to consultants; the issuance of stock-based awards to employees and members of our board of directors, which included a combination of stock options with exercise prices below fair market value at the date of grant and restricted stock units; and common stock granted to employee benefit plans. Of this expense, $5,706 resulted from the accelerated vesting of stock options upon the satisfaction of performance criteria in 2004. The remaining increase in expense associated with stock options, restricted stock, restricted stock units and other stock-based awards for the year ended December 31, 2004 was primarily accrued based on certain consultants’ performance toward achieving milestones.

      Equity granted to third parties and employees expense for the year ended December 31, 2004 also included $4,285 of expense associated with the 15,173,070 shares of our common stock granted to the NFL upon signing a seven-year agreement with the NFL.

      

This excerpt taken from the SIRI 10-Q filed Aug 3, 2005.
Operating Expenses

      Satellite and Transmission. Satellite and transmission expenses decreased $3,114 to $13,481 for the six months ended June 30, 2005 from $16,595 for the six months ended June 30, 2004. The decrease was primarily attributable to a $4,422 reduction in satellite insurance costs. Such decrease was offset primarily by increased costs associated with the use of security software to prevent the theft of our service and additions to our personnel.

      Programming and Content. Programming and content expenses increased $21,540 to $40,635 for the six months ended June 30, 2005 from $19,095 for the six months ended June 30, 2004. The increase was primarily attributable to an increase in personnel-related costs and license fees associated with sports related programming initiatives, such as the NFL, NBA and college sports. We also incurred additional on-air talent costs due to the expansion of our programming line-up and variable broadcast royalties as a result of the increase in our subscriber base.

      Customer Service and Billing. Customer service and billing expenses increased $8,841 to $17,230 for the six months ended June 30, 2005 from $8,389 for the six months ended June 30, 2004. The increase was primarily due to increased customer service representative costs and credit card fees necessary to support the growth of our subscriber base, increased telecommunication charges as a result of the expansion and growth of our call centers to accommodate the increase in our subscriber base and increased operation and maintenance costs associated with our new billing system implemented in the fourth quarter of 2004. Customer service and billing expenses increased 105% compared with an increase in our end of period subscribers of 278% as of June 30, 2005 as compared with June 30, 2004. Customer service and billing expenses per average subscriber per month for the six months ended June 30, 2005 was $1.96 compared with $3.89 for the six months ended June 30, 2004.

      Cost of Equipment. Cost of equipment increased $2,459 to $2,928 for the six months ended June 30, 2005 from $469 for the six months ended June 30, 2004. The increase in cost of equipment was attributable to increased sales through our direct to consumer distribution channel, offset by reductions in the per unit costs of SIRIUS radios and accessories.

      Sales and Marketing. Sales and marketing expenses increased $8,026 to $68,774 for the six months ended June 30, 2005 from $60,748 for the six months ended June 30, 2004. Advertising media and production costs increased primarily due to additional sponsorship, event marketing and advertising costs as we build brand awareness through national advertising and promotional activities. Distribution costs increased primarily as a result of additional costs associated with the expansion of our retail distribution channel, increased retail residuals and OEM revenue share as a result of the increase in subscribers, and increases in personnel-related costs to support our growth. Such increases were offset in part by costs associated with the commencement of our sales efforts with RadioShack in June 2004.

      Subscriber Acquisition Costs. Subscriber acquisition costs increased $74,094 to $135,786 for the six months ended June 30, 2005 from $61,692 for the six months ended June 30, 2004, an increase of 120%. Over the same period, gross subscriber additions increased 205% from 257,896 for the six months ended June 30, 2004 to 787,395 for the six months ended June 30, 2005. The increase in subscriber acquisition costs was attributable to subsidies for higher shipments of SIRIUS radios and chip sets to accommodate the growth of our subscriber base and to restock inventory in the first quarter of 2005 as a result of selling out at retail after the 2004 holiday season, in addition to increases in commissions resulting from the increase in gross subscriber additions.

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      Subscriber acquisition costs per gross subscriber addition were $173 and $240 for the six months ended June 30, 2005 and 2004, respectively. The decline was primarily attributable to the reduction in hardware subsidy rates as we continue to reduce manufacturing and chip set costs.

      General and Administrative. General and administrative expenses increased $9,751 to $28,952 for the six months ended June 30, 2005 from $19,201 for the six months ended June 30, 2004. The increase was primarily a result of additional personnel-related costs and rent and occupancy costs to support the growth of our business.

      Engineering, Design and Development. Engineering, design and development expenses increased $11,802 to $23,448 for the six months ended June 30, 2005 from $11,646 for the six months ended June 30, 2004. The increase was primarily attributable to additional personnel-related costs to support research and development efforts, costs associated with tooling and manufacturing upgrades at DaimlerChrysler and Ford to support factory installations of SIRIUS radios, and product development costs for our next generation of products.

      Equity Granted to Third Parties and Employees. Equity granted to third parties and employees expense for warrants increased $30,646 to $46,024 for the six months ended June 30, 2005 from $15,378 for the six months ended June 30, 2004. This increase is primarily attributable to expense accrued based on certain distribution partners' performance toward achieving eligible vehicle, subscriber activation and delivery milestones. In addition, we also recognized approximately $5,000 of higher expense associated with performance based vesting events for warrants granted pursuant to various distribution and programming agreements.

      Equity granted to third parties and employees expense for stock options, restricted stock, restricted stock units and other stock-based awards increased $17,815 to $32,052 for the six months ended June 30, 2005 from $14,237 for the six months ended June 30, 2004. The increase was primarily attributable to expense associated with restricted stock units which accelerate to earlier periods as performance targets for fiscal periods are met, grants of stock-based awards, and modifications of existing stock-based awards. The remaining increase was primarily related to expense accrued for 2005 profit sharing and for restricted stock units we expect to grant for services performed in 2005. Such increases were offset in part by lower expense associated with 2004 performance options that vested in March 2005.

      Equity granted to third parties and employees expense for the six months ended June 30, 2005 and 2004 also included $1,860 and $293, respectively, of expense associated with the 15,173,070 shares of our common stock granted to the NFL.

      

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