Commitments and Contingencies |
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Commitments and Contingencies
Movie License and Internet Protocol Television (“IPTV”) Commitments
In the ordinary course of business, the Company has long-term commitments, such as license fees and guaranteed minimum payments owed to content providers. In addition, the Company has long-term arrangements with service and television providers to license and provide content and IPTV services that are subject to future guaranteed minimum payments from the Company to the licensor.
The following is a schedule of future unconditional minimum commitments under movie and IPTV arrangements as of December 31, 2019 (in thousands):
Satellite Capacity Commitments
The Company maintains agreements with satellite service providers to provide for satellite capacity. The Company expenses these satellite fees in the month the service is provided as a charge to licensing and services cost of sales.
In connection with the EMC Acquisition, the Company assumed several contractual commitments for satellite services. During the third quarter of 2016, EMC entered into an amendment to its existing service agreement with one of its satellite service providers. Under this amendment, the amount of committed satellite bandwidth was significantly increased, and the Company’s total contract commitment was increased by $40 million.
The following is a schedule of future unconditional minimum satellite costs as of December 31, 2019 (in thousands):
Other Commitments
In the normal course of business, the Company enters into future purchase commitments with some of its connectivity vendors to secure future inventory for its airlines customers and the development pertaining to engineering and antenna projects. At December 31, 2019, the Company also had outstanding letters of credit in the amount of $4.3 million, which was issued under the letter of credit facility under the 2017 Credit Agreement. See Note 10. Financing Arrangements.
Contingencies
The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully adjudicated. The Company recorded accruals for loss contingencies when management concludes it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. On a regular basis, the Company’s management evaluates developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that has been accrued previously. While it is not possible to accurately predict or determine the eventual outcomes of these matters, an adverse determination in one or more of these matters could have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Some of the Company’s legal proceedings as well as other matters that its management believes could become significant are discussed below:
In 2016, the Company received notices from several other music rights holders and associations acting on their behalf regarding potential claims that the Company infringed their music rights and the rights of artists that they represent. To date, none of these rights holders or associations has initiated litigation against us, except for BMG Rights Management (US) LLC (“BMG”) as described in the following paragraph. Other than in respect of the BMG litigation (the loss probability and liability estimate of which the Company discusses in the following paragraph), the Company believes that a loss relating to these matters is probable, but the Company believes that it is unlikely to be material and therefore have accrued an immaterial amount for these loss contingencies. If initiated however, the Company intends to vigorously defend ourselves against these claims.
On May 3, 2018, BMG filed suit in the United States District Court for the Central District of California against us and IFP for copyright infringement and related claims and unspecified money damages. On December 3, 2019, the case was dismissed with prejudice pursuant to a settlement agreement with BMG for an aggregate payment of $5.5 million, to be paid over time, as follows: $0.5 million within 14 days of the execution of the settlement agreement; $1.5 million on or before each of December 31, 2019, June 30, 2020, and June 30, 2021; and $0.5 million on or before June 30, 2022. The Company has an accrual for this legal settlement in the amount of $3.5 million as of December 31, 2019.
In addition, from time to time, the Company will or may be party to various additional legal matters incidental to the conduct of our business. Some of the outstanding legal matters include speculative claims for indeterminate amounts of damages, for which the Company has not recorded any contingency accrual. Additionally, the Company has determined that other legal matters are likely not material to our financial statements, and as such have not discussed those matters above. Although the Company cannot predict with certainty the ultimate resolution of these speculative and immaterial matters, based on our current knowledge, the Company does not believe that the outcome of any of these matters will have a material adverse effect on our financial statements.
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